Nephrologists Object to New Medicare Audit Program

Butcher, Lola

doi: 10.1097/01.NEP.0000352292.02414.98

The American Society of Nephrology (ASN) and Renal Physicians Association (RPA) have joined with other medical societies to protest some aspects of a new Centers for Medicare & Medicaid Services (CMS) audit program that is rolling out nationwide this year.

Their concern is that the Recovery Audit Contractor program, which netted about $1 billion for Medicare in a three-year demonstration project, may capitalize on confusion over how physicians should code and bill for certain services.

The RAC program, which comes on top of other Medicare auditing programs, is being carried out by private contractors instead of government employees. Through a competitive bidding procedure, four firms were each awarded a region of the country to audit, with the assignment to ferret out overpayments and underpayments to Medicare providers.

“As the world gets more complex and more agencies have a crack at dealing with doctors to make sure that we are billing properly, it becomes so hard for a good and conscientious practicing doctor to continue taking care of patients as a main focus,” said Alan S. Kliger, MD, Chair of the Department of Medicine at the Hospital of Saint Raphael, Clinical Professor of Medicine at Yale University, and Immediate Past President of the RPA.

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‘Find and Prevent Waste’

The Recovery Audit Contractor program is one of the steps CMS is taking to “find and prevent waste, fraud, and abuse in Medicare,” the agency said in a news release.

“By enhancing our oversight efforts we can better ensure that Medicare dollars are being used to pay for equipment or services that beneficiaries actually received while protecting them and the Medicare Trust Fund from unscrupulous providers and suppliers,” said then CMS Acting Administrator Kerry Weems in the release.

Dr. Kliger supports the goal of getting Medicare billing and payment right, but the multilayered process for doing so is a concern, he said.

“I strongly believe that Medicare and payers need to have efficient models of review that don't ask doctors to respond to multiple different agencies with multiple different issues.”

Now a permanent, 50-state program, RAC auditing began in 23 states in March and is to expand to the remaining 27 states on August 1 or thereafter. By the end of the year, RAC auditors are to be working in all states.

“Providers are on pins and needles,” said Elissa K. Moore, JD, MSc, an attorney specializing in RAC audits for McGuire Woods, a national law firm with a big health care practice. “Most of them think they have been doing everything correctly and they have been abiding by all the rules, and now there are auditors going through their records who are being paid based on a contingency fee.”

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‘A Bounty Payment’

Paying the RAC auditors on a contingency-fee basis has been controversial since a three-state demonstration program began in 2005. The auditing firms receive a portion of the inaccurate Medicare payments they discover.

“It's sort of like a bounty payment for collecting the dollars,” said W. Kline Bolton, MD, Professor of Medicine in the Division of Nephrology at the University of Virginia in Charlottesville and a member of the RPA Board of Directors. “In my mind, there is a great conflict of interest for these groups to have a financial incentive for collecting.”

When the RAC demonstration ended in early 2008, the Centers for Medicare & Medicaid Services paused to consider various complaints from providers, and several changes were implemented. But requests to discontinue the contingency-fee approach ultimately were rejected.

Initiated by Congress in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the program began as a demonstration in the states with the highest Medicare utilization: California, Florida, and New York. Three other states—Arizona, South Carolina, and Massachusetts—were added to the trial in 2007.

Despite the limited number of states participating in the demonstration, RACs identified and corrected more than $1.03 billion of improper Medicare payments.

About 4%—$38 million—were underpayments that CMS repaid to hospitals and physicians, but the vast majority—96%—were Medicare overpayments to hospitals, physicians, and other Medicare providers. That translates into more than $900 million that providers are sending back to CMS, with interest.

The RAC program features a five-level appeals process. A RAC loses its contingency fee if its overpayment determination is reversed at any level of appeal, said Connie Leonard, Director of the CMS Division of Recovery Audit Operations, in an e-mail interview. That is one of various safeguards CMS has implemented to make sure the RACs act appropriately.

CMS will publish annual statistics for the auditing program, including appeal information and accuracy rates by contractor.

During the demonstration, 23% of the initial RAC rulings were appealed, and more than one-third of those appeals were decided in favor of the provider.

Physicians need to consider the time and money involved with an appeal—and the likelihood of winning—in deciding whether to appeal a RAC decision, Ms. Moore said.

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Big Money at Stake

Extrapolating from early RAC results, CMS estimates that 3.9% of Medicare dollars paid in 2007 involved the inappropriate use of coverage, coding, billing, or payment rules. That translates into an estimated $10.8 billion in Medicare overpayments and underpayments in a single year.

