Auditor Update: Part II

Shifting trends among healthcare auditors means one thing in particular for providers: they have to stay on their toes.

Continued improper payment rates and high error rates serve as the basis for audit, deterrence, and prevention activity by the Centers for Medicare & Medicaid Services (CMS). Unfortunately, these medical reviews and audits can be costly – and most organizations do not understand how costly until it is too late. Once audit teams find your vulnerability, it is difficult to avoid a series of focused audits and painful denials. Since policy and audit issues change frequently, historical statistics are not a good indicator of the outcome of your next audit, and can often create a false sense of security.

Whether you are a Part A provider or a durable medical equipment (DME), prosthetics, orthotics, and supplies provider, watch out! Despite CMS indicating that there was a decrease in such improper payments from 2020 to 2021, from 6.27 to 6.26 percent (a historic low), the overall sum still totals over $25 billion, like last year. While the improper rate for Part A (excluding hospitals paid under the Inpatient Prospective Payment System, or IPPS) for 2021 was only 6.31 percent, that still represents over $11.5 billion. When you add in the 2.39-percent improper payment rate for Part A IPPS hospitals, it’s another $2.5 billion, meaning Part A alone accounts for $14 billion of the $25 billion, or 56 percent of the improper payment dollars. Tack on another $2.4 billion for DME, with a 28.6-percent improper payment rate, and it represents nearly two-thirds of the dollars. It’s not really surprising that CMS is still very active in recouping improper payments.

Adding to the improper payment rate, it has been estimated that the DME industry is expected to grow to $3.02 billion by the end of 2025. Despite this anticipated growth, or perhaps because of it, federal and state health programs are suspicious and distrustful of the industry, and see continued threats from DME suppliers. Overpayment determinations and associated CMS activity can have impactful financial consequences for DME suppliers. Below is an example of a recent change that has the potential to wreak havoc on such suppliers, and can help to drive down the improper payment rate.

A Certificate of Medical Necessity (CMN) or a DME Information Form (DIF) are required forms utilized to support and document the medical necessity and other coverage criteria for selected DME items.

Failure to have a valid CMN or DIF on file, or to submit a valid CMN or DIF to the DME Medicare Administrative Contractor (MAC) or Unified Program Integrity Contractor (UPIC), means that CMS does not have sufficient information to determine whether the claim is reasonable and necessary, therefore making the underlying claim improper. For a CMN to be valid, the treating physician must attest to and sign the document evidencing support for the medical need for the item – and that the appropriate individuals have completed the medical portion of the CMN. A valid DIF is also attested to and signed by the supplier, further supporting the medical need for the item.

Until recent changes to the CMS Program Integrity Manual (Pub. 100-08), Chapter 5, Section 5.6, only DME MACs had the authority to deny a claim and initiate an overpayment if they identified a claim for which a CMN or DIF was invalid. The stakes are now much higher.

Under recent updates, CMS made two significant changes. In addition to the DME MAC’s ability to initiate an overpayment, CMS has now empowered the UPIC to do the same. The UPIC has the responsibility to perform fraud, waste, and abuse detection, deterrence, and prevention activities for Medicare and Medicaid claims processed in the United States. In addition, and more troublesome to DME suppliers, is that in addition to being able to initiate an overpayment, both the DME MAC and the UPIC can now initiate a civil monetary penalty case against the supplier if they identify a pattern of improperly completing the CMN or DIF. The significance of this could be staggering, and will be greatly impacted by claim volume. Under these provisions, the civil monetary penalty can be up to $1,000 for each invalid CMN or DIF. There has never a better time to make sure you are properly documenting and completing CMNs and DIFs.

With the abundance of audit activity in the healthcare arena, it’s no wonder that DME suppliers are scrambling to take action to submit proper claims, including ensuring that they have the documentation to support the medical necessity of each item or service being billed, are coding claims properly, and are pushing back against auditors that are not themselves properly applying the rules and regulations when adjudicating and auditing claims. One of the best ways to make sure you are maintaining claim integrity is to conduct regular internal audits of your processes and operations, and adjust as needed to ensure the submission of properly documented claims.