Defending Against a ZPIC Audit or Other Potential Fraud Investigation by the OIG Matthew Horton, JD, LLM Fotheringill & Wade, LLC

Objectives 1. Fundamentals of the ZPIC Program. 2. How to Respond to a ZPIC ADR & Denial. 3. Case Study of ZPIC Audit.

CMS Financial Report: Fiscal Year 2014 “In 2026, the HI Trust Fund will be exhausted according to the projections by the CMS Office of the Actuary. Under current law, when the HI Trust Fund is exhausted, full benefits cannot be paid on a timely basis”. From the 2013 report.

Alphabet Soup of Auditors ZPIC OIG SMRC CERT QIO MAC MIC RAC DOJ FBI

CMS Financial Report: 2014 Program Integrity activities target the range of causes of improper payments including errors, fraud, waste, and abuse.

Medicare Program Integrity  Functions include the detection & deterrence of fraudulent billing  Accomplished through: 1. Enhanced provider enrollment activities; 2. Proactive data analysis; 3. Close collaboration among law enforcement; 4. Subject matter experts and program integrity contractors; and/or 5. The investigation of complaints from various sources; provider on-site visits; and beneficiary interviews.

What Is Medicare Fraud?  In general, fraud is defined as making false statements or representations of material facts to obtain some benefit or payment for which no entitlement would otherwise exist. These acts may be committed either for the person’s own benefit or for the benefit of some other party.  Examples of Medicare fraud may include: 1. Knowingly billing for services that were not furnished and/or supplies not provided, including billing Medicare for appointments that the patient failed to keep; and 2. Knowingly altering claims forms and/or receipts to receive a higher payment amount. (See MPIM, Ch. 4, Sect for more examples)

What Is Medicare Abuse?  Practices that, either directly or indirectly, result in unnecessary costs to the Medicare Program.  “Abuse appears quite similar to fraud except that it is not possible to establish that abusive acts were committed knowingly, willfully, and intentionally.”  Examples of Medicare abuse may include: 1. Misusing codes on a claim 2. Charging excessively for services or supplies 3. Billing for services that were not medically necessary or services that do not meet professionally recognized standards.  Both fraud and abuse can expose providers to criminal and civil liability.

Per Medicare Learning Network “[T]here is no precise measure of health care fraud…”  Fraud?  Abuse?  Improper Payment?  Reasonable Minds can Differ?

How far back can the OIG look?  A civil action under section 3730 may not be brought —  more than six years after the date on which the violation of section 3729 is committed, or  more than three years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.

The Affordable Care Act  “An overpayment must be reported and returned [within 60 days].”  “Any overpayment retained by a person after the deadline... is an obligation” to repay under the False Claims Act and can trigger liability under that Act’s penalty provisions. What qualifies as an overpayment?

The False Claims Act, 31 U.S.C. §§  Knowingly submitting a false or fraudulent claim for payment can lead to: 1. Treble damages and 2. Fines of $5000-$10,000 per claim (current fines of $5,500 to $11,000)  In theory, a $1.00 error on 100 claims could expose a provider to $1,000,000 in damages and fines.

ZPIC: Fraud-Fighting Specialists  HIPAA (1996) required Medicare to enlist dedicated contractors to protect the integrity of Medicare’s payments (had been FI responsibility).  The first fraud-fighting contractors were 18 geographically divided Program Safeguard Contractors (PSC).  In 2008, Medicare replaced the PSC program with the Zone Program Integrity Contractor program (ZPIC).

ZPIC: Setup

Zone Program Integrity Contractors (ZPICs) ZPICZoneStates in Zone Safeguard Services1 California, Hawaii, Nevada, American Samoa, Guam, and the Mariana Islands AdvanceMed2 Washington, Oregon, Idaho, Utah, Arizona, Wyoming, Montana, N. Dakota, S. Dakota, Nebraska, Kansas, Iowa, Missouri, Alaska Cahaba3 Minnesota, Wisconsin, Illinois, Indiana, Michigan, Ohio, Kentucky Health Integrity4Colorado, New Mexico, Texas, Oklahoma AdvanceMed5 Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Georgia, N. Carolina, S. Carolina, Virginia, W. Virginia Under Protest-PSCs continue to operate. (Safeguard Services) 6 Pennsylvania, New York, Delaware, Maryland, D.C., New Jersey, Massachusetts, New Hampshire, Vermont, Maine, Rhode Island, Connecticut Safeguard Services7Florida, Puerto Rico, Virgin Islands ZPICs identify target areas based on: Investigations OIG and law enforcement instructions Congressional mandates Data Mining or “Predictive Modeling”

Program Safeguard Contractors (PSCs) Operating in Maryland  TriCenturion PSC Contractor for:  Durable Medical Equipment  Prosthetics  Orthotics  Supplies  SafeGuard Services PSC Contractor for:  Part A and Part B

ZPIC: Medical Review Function When the PSC and the ZPIC BI units receive an allegation of fraud, or identify a potentially fraudulent situation, they shall investigate to determine the facts and the magnitude of the alleged fraud. They shall also conduct a variety of reviews to determine the appropriateness of payments, even if there is no evidence of fraud. (MPIM, Chapter 4 Section 4.7)  Reactive  Referrals from MACs, HHS OIG tipline, law enforcement, whistleblowers  Proactive  Data-mining across years of claims data  Fraud Prevention System (FPS)  CMS-operated analytical and predictive tool