In general, physicians do not refute the fact that many Medicare payments are in error, and they attribute these errors to the complexity of Medicare coding and billing rules. Indeed, it is precisely because of this complexity that nephrology professionals worry that RAC auditors will not be able to distinguish between proper and improper coding.

“Our auditor will be Diversified Collection Services—the name in itself is a little scary,” said Sue Young, administrator for Lehigh Valley Nephrology Associates, a five-physician practice in Easton, PA. “How much knowledge will they have about nephrology to be auditing our charts properly?”

In their March 9 letter to CMS, the medical societies specifically urged the agency not to allow RAC auditors to review evaluation-and-management (E&M) codes.

“CMS has acknowledged the legitimate differences of opinion in determining how documentation aligns with the E&M level of service billed in other review programs,” the letter said. “Moreover, auditing E&M services threatens to overburden physicians at a time when many specialties are in increasingly short supply and impending baby boomer retirements will exacerbate existing shortages.”

Of special concern are the billing rules for consultations. Pointing out that CMS knows that its policies in that area are unclear, the medical societies said that allowing RAC auditors to review consultations exploits the confusion.

CMS must approve any new issues or areas before RAC contractors undertake widespread review. While E&M codes are technically available for RAC review, Ms. Leonard said CMS does not intend to have the RACs begin reviewing the levels of an office visit or consultation services without advance notice to the American Medical Association and to the physician community.

However, she said, CMS does believe there are some situations—duplicate claims, unbundling, and the correct choice of new or established patient codes—that are self-explanatory and appropriate for RAC review.

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Implications for Nephrology

With consultations in the audit purview, Dr. Kliger said he thinks nephrology practices may be seen as fertile ground for auditors.

“A very high percentage of our patients have multiple specialists seeing them with multiple parts of the pie they are managing,” Dr. Kliger said. “CMS' current policies on split or shared billing and transfer of care are particularly complex for patients with chronic kidney disease and I believe could be red flags for review.”

During the RAC demonstration, auditors devoted most of their attention to hospitals, rather than physicians. Of the overpayments recovered, 85% came from hospitals and another 10% came from inpatient rehabilitation facilities and outpatient hospital providers, according to an analysis by the Milliman consulting firm.

Because of the sheer dollars involved, hospitals will likely continue to be RAC's primary target, but more physicians are expected to receive RAC attention now that the program is permanent. In light of RAC's incentive to go after the biggest dollars, nephrology might be especially attractive.

“I do worry that we would be a target,” Dr. Bolton said. “We are low-hanging fruit because we represent a large amount of dollars that are spent on a disproportionately small number of patients.”

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The Recovery Audit Contractor Program: How to Prepare for an Audit

Elissa K. Moore, JD, MSc, an attorney specializing in Recovery Audit Contractor (RAC) audits for the national law firm McGuire Woods, offered several steps that she said nephrology practices should take to prepare for a RAC audit.

* Form a compliance committee if one is not already in place and active. This committee should develop and implement a plan for how the practice will mitigate the risk of billing inaccuracies. Ms. Moore recommends an interdisciplinary team that includes a staff member who handles billing and coding, a physician, a nurse, and a representative from the front-office staff.

* Make sure that physicians are documenting properly in patient medical records. It may be appropriate to appoint someone to review medical records to ascertain whether they are accurate and complete.

* Conduct an internal audit of the practice's bills to ensure that claims meet Medicare coverage and payment rules. Specifically look to see whether claims adhere to Medicare's “Medical Necessity” policy.

* Appoint a person to track the Centers for Medicare & Medicaid Services (CMS) Web site to stay on top of changes to the RAC program, as well as the Web site for the RAC operating in your region. The RACs are supposed to use their Web sites to report what they are finding in audits so that providers can learn from the experiences of others.

* Educate physicians and all staff members in the practice about the RAC program and why it is essential that medical record documentation, coding, and billing be complete and accurate.

* Make sure the person who opens the practice's mail knows the name of the recovery audit contractor for the region and will recognize a letter with a medical records request.

* Designate a point person who is responsible for handling all RAC correspondence and requests. This person will make sure that record requests are addressed within the 45-day response period.

* If the practice does not have an attorney or audit consultant, begin researching your options. You may not need to actually engage outside help unless the auditors notify you of an overpayment you wish to appeal. The appeals process has short response times, though, and having identified the appeals team ahead of time will make filing an appeal easier.

© 2009 Lippincott Williams & Wilkins, Inc.