Medicare & Medicaid Audits & Appeals

The Medicare and Medicaid programs employ a number of contractors to conduct audits of medical providers. These contractors include the Medicare Administrative Contractors (MACs), the Zone Program Integrity Contractors (ZPICs), Comprehensive Error Rate Testing Contractors (CERT), Recovery Audit Contractors (RACs), Unified Program Integrity Contractor (UPIC), and in the case of Medicaid in Florida, the Agency for Health Care Administration (AHCA), the Medicaid Fraud Control Units (MFCU), and the Medicaid Audit Contractors (MICs).

First Coast Service Option (FCSO)

The Medicare Administrative Contractor in Florida is First Coast Service Options (FCSO). FCSO administers the Medicare program payments in Florida for Parts A and Part B. In addition to processing claims for payment submitted by medical providers, FCSO also conducts medical review audits of claims submitted. These audits can be either prepayment reviews or post-payment audits.

SafeGuard Service (SGS)

The Zone Program Integrity Contractor (ZPIC) in Florida is SafeGuard Services (SGS). SGS is tasked with identifying potential fraudulent claims and providers. As part of its benefit integrity function, SGS, along with its related contractor, IntegriGuard, conducts prepayment review audits of Medicare providers.

The CERT contractors conduct post-payment audits to determine the percentage of Medicare claims submitted that are erroneous, that is, that should not have been paid.

Recovery Audit Contractors (RAC)

Recovery Audit Contractors (RACs) are private companies under contract with the Centers for Medicare and Medicaid Services which have been tasked with identifying Medicare overpayments and underpayments and returning Medicare overpayments to the Medicare Trust Funds. RACs review claims submitted by health care providers and suppliers in an attempt to identify improper payments. Because RACs receive a portion of the improper payments they identify, the RACs are highly motivated to identify overpayments and other improper payments.

The RAC program began as a three-year demonstration program in 2005 in California, Florida and New York, the three states with the highest Medicare expenditures. In 2007, the program expanded to include Massachusetts, South Carolina, and Arizona. The purpose of the RAC demonstration program was to determine whether the use of RACs would be a cost-effective way to identify and correct improper Medicare payments.

The Tax Relief and Health Care Act of 2006 made the RAC program permanent and required its expansion nationwide by no later than 2010. According to CMS’ “Expansion Schedule,” CMS planned to expand to 23 states by March 1, 2009, and the remaining states by August 1, 2009, or later.

Medicare providers and suppliers should prepare in advance for the potential of a claims audit. That preparation should include:

  • Preparing to timely respond to record requests within strict timeframes set by the program;
  • Self-audits of claim types which have been the focus of reviews of other providers;
  • Implementing compliance efforts to identify and correct poor claims or coding practices; and
  • Timely appealing any denied claims through the Medicare appeals process.

Although Medicare audit contractors often deny claims, many of the claim denials can be later reversed on appeal if the appeal is done properly. As a consequence, it is important for providers and suppliers to maintain adequate records of the documentation provided to audit contractors and to engage competent counsel in preparing responses to the audit contractors, or if appealing denied claims are beyond the providers’ or suppliers’ comfort level. Also, there are limitations in the time period and the number of claims certain audit contractors may audit, and providers and suppliers may not be familiar with these limitations.

The audit contractors have the authority to extrapolate the error rate they determine to exist in the sample to universe of a provider’s or supplier’s claims. This makes it all the more important for providers and suppliers to ensure that they timely and properly respond to audit requests and to appeal any appealable claim denials.

Medicare providers and suppliers should expect audit contractors to attempt to identify improper payments resulting from:

  • Incorrect payment amounts;
  • Non-covered services (including services deemed medically unnecessary);
  • Incorrectly coded claims; and
  • Duplicate claims

Medicare Claims Appeal Process

The Medicare claims appeal process has several levels of appeal: redetermination, reconsideration, Administrative Law Judge, Medicare Appeals Council, and finally, judicial review. There are different time periods and claims amount requirements for each of these levels, and adherence to these requirements is necessary.

Medicaid Audits

The agency that administers the Medicaid Program in Florida is the Agency for Health Care Administration. In addition to processing claims, AHCA also conducts claims audits.

The Medicaid Fraud Control Unit (MFCU) in Florida conducts Medicaid fraud investigations, including the review of claims for evidence of fraud.

Medicaid Integrity Contracts (MICs) are similar to RACs, but conduct audits of Medicaid claims. Although serving a similar function as the RACs, the procedures and requirements of the MICs are different. Although Audit MICs, unlike RACs, are not paid on a contingency fee basis, MICs are eligible for financial bonuses based on the effectiveness of their audits. MICs can review Medicaid claims as far back as permitted under the laws of the respective states that have paid the claims. The MICs also are not limited to a set number of claims for which they may request records and may request that records be produced in as little as two weeks. In the event that the provider disputes the overpayment assessed in the final audit report, the provider may exercise applicable appeal or adjudication rights. Unlike other CMS audit contractors, such as RACs and ZPICs, which must follow specific appeal processes set forth in federal regulations, providers’ appeal rights for MIC denials are determined by the laws of a particular state program.

The attorneys at Nicholson & Eastin, LLP represent and defend providers and suppliers in all types of Medicare, Medicaid and other third-party payer audits, appeals, and controversies. We have the knowledge and experience to assist providers and suppliers in responding to audit requests in order to minimize the number of initial denials, as well as to successfully appeal any improperly denied claims. Please do not hesitate to contact us to discuss your particular situation.

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