ZPIC: Investigating Potential Fraud  Medical record requests  Unlike RACs, NO limit on volume of record requests  Beneficiary interviews  Staff interviews  Can be under penalties of perjury  Right to counsel  Site visits  Can be unannounced

ZPIC: Recovery  When a ZPIC finds a claim that should be denied or recovered, it refers the claim to the relevant MAC to process the denial or recovery.  In 2012, the GAO estimates ZPICs saved Medicare $252 million.  If a ZPIC suspects fraud, it must refer its investigation to law enforcement, usually the HHS Office of the Inspector General or the FBI.  Civil and criminal penalties can result.  Restitution  Fines  Incarceration

ZPIC: Expanded Reach  A ZPIC can act claim-by-claim or at the whole- provider level. 1. Extrapolation 2. Payment suspension  MAC hands claims to ZPIC for review before payment. This can last indefinitely. 3. Revocation/deactivations  A provider’s Medicare billing privileges are revoked or its NPI deactivated

ZPIC: Extrapolation  Other reviewers—from MACs to HHS OIG—can use extrapolation, but they are a key feature of the ZPIC program.  The purpose of extrapolation is to save the administrative costs that would be necessary to investigate each claim.  When a ZPIC finds what it believes is a “sustained or high level of payment error,” it can use sampling and extrapolation.  CMS has not defined a sustained or high level.  The determination of a sustained or high level of error is not subject to judicial review.

ZPIC: Sampling Steps  Determining the period of review  Can range from days to years  No look-back limit  Defining the universe, sampling unit, and sampling frame  Universe is usually all claims in sampling period  Unit can be line items, claims, clusters of claims (by beneficiary, physician, etc.)  Frame is list of all possible sampling units  Designing the sampling plan and selecting the sample  Selecting the kind of sampling to use (e.g. random, systematic, stratified)  Can use pretty much any methodology endorsed by CMS or employed by other law enforcement agencies

ZPIC: Hypothetical Sampling Results Total Sample Size 50 Total Universe500 Sample Mean Overpayment $5, Point Estimate$2,500, Lower Limit$2,250, Billing Error Rate 100% Payment Error Rate 100%

Responding to a ZPIC Audit  Assemble all medical records and other pertinent documentation.  Pre-payment reviews: Documents must be submitted within 45 days  Post-payment reviews: Documents must be submitted within 30 days  Review all relevant Medicare criteria and regulations  Have properly trained team and/or attorney evaluate the cases  The key skill is experience interpreting medical records in light of complex regulations & often fuzzy criteria and formulating a clear, targeted response.  Ordinary denial management processes are likely under-prepared for the scope of a ZPIC audit and under-skilled for what’s at stake.  You should consider retaining a lawyer.  Civil & criminal penalties for ZPIC period  Civil & criminal penalties under False Claims Act outside ZPIC period  Attorney client privilege

ZPIC Requirements  ZPICs have to:  Re-open claims for post-payment review 1. Don’t need good cause within 1 year of initial determination 2. Need good cause 1-4 years  Use a medical specialist for any denials “not based on the application of clearly articulated policy with clearly articulated rationale”  MACs have to put recovery on hold if you appeal within 30 days  Ordinary appeals process applies to ZPIC denials  Redetermination, reconsideration, ALJ, Appeals Council, District Court

ZPIC: Case Study  PSC conducted proactive data analysis of small hospital.  In 2010, PSC sent written request for medical records associated with claim sample.  In 2013, ZPIC sent 15 pg. “Post Payment Review Results & Overpayment Determination” to CEO.  Alleged insufficient documentation to justify medical necessity  Denial premised on non-compliance with LCD’s detailed service and doc. requirements  Extrapolation!  Universe of 500 claims  Sample of 50 claims, all denied post-payment  $250, at issue on sample claims  $2,250, “lower limit” (total estimate $2,500,000.00)

ZPIC: Case Study  Worked quickly to put recoupment on hold-within 30 days  Some issues getting MAC to comply  Worked closely with hospital and with treating physician  Developed arguments on both the audit process and the claim details  Analyzed LCD at issue, applied it to facts of each claim  Attacked quality & promptness of notice  Sent appeals—one for each claim and one for the extrapolation

Wisconsin Physician Services (WPS) LCD L30159: Cataract Surgery and Complex Cataract Surgery

ZPIC: Case Study  Of 50 denied claims:  93% favorable at redetermination  7% favorable at reconsideration  No decision on extrapolation arguments, but “0” extrapolated is still “0.”  Key was understanding the LCD and linking it to specific record details  Back up would be argument that LCD not binding on ALJ

ZPIC: Summary  ZPICs do have big hammers  Extrapolated denials  Payment suspension  Revocation  Prison  Do:  Prepare through avoidance.  Know the rules and follow them.  Document, document, document.  Respond quickly and thoroughly.  Don’t:  Panic, ignore, or lash out  Rely on normal audit processes. ZPIC is not a normal audit

What is a provider expected to know?  Know what you “should have known.”  CMS presumes your knowledge of every word of every statute, rule, NCD/LCD, manual, transmittal, etc.  Administrative Law Judge comment in an Unfavorable ALJ Decision:  “The Provider was unquestionably aware of the CMS regulations, manuals and rulings, CMS bulletins, past unfavorable CMS contractor actions and the lack of substantiating medical records. See 42 CFR Section (e) (knowledge presumed from experience and constructive notice of CMS publications).”

Thank You For Your Attention! Questions? Comments? Matthew Horton , ext. 169 Fotheringill & Wade, LLC 1 Olympic Place, Suite 500 Baltimore, Maryland

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