What You Need to Know: Auditor Activity: Part I

The number of audits is now on the upswing.

The COVID pandemic caused a sharp decline in audit activity. Under the Payment Integrity Information Act of 2019 (PIIA), there is a statutory timeline required for improper payment reporting. Despite the pandemic, in August 2020, the Centers for Medicare & Medicaid Services (CMS) was required to resume Comprehensive Error Rate Testing (CERT) program activities that were temporarily suspended in response to the public health emergency (PHE), in order to meet reporting deadlines. 

Based upon the FY 2020 report (2020 CERT Report), it’s no surprise that CMS and others continue to undertake aggressive audit activity against all types of Medicare providers and suppliers, from the smallest “mom-and-pop” durable medical equipment (DME), prosthetics, orthotics, and supplies shops to the largest hospital systems. In this first part of a three-part series, we will discuss DME and the Recovery Audit Contractors (RACs).

Despite the FY 2020 report evidencing a continuation in the decline in the overall improper payment rate (from 7.25 percent in 2019 to 6.27 percent in 2020, and 6.26 percent in 2021), there remains improper payments of over $25 billion. The overall improper payment rate of roughly 6.3 percent is misleading, however, when you drill down to the improper payment rate for DME. The DME improper payment rate was a staggering 31.8 percent in 2020, and is still high in 2021 at 28.6 percent – meaning that roughly one out of every three payments was found to be improper!

The number of audits is now on the upswing. From an auditor perspective, the lull of activity has auditors chomping at the bit, with the environment super-ripe for extrapolation. Targeted probe-and-educate (TPE) audits have restarted, and there will be more enforcement activity against those suppliers with consistently high error rates. The Medicare Administrative Contractors (MACs) and the RACs will be looking for ways to make up for the delay in enforcement, especially the RACs that are paid on a contingency basis. Accordingly, CMS has decided to increase audit activity, which now has an even greater chance of landing you in trouble with the likes of the Unified Program Integrity Contractors (UPICs, formerly the Program Safeguard Contractor and Zone Program Integrity Contractor), U.S. the Department of Justice (DOJ), and the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG), relating to fraud, waste, and abuse concerns.

Regular auditing by the DME RAC came to a complete halt during the PHE, from March 2020 until about August/September 2020. From then until the summer of 2021, there has been a reduced and limited number of additional documentation requests (ADRs) per supplier, every 45 days. ADR limits for each DME supplier are set by CMS, and are based in large part on the volume of claims submitted to CMS. Some can be a few dozen every 45 days, while some can be several hundred every 45 days. ADRs can cover a wide array of items (spinal orthoses, diabetic shoes, CPAPs, etc.), based on what the supplier provides to Medicare beneficiaries.

According to Dr. Robert Glenn, Chief Medical Officer for Engage Health Solutions, a company that utilizes its unique RAC and national payor experience to partner with DME suppliers, providers, and health systems to improve performance, and former Contractor Medical Director for Performant, DME suppliers should be concerned because “RACs are back to full steam ahead, and will almost certainly be driving some of their initial ADR activity based upon the CERT findings and error rates.”

Once a supplier goes through an initial round of audits pertaining to a topic (e.g., spinal orthoses), the RAC takes a look at the “hit rate” (percentage of claims where a denial was issued) for that issue and determines if they are going to continue to pursue ADR requests for that topic from that supplier – and if so, whether to ramp up ADRs for that topic or ramp down ADRs. The same principle applies for items that involve serial claims (e.g., catheters every month), except they may choose to pursue multiple claims involving the same beneficiary, in this instance if the initial claim they reviewed resulted in an error.

Having been at the forefront of DME RAC activity, Dr. Glenn notes that “bottom line, if you are a supplier and the first few claims involving a specific item or a particular beneficiary are denied, you can expect to see the RAC focus their requests in that area and for the ADRs to continue. If they see enough related errors, they can request an increase in ADR activity from CMS. If they see high enough error rates and/or the appearance of potentially fraudulent activity, they can refer the supplier to another contractor, such as the UPIC.”

