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On the Enforcement Radar

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Unlike the Department of Health and Human Services Office of Inspector General (“OIG”) which publishes a Work Plan each year, the Department of Medicaid Services (“Medicaid”) generally does not publish guidance on the areas which it plans to investigate and/or audit. In fact, Medicaid’s website states … “Medicaid does not provide guidance on how companies should bill for services, but will direct you to applicable regulations. If you receive direction from staff about how to bill, the Department will not be bound by such instruction, unless it was given by a Director or Commissioner.” Because the federal integrity programs are now moving through the process, Kentucky Medicaid providers are starting to see lots of audit activities. Unlike the OIG audits, we don’t know the precise subject matter of the Medicaid audits, but the process for appeal is outlined below in addition to the areas announced for review by the OIG.

In addition to the audits that Medicaid contracts for under its Surveillance Utilization Review System (“SURS”), the Medicaid Integrity Program provides for another type of review and audit process that is overseen by CMS. Under the Medicaid Integrity Program, Review Medicaid Integrity Contractors or MIC’s have been contracted to analyze Medicaid claims data to identify aberrant claims and potential billing vulnerabilities through data mining of all paid Medicaid claims using the Medicaid Statistical Information System. Once problem areas are determined, CMS vets the providers that have been identified with Medicaid and other state agencies and then provides leads to Audit MICS that actually perform post-payment audits of all types of Medicaid providers and identify overpayments. If, after an audit is performed, an overpayment is determined, then an audit report is prepared and forwarded to CMS and Medicaid. When CMS finalizes an audit report, the State must repay the Federal share of the overpayment to CMS within 60 calendar days, whether or not the State recovers, or seeks to recover the overpayment from the provider. The State is responsible for issuing the final audit report to the Provider and must follow its administrative process. The provider may exercise whatever appeal or adjudication rights are available under state law when it seeks to collect the overpayment amount identified in the final audit report.

Medicaid Appeal Process

Providers and particularly physicians should pay close attention to the correspondence that they may receive from the Department of Medicaid and its auditors and contractors. As the Medicaid Integrity Contractors gear up, physician practices are starting to see the results of audits as the Department of Medicaid starts the collection phase. While the process is confusing, some of the letters contain very important deadlines and requests for information that if ignored, will be used against providers at later dates. By regulation, Kentucky has established an important appeal process for challenging Medicaid audits in 907 KAR 1:671. While the regulation is complicated and the processes and procedures vary based upon what type of audit is involved, there are several significant notices that providers and their staff should watch for. These include a Demand Letter or a letter that announces adjustment of rates. While the Demand letter is what most physician practices may receive, it should allow a provider to request a dispute resolution meeting with Medicaid. Importantly, the regulation requires that all issues that may later be appealed be addressed at this meeting. Usually, the meeting involves Medicaid staff and the Auditors. While the dispute resolution is described as informal, the regulation requires issues to be raised and evidence presented. After this meeting, if a provider is not satisfied, the provider may proceed to an appeal before a hearing officer that is employed by the Cabinet for Health and Family Services. During this hearing, Medicaid carries the burden to establish an overpayment, which it usually does by calling the auditor as a witness and introducing the reports. If a provider is not successful at the hearing level, then an appeal may be taken to Franklin Circuit Court.

Importantly, no collection or recoupment efforts are to be undertaken during the time that a provider is challenging Medicaid’s demand for repayment. Given the current backup in processing appeals, these challenges can significantly benefit a provider by putting off repayment if an overpayment has been made. Please note, however, that Medicaid may take the position that an overpayment must be repaid within 60 days of the determination under the Health Care Reform Act regardless of the administrative appeal process.

The 2012 OIG Work Plan

The Office of Inspector General of the United States Department of Health and Human Services (OIG) released its Work Plan for fiscal year 2012. At the beginning of each fiscal year, the OIG issues its annual Work Plan, which describes current audit, enforcement and evaluation activities and those the agency plans to initiate in the upcoming year. The Work Plan also provides a general view of the OIG’s investigative, enforcement and compliance activities. Basically, the Work Plan informs health care providers what is on the OIG’s enforcement radar in the coming year. Physicians should know what areas that the OIG is concerned about and review their own practices to ensure compliance with regulatory requirements. The following are some of the highlights for physicians from the FY 2012 Work Plan.

