CMS Announces New Audit Strategy

Posted on Health Care Law News by Robert Nicholson

On August 14, 2017, CMS announced a significant change in its claims audit strategy for Medicare Administrative Contractors (MACs).  Under the new strategy — called Targeted Probe and Educate — MACs “will select claims for items/services that pose the greatest financial risk to the Medicare trust fund and/or those that have a high national error rate.”   MACs are being directed to focus on providers and suppliers who have the highest claim error rates or who based upon analytics have claims that vary significantly from their peers.  In other words, the MACs are being directed to focus their claims audit resources on high risk services and on those providers that are most likely to be submitting incorrect claims.  This represents a welcome shift from the prior practice of conducting random audits of all providers submitting claims for a particular service or CPT code under review.

The change is also designed to help reduce the massive backlog of pending Medicare claims appeals (currently at over 600,000), as well as to reduce the audit burden on providers who are most likely submitting correct claims.

Under the new program, “a review of 20-40 claims followed by one-on-one, provider-specific, education to address any errors with in the provider’s reviewed claims” will be conducted. “Providers/suppliers with moderate and high error rates in the first round of reviews, will continue on to a second round of 20-40 reviews, followed by additional, provider specific, one-on-one education. Providers/suppliers with high error rates after round two will continue to a third and final round of probe reviews and education.”  “Providers/suppliers with continued high error rates after three rounds of TPE may be referred to CMS for additional action, which may include 100% prepay review, extrapolation, referral to a Recovery Auditor, or other action.”

As described by CMS, the new program provides ample opportunity for providers/suppliers to interact with the MACs to be “educated” regarding the reasons for claims denials and to implement corrective action to avoid further rounds of audits, prepayment review or extrapolated overpayments.  This, of course, requires affirmative action by the provider/supplier to review and react to the “education” provided by the MAC, as well as a willingness for open dialogue by the MAC itself.

This new program is specific to the MACs, and does not appear to apply to ZPICs and other Medicare audit contractors.  The ZPICs in particular, which are focused on fraud and abuse audits, do not regularly engage in provider education, and are generally much quicker to impose prepayment reviews, payments suspensions and to seek extrapolated overpayments.  As a consequence, it remains important for providers and suppliers to identify which type of Medicare audit contractor is conducting the audit when a request for records is received.

The attorneys at Nicholson & Eastin, LLP routinely assist our clients with Medicare claims audit matters.  If you are presently subject of an audit requests, please do not hesitate to contact us for a consultation.