Rises Over Medicare Audit Programs
officials in Florida and New York may join California lawmakers
who seek a national moratorium
David Whitney - email@example.com
Published 12:00 am PST Monday, November 26, 2007
Jeffrey Kaufman's Response
WASHINGTON – Florida and New York hospital officials are leaping
onto legislation sponsored by California lawmakers that would temporarily
halt a controversial Medicare auditing program.
commission-based program has been operating for more than two years
on an experimental basis in the three states and is set to expand
permanently to 20 more in March.
because of the California experience – in which rehabilitation
hospitals have been forced to surrender tens of millions of dollars
for past services deemed by auditors to be medically unnecessary
– Democratic Rep. Lois Capps of Santa Barbara and Republican
Rep. Devin Nunes of Visalia recently introduced legislation that
would place the program on a one-year moratorium to investigate
New York and Florida have not had the depth of problems that have
the California Hospital Association complaining, officials in those
states said the program has not gone smoothly there, either.
increasing anxiety has elevated the auditing program to a top agenda
item of the American Hospital Association. Don May, the association's
vice president for policy, said association lobbyists are actively
pressing for passage of the Capps-Nunes bill.
like to see this (program) scaled back substantially," May
said in a telephone interview.
the biggest concerns is that the congressionally created program
relies on "recovery auditing" – auditors who are
paid a percentage of the money they recoup from hospitals through
contingency fee or bounty mechanism sets some incentives for these
auditors to be overly aggressive and to make questionable decisions
in their favor by denying claims," May said.
said she has been hearing more and more from Florida and New York
lawmakers about program auditors in their states, and they are showing
increasing interest in the bill she and Nunes introduced.
is very concerned that this program and the Centers for Medicare
& Medicaid Services mismanagement of it could be compromising
the quality of health care for our seniors," Capps said.
ire of California lawmakers was raised last summer when the California
Hospital Association complained that the auditing company selected
to review old Medicare payments in the state was targeting claims
submitted for care of patients who had undergone knee and hip replacement
surgery. The denial rates have been more than 90 percent of the
company, Atlanta-based PRG-Schultz International, said it is following
rules laid out by Congress and the Centers for Medicare & Medicaid
Services. It has focused on rehabilitation hospitals because of
a Government Accountability Office report that most knee and hip
replacement patients sent to them need such intensity of care, it
job is to review claims and determine if patients got the right
service, not whether they needed services," N. Lee White, executive
vice president of operations for the auditing company, said in a
Reep, vice president for financial services at the Florida Hospital
Association, said hospitals there haven't been hit with the same
severity of problems with the auditing contractor.
process hasn't put any of our hospitals at the point of closure,"
internal auditors are starting to demand that hospital administrators
adjust their budgeting forecasts in anticipation of future claims
denials, she said.
Wynn, assistant vice president of finance for the Greater New York
Hospital Association, said its concerns about the auditing program
"are aligned with California's," even though New York's
experience with the auditor also has not been so dramatic.
addition to objections to the way the auditors are paid, Wynn said
New York hospitals would like to see Congress eliminate their ability
to reject claims based on medical necessity, which she and others
said should be the province of doctors.
option they like, Wynn said, is the arrangement hospitals use with
health insurers where prior approval is obtained for hospital services.
burgeoning support for the Capps-Nunes bill, most think it has a
poor chance of passing as stand-alone legislation before the auditing
program is set to expand nationally in March.
with Congress under pressure to enact legislation before Jan. 1
to stop an automatic cut in Medicare fees paid to physicians, advocates
see an opportunity for the bill to be merged into a larger Medicare
like to see this attached to any train that is moving," said
May of the American Hospital Association.
the Capps-Nunes bill would do, however, is set a moratorium on the
national rollout of the auditing program while the pilot program,
more recently expanded to Massachusetts and South Carolina, is studied.
would have to tackle broader questions such as how the auditors
are compensated. So far there is no legislative proposal to do that.
Jeffrey Kaufman's Response
I appreciate your article and interest in this area, it appears
from your story that you might not be as aware of how the Recovery
Audit Contractor program has impacted physicians as you are about
the hospitals' experience.
The RAC pilot project allowed 3 independent contractors freedom
to audit part A and B Medicare claims in New York, Florida and California
for the preceding 4 years with a few exceptions. Since reimbursement
is on a contingency basis (or what we like to call "bounty
hunting"), the contractors for Florida and New York chose to
emphasize part A hospital charges since those are typically higher
cost items with greater potential to return benefit to the contractor
for the effort put forth (a better return on investment). However,
last year, PRG Schultz, the California RAC contractor began to look
at certain physician charges. As the result, physician offices began
to receive requests for records in mid-2006 at a rate that became
quite a burden. Some medical oncology offices were receiving more
than 50 requests at a time which became impossible to address without
closing their offices to patients while the staff devoted time to
copying charts and responding to the requests. As if this unreimbursed
overhead wasn't enough (although hospitals are paid for their effort
responding to the records requests, physician offices are not),
the RAC contractor then started to demand repayment for many charges
that had been properly considered and paid correctly (or so we thought)
up to 4 years earlier and beyond. You can imagine the impact this
had on smaller practices.
At the same time, complaints arose that some requests were for patients
that did not belong to that practice. Because of the identifying
information accompanying such requests, this was a major HIPPA violation.
At other times, the Explanation of Benefits from the Medicare intermediary
demanding repayment or threatening to withhold money from future
checks arrived before any letter of explanation from the RAC contractor
causing much confusion and consternation among physicians who had
no idea why such demands were made or how to appeal. The letters
demanding records were vaguely written in a Kafka-esque fashion
darkly suggesting that someone had preliminarily reviewed the records
and had cause to suspect that payment had been made incorrectly.
