Update on Medicare/Medicaid Audits in the Wake of COVID-19

As COVID-19 looms large in health care, the CMS has suspended some audits. This author analyzes the temporary regulatory waivers and how wound clinic audits will look after the pandemic runs its course.

When I was asked to draft an article for Today’s Wound Clinic, it was approximately mid-April. I was asked to write about the current state of Medicare and Medicaid audits. Specifically, I was asked to provide a legal analysis about the Centers for Medicare and Medicaid Services (CMS) suspending audits unrelated to COVID-19.

In the month of April, we have seen the spike of COVID-19, which has overturned our everyday world. The current state of Medicare/Medicaid audits, at the moment, is dictated by COVID-19.

We can divide the post-COVID-19 audit rules into three categories:

1. Those exceptions published by CMS to apply to all health care providers
2. Those special, verbal exceptions given directly to an individual provider that were not published by CMS
3. Effective immediately, new guidelines that CMS will follow until CMS believes it no longer needs to follow (by its own choice, of course).

An example of an “effective immediately” guideline is our current state of Medicare/Medicaid audits in the wake of COVID-19. CMS has not suspended all Medicare/Medicaid regulatory audits. But CMS has suspended most audits.¹

Effective immediately, survey activity is limited to the following (in priority order):

• All immediate jeopardy complaints (cases that represents a situation in which entity noncompliance has placed the health and safety of recipients in its care at risk for serious injury, serious harm, serious impairment or death or harm) and allegations of abuse and neglect;
• Complaints alleging infection control concerns, including facilities with potential COVID-19 or other respiratory illnesses;
• Statutorily required recertification surveys (nursing home, home health, hospice, and intermediate care facilities for individuals with an intellectual disability [ICF/IID]);
• Any re-visits necessary to resolve current enforcement actions;
• Initial certifications;
• Surveys of facilities/hospitals that have a history of infection control deficiencies at the immediate jeopardy level in the last three years; and
• Surveys of facilities/hospitals/dialysis centers that have a history of infection control deficiencies at lower levels than immediate jeopardy.

See CMS QSO-20-12-ALL.² You can see that these “effective immediately” guidelines are usually published on CMS letterhead. The “effective immediately” guidelines explain why CMS is taking the stated action, the stated action, and that the action is temporary and due to COVID-19.

What the ‘Effective Immediately’ Guidelines Dictate

Here are a few recent “effective immediately” guidelines that were enacted due to COVID-19:³

• On April 26, 2020, CMS said it would stop expediting Medicare payments to doctors and would be more stringent about accelerating the payments to hospitals as congressional relief for providers reaches $175 billion.
• CMS is no longer accepting any new applications for the loans from Medicare Part B suppliers, including doctors, non-physician practitioners and durable medical equipment (DME) suppliers. CMS will continue to process pending and new requests from Part A providers, including hospitals, but will be stricter with application approvals.
• In late March, CMS expanded the Accelerated and Advance Payment Programs as the pandemic continued to gain strength in the U.S. CMS has since approved more than 21,000 applications, totaling $59.6 billion in accelerated payments to Part A providers, and has approved almost 24,000 applications totaling $40.4 billion in payments for Part B suppliers.

The Coronavirus Aid, Relief, and Economic Security (CARES) stimulus package passed by Congress in March, totaling $2.2 trillion, set aside $100 billion in funds for hospitals.³ On April 24, President Trump signed into law a second round of emergency funding, the Paycheck Protection Program and Health Care Enhancement Act, which allocates another $75 billion for providers. This is roughly three-quarters of what major provider trade associations requested.

Between April 10 and 17, an initial $30 billion from the fund was distributed based on Medicare fee-for-service revenue. This sparked criticism that put facilities with a smaller proportion of Medicare business, such as children’s hospitals and disproportionate share hospitals, at a disadvantage.³ On April 24, the Department of Health and Human Services (HHS) began releasing an additional $20 billion in CARES payments to providers based on their 2018 net patient revenue. CMS said more funding would roll out “soon,” including $10 billion for hard-hit areas such as New York.

A Closer Look at RAC/MAC Auditor Compensation

How Recovery Audit Contractor/Medicare Administrative Contractors (RAC/MAC) auditors are compensated dictates their actions and/or aggressiveness.

RAC auditors are paid by contingency. They are usually compensated approximately 13%, depending on the state. Imagine what 13% is of 1 million. It is $130,000—more than most people make in a year. If you do not believe that 13% contingency is enough to incentivize a company—which, in turn, incentivize the employees—then you are sorely mistaken.