Physicians and Suppliers: Compliance with Assignment Rules

The OIG will review the extent to which providers comply with assignment rules and determine to what extent beneficiaries are inappropriately billed in excess of amount allowed by Medicare. Physicians participating in the Medicare program agree to accept payment on an assignment for all items and services furnished to individuals enrolled in Medicare. Medicare considers the assignment as a written agreement between beneficiaries and their providers. By accepting assignment of their right to be reimbursed for services, providers agree not to bill beneficiaries for services and accept the amount Medicare pays. In other words, the provider accepts the amount Medicare pays as the full reimbursement. This means that providers may not bill beneficiaries in excess of the Medicare payment. Physicians can bill beneficiaries for the co-pay. Physicians should check their billing practices to assure that no balance billing is made for Medicare patients.

Physician Billing for Incident-To Services

The OIG plans to review physician billing for “incident-to” services to determine whether payment for such services had a higher error rate than that for non-incident-to services. Medicare Part B pays for certain services billed by physicians that are performed by non-physicians incident to a physician office visit. A 2009 OIG review found that when Medicare reviewed physicians’ billings for more than 24 hours of services in a day, half of the services Medicare Part B paid claims for were not performed by a physician. Medicare found that 21% of those services not performed by physicians were performed by unqualified personnel. The OIG believes that improper use of incident-to services can result in over-utilization and expose Medicare beneficiaries to care that does not meet professional standards of quality. Physicians should be aware that if they are billing for incident-to services that those services must be performed with the required level of supervision by proper personnel.

Physicians’ Place of Service Errors

The OIG will review physicians’ coding on Medicare Part B claims for services performed in ambulatory surgical centers and hospital outpatient departments to determine if the claims were properly coded for place of service. Federal regulations provide for different levels of payments to physicians depending on where services are performed. Medicare pays a physician a higher amount when a service is performed in a non-facility setting, such as a physician’s office, than it does when the service is performed in a hospital outpatient department or in an ambulatory surgical center. Physicians should be mindful that coding is proper when the place of service is different than the office.

OIG plans to review physician coding of place of service on Medicare Part B claims for services performed in ambulatory surgical centers and hospital out-patient departments. Medicare regulations provide for different levels of payments to physicians depending on the location where the services were performed, with Medicare paying a higher amount when a service is performed in a non-clinical setting, such as a physician’s office, than when a service is performed in a hospital out-patient department or, with certain exceptions, in an ambulatory surgical center.

Coding of Evaluation and Management Services

The OIG plans to review evaluation and management (E & M) claims to identify trends in the coding of these services and to ensure that providers providing these services submit codes that accurately reflect the services provided. The OIG is focusing on 2009 claims as it found that Medicare $32 billion for E & M services, representing 19% of all Medicare Part B payments. As always, physicians should be diligent in their coding and documentation so that documentation supports the level and type of visit performed. This is an area that will be on the OIG’s radar screen for years to come as well.

Audit and enforcement activities are on the rise as the federal integrity programs are reaching the provider audit level. Even though we don’t know the areas for these audits, providers should become acquainted with the appeal process. For 2012, physicians should be mindful of the OIG’s areas of concern as outlined in the 2012 Work Plan and be prepared for potential audits and other enforcement activities in the coming year.

A complete copy of the OIG FY 2012 Work Plan can be downloaded from the OIG website at and clicking on the link to publications.

Medicare regulations provide for different levels of payments to physicians depending on the location where the services were performed.

Lisa English Hinkle is a Partner of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Ms. Hinkle concentrates her practice area in health care law and is located in the firm’s Lexington office. She can be reached at or at (859) 231-8780.

Molly Nicol Lewis is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Ms. Lewis concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at or at (859) 231-8780.

This article is intended as a summary of newly enacted federal law and does not constitute legal advice.