However, this was untrue; the demands were kicked out by computer
and the chart had not been previously screened except for the fact
that the charge code fell within the group which the contractor
wished to audit. Moreover, the letters were quite unclear as to
what records might be needed to fulfill the audit leaving the practice
in a quandary as to how to respond, which records were requested
and how much information to supply. Communication with the contractor
was limited despite official invitations to PRG Schultz to appear
before the Medicare Carrier Advisory Committee where William Davis,
PRG Schultz VP, was reticent to respond to our concerns. Further,
as you probably know, it came out that shortly before the contract
was awarded to PRG Schultz, a major San Francisco investment group
bought a controlling share of stock. It later came out that the
principle in that group was Richard Blum, husband to our senior
US Senator Diane Feinstein. Although the OIG has investigated and
found no conflicts of interest, this close involvement with a for-profit
bounty hunter engaged to investigate health care spending has not
been well received by California hospitals and physicians (see articles
in the Sacramento Bee from earlier this year).
Specific to my specialty, many urologists began to receive requests
for records in mid-2006 that were shortly followed by demands for
repayment for medications provided to prostate cancer patients more
than 4 years earlier. Despite agreements at the time between the
California Medicare carrier and state urologists that payments for
Lupron (an LHRH agonist used to treat prostate cancer) were being
made properly, the RAC contractor decided that such payments were
not consistent with an element of the payment policy that provides
for payment limited to the Least Costly Alternative. This principle
was originally designed to limit payment for durable medical equipment
to that attached to the least expensive, comparable item. Several
years ago, CMS decided to extend the policy to medications however,
in fact, there was only 1 class of drugs to which it applied, the
LHRH agonists used for prostate cancer. For many years, the least
expensive of these was Zoladex. If a doctor provided Lupron instead,
he could have the patient sign a separate contract making the patient
responsible for the difference between what Medicare paid (for the
Zoladex) and what was charged for Lupron. Or the doctor would simply
write off the difference as a loss. For a few years, while we discussed
how the policy should be applied, what agents should be considered
in computing the "least costly", whether some patients
would be grandfathered in for the more expensive drug and other
details, NHIC continued to pay for Lupron. After some time, when
the disputed areas were worked out, all LHRH payments were limited
to the least costly alternative.
For the interval before the issue was resolved, PRG Schultz decided
that all payments that were paid at the higher rate were actually
paid incorrectly and refunds were demanded. The law holds that the
physician is responsible for knowing the law and applicable policies
and adhering to them. If payment is made incorrectly and the physician
is aware of it, he is obligated to notify the payer and refund the
money. However, California urologists were intimately involved in
discussions with NHIC (our California Medicare carrier) at that
time and were quite clear that payments made were correct and in
line with all applicable policies. Thus, the RAC contractor's decision
made over 4 years after the fact was unilateral, arbitrary and contrary
to our concurrent understandings when the payments were processed.
The amount of money involved was less than what was demanded of
the rehabilitation hospitals but, considering that it was due from
many small practices, each of whom was responsible for many tens
of thousands of dollars, it was very a considerable sum. Individual
appeals to PRG Schultz were of no avail. At the 11th hour, we were
able to convince NHIC that the demands made by the contractor were
for payments processed earlier than the 4 year interval the RAC
contractor was authorized to review. Among other arguments, this
convinced CMS that the demands were not justified and literally,
at the last moment before penalties would begin to accrue on delinquent
repayments, the demands were rescinded. Subsequently, I have been
involved in many discussions with CMS mediated by attorneys for
the AMA and CMA with the involvement of the CMA and a few representatives
of my specialty, the American Urologic Association. CMS has made
some concessions to limit their look back interval to 3 years (beginning
August 31, 2007--this agreement is limited to California only),
to alter their demand letters to make them more informative about
the appeal process, to amend their request for records letters to
make them more clear and less threatening and to improve communications
It was only after these repeated negotiating sessions with CMS that
the 3rd level appeal was successful for the California Hospital
Association and the entire RAC program was put on temporary hold.
We are still waiting to see how it is changed based on the combined
efforts of the CHA and our own intervention. I have asked our Washington
lobbyists to investigate the status of Congresswoman Capps' bill
and offer the support of the American Urologic Association and possibly
bring in further support from the AMA if the situation warrants.
Obviously, I cannot speak officially for either organization but
I believe we would be supportive of any efforts to suspend, abolish
or at least improve the RAC program. We are all supportive of efforts
to eradicate improper payments, root out fraud and abuse from federal
programs, make all payments correctly according to written policy
and fairly according to the medical care provided. However, we view
a bounty hunter audit program that looks back many years for questionable
issues as contrary to the interests of the Medicare program and
distasteful to physicians who endeavor to provide the best quality
care possible to their patients. We would hope that a program could
be designed to improve the administration of Medicare payments and
still foster good relations with medical providers.
Please feel free to contact me if you wish more details on the RAC
program's impact on physicians or need clarification on the issues.
I have been very involved in all the above efforts and remain the
lead for California and American urologists in this regard. Thank
you again for your efforts to shed light on this issue which so
far has been narrowly confined to California with very little awareness
outside the 3 states involved in the pilot project (although they
will soon be aware enough if the plan to extend the program to all
50 states goes forward!).
Jeffrey Kaufman MD, FACS
Diplomate, American Board of Urology
Immediate past president, American Association of Clinical Urologists
Chair, Health Policy Committee, Western Section, American Urologic
Past president, California Urologic Association
Urology representative, NHIC Carrier Advisory Committee