RACs were established through a demonstration program under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), piloted between 2005 and 2008. RACs were later made permanent under the Tax Relief and Health Care Act of 2006, which required CMS to establish recovery auditors for all states before 2010.

MACs are not compensated by contingency, per se. CMS decided to structure the MAC contracts with 1-year base performance periods and four, optional, 1-year performance periods at the time. The MMA required that these contracts be recompeted at least once every 5 years. The recent enactment of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 amended this requirement to authorize a maximum 10-year performance period before MAC contracts must be recompeted.⁴ The amendment, which applies to MAC contracts in effect at the time of enactment of the amendment or contracts entered into on or after enactment, would permit CMS to modify existing MAC contracts or enter into future MAC contracts for 1-year base performance periods and nine optional 1-year performance periods.

Therefore, while MACs are not compensated on contingency, MACs are compensated on performance. The less a MAC spends, the more services a MAC allows, the strict oversight a MCA ensues on its providers. All these “performance-based” measures may not be a contingency compensation relationship, but it’s pretty close. Saved money becomes profit for MACs.

Medicare and Medicaid auditors love rules, even if the rules that auditors are instructed to follow really are not required by actual law. It goes without saying that auditors are not lawyers. Auditors are not trained to decipher whether statutes, regulations or policy are superseded by federal statutes and regulations. The fact is that, more times than one would hope, the auditors are wrong in their assessments that a claim should be denied, not out of malice, but because of a basic misunderstanding of what the law actually requires.

I have all kinds of stories about auditors claiming money is owed, when, really it was not owed because the RAC/MAC auditor failed to follow the actual, correct procedure or misconstrued a regulation. For example, I had a durable medical equipment (DME) provider, ABC, which was informed by the NSC Supplier Audit and Compliance Unit of Palmetto GBA that it owed $1,075,548.64. Palmetto is one of the MACs for Medicare DME. There was no demand letter. The alleged overpayment amount came to light in a telephone conference between the CEO of the company and an employee of Palmetto. Let’s call her Nancy. Nancy told CEO that company owed $1,075,548.64 based on an alleged violation of 42 C.F.R. § 424.58.

Even more disconcerting was the fact that Palmetto claimed that its oral overpayment allegation against DME ABC arose from a normal, reoccurring validation process pursuant to 42 C.F.R. §424.57, approved by CMS and in accordance with the requirements of 42 C.F.R. §424.58. No formal letter was necessary was Palmetto’s retort. This is not correct; a formal demand letter is always required.

In this case, Palmetto began to backtrack once we pointed out that neither Palmetto nor Nancy ever sent a formal demand letter with any reconsideration review appeal rights or administrative appeal rights. We knew this was procedurally incorrect because federal law dictates that you receive a formal demand letter with appeal rights and notice of how many days you have to appeal. But out of fear of retribution, DME ABC was willing to write a check without pushing back. Obviously, we did not do so.

I tell this story as an example of how intimidating, scary, and overwhelming auditors can be. If someone off the street asked you for a million dollars, you would laugh them off your doorstep, right? (After you tell them to don a mask and maintain social distancing.)

But in the new-age world of COVID-19, rules have been broken. This behavior would not be acceptable pre-COVID-19. But this provider honestly was going to pay.

A Closer Look at Temporary Regulatory Waivers

The Trump Administration is issuing an unprecedented array of temporary regulatory waivers and new rules to equip the American healthcare system with maximum flexibility to respond to the COVID-19 pandemic.

Pre-COVID-19, if you were to state “paperwork over patients,” everyone in the industry would agree. There would be snickers and eyes rolling, because no one wanted paperwork to be over patients. But it was. Now the mantra has flipped upside down. Now the mantra is “patients over paperwork.”

Post-COVID-19, if documents are lost or misplaced, or otherwise unusable, DME MACs have the flexibility to waive replacements requirements under Medicare such that the face-to-face requirement, a new physician’s order, and new medical necessity documentation are not required. Suppliers must still include a narrative description on the claim explaining the reason why the equipment must be replaced and are reminded to maintain documentation indicating that the durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) was lost, destroyed, irreparably damaged or otherwise rendered unusable or unavailable as a result of the emergency.