DME suppliers continue to be plagued by documentation challenges because they are unable to demonstrate medical necessity without reliance on others, such as physicians and other third-party care providers, to examine patients and order DME. These providers often do not properly document the basis for their orders in the medical record, because most DME products carry little risk, are easily obtained, and typically don’t require much follow-up. Unfortunately, the DME market’s relative ease of entry allows new and often unsophisticated suppliers to encounter an incredibly complex set of federal rules and regulations resulting in billing issues and errors, often associated with unknowledgeable or uncooperative providers. Meanwhile, a number of unscrupulous suppliers take advantage of federal programs for which auditors usually only scrutinize claim submissions after reimbursements have already been made…and that’s way too late to prevent improper payments. With continued growth and demand for DME, associated fraud-and-abuse enforcement activities continue to grow. With DME, it is no longer a question of whether a DME supplier will be investigated, but rather when.

Programming Note: Listen to Dr. Robert Glenn during the next live edition of Monitor Mondays.


Steven Greenspan, JD, LLM

Steven Greenspan, JD, LLM, serves as the Chief Strategy Officer for Engage Health Solutions. In this role, Steven leverages his in-depth knowledge of healthcare regulatory compliance and the resulting challenges faced by providers and payors alike, to lead the enterprise strategic growth initiatives at Engage. Engage utilizes their unique RAC and national payor experience to partner with health systems to improve operational and financial performance, by addressing the vulnerabilities that remain despite costly initiatives which result in continued unnecessary audit activity and inappropriate denials. The Engage experience drives a program that not only corrects existing issues but goes beyond to prevent the problems that plague appropriate and accurate reimbursements.

Related Stories

What Everyone Knows About You

What Everyone Knows About You

It’s all in the data: and it’s available. A few years ago, I was giving a presentation to a group of cardiologists. I provided to

Read More

New Workflow Manages DRG Mismatches

Workflow increases productivity, while proving itself to be successful in reconciling DRG mismatches. When asking many clinical documentation improvement specialists (CDISs) what they dislike most

Read More

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

Mastering Good Faith Estimates Under the No Surprises Act: Compliance and Best Practices

Mastering Good Faith Estimates Under the No Surprises Act: Compliance and Best Practices

The No Surprises Act (NSA) presents a challenge for hospitals and providers who must provide Good Faith Estimates (GFEs) for all schedulable services for self-pay and uninsured patients. Compliance is necessary, but few hospitals have been able to fully comply with the requirements despite being a year into the NSA. This webcast provides an overview of the NSA/GFE policy, its impact, and a step-by-step process to adhere to the requirements and avoid non-compliance penalties.

Mastering E&M Guidelines: Empowering Providers for Accurate Service Documentation and Scenario Understanding in 2023

Mastering E&M Guidelines: Empowering Providers for Accurate Service Documentation and Scenario Understanding in 2023

This expert-guided webcast will showcase tips for providers to ensure appropriate capture of the work performed for a visit. Comprehensive examples will be given that demonstrate documentation gaps and how to educate providers on the documentation necessary to appropriately assign a level of service. You will gain clarification on answers regarding emergency department and urgent care coding circumstances as well as a review of how/when it is appropriate to code for E&M in radiology and more.

June 21, 2023
Breaking Down the Proposed IPPS Rule for FY 2024: Top Impacts You Need to Know

Breaking Down the Proposed IPPS Rule for FY 2024: Top Impacts You Need to Know

Set yourself up for financial and compliance success with expert guidance that breaks down the impactful changes including MS-DRG methodology, surgical hierarchy updates, and many new technology add-on payments (NTAPs). Identify areas of potential challenge ahead of time and master solutions for all 2024 Proposed IPPS changes.

May 24, 2023

Trending News