Post-COVID-19, CMS is pausing the national Medicare Prior Authorization program for certain DMEPOS items.¹ CMS is not requiring accreditation for newly enrolling DMEPOS and extending any expiring supplier accreditation for a 90-day time period. CMS is waiving signature and proof of delivery requirements for Part B drugs and durable medical equipment when a signature cannot be obtained because of the inability to collect signatures. Suppliers should document in the medical record the appropriate date of delivery and that a signature was not able to be obtained because of COVID-19.

Post-COVID-19, in order to increase cash flow to providers impacted by COVID-19, CMS has expanded the current Accelerated and Advance Payment Program.⁵ An accelerated/advance payment is a payment intended to provide necessary funds when there is a disruption in claims submission and/or claims processing. CMS may provide accelerated or advance payments during the period of the public health emergency to any two Medicare providers/suppliers who submits a request to the appropriate MAC and meets the required qualifications. The process of obtaining the funds is a MAC-by-MAC process. Each MAC will work to review requests and issue payments within seven calendar days of receiving the request. Traditionally repayment of these advance/accelerated payments begins at 90 days. However, for the purposes of the COVID-19 pandemic, CMS has extended the repayment of these accelerated/advance payments to begin 120 days after the date of issuance of the payment. Providers can get more information on this process here: www.cms.gov/files/document/Accelerated-and-Advanced-Payments-Fact-Sheet.pdf .

The Future of Medicare/Medicaid Audits

The beauty of predicting the future is that no one can ever tell you that you are wrong. These are my predictions:
Auditors will deny claims for not having prior authorizations. Auditors will deny claims because the supplier accreditation expired after the 90-day time period. Auditors will deny claims because the percentage of face-to-face time was not met as described per CPT codes.

Obviously, these would be erroneous denials if the denials are for claims within the dates that the COVID-19 pandemic occurred. The problem will be that the auditors will not be able to keep up with all the exceptions, not because the auditors are acting out of malice or dislikes providers. They will be simply trying to do their job. They will simply not be able to take into consideration all the exceptions that were given during the virus. Because while we do have many written exceptions, if you call CMS will a personal and individualized problem, CMS will, most likely, grant you a needed exception, as long as the exception has the best interest of the consumer at heart. However, this personalized exception will not be written on CMS’s website. In five years, when you undergo a MAC or RAC audit, you better have proof that you received that exception. It will not be enough proof for you to state that you were given the exception over the phone.

So how can you protect yourself from erroneous future audits?

Write everything down. When you speak to CMS, document concurrently the date, time, name of the person to whom you are speaking, the summary of your conversation, the COVID-19 regulatory exception, sign it and date it.

It is a hearsay exception. Writing down everything does not magically transform your note into the truth. However, writing down everything concurrently does magically allow that note that you wrote to be allowed in a court of law as an exhibit. Had you not written the note contemporaneously with the conversation that you had with CMS, then the attorney on the other side of the case would move to exclude your handwritten or typed note as hearsay.

Hearsay is defined as a statement that (1) the declarant does not make while testifying at the current trial or hearing; and (2) a party offers in evidence to prove the truth of the matter asserted in a statement. There are too many hearsay exceptions to name in this article.

Just know, for purposes of this article, that any health care provider who is relying on an exception to a normally required regulatory mandate—regardless what it is—either be able to: (1) cite the written exception that was published by CMS to the public; or (2) produce the written or typed contemporaneously written note that you wrote to memorialize the conversation.

Knicole Emanuel is a Partner at Potomac Law Group, PLLC, in North Carolina.

 

1. Centers for Medicare and Medicaid Services. Coronavirus disease 2019 (COVID-19) provider burden relief frequently asked questions (FAQs). https://www.cms.gov/files/document/provider-burden-relief-faqs.pdf . April 2020.
2. Centers for Medicare and Medicaid Services. Suspension of survey activities. https://www.cms.gov/files/document/qso-20-12-all.pdf . March 4, 2020.
3. Pifer B. CMS hits pause on speeding Medicare payments to doctors as COVID-19 funding reaches $175 billion. https://www.healthcaredive.com/news/cms-hits-pause-on-speeding-medicare-payments-to-docs-as-covid-19-funding-re/576797/ . April 27, 2020.
4. Pub. L. No. 114-10, § 509(a)- (b). https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf . April 16, 2015.
5. Centers for Medicare and Medicaid Services. Fact sheet: expansion of the accelerated and advance payments program for providers and suppliers during COVID-19 emergency. https://www.cms.gov/files/document/Accelerated-and-Advanced-Payments-Fact-Sheet.pdf .