Civil Investigative Demands (CIDs) & Collateral Enforcement Risks: A Review

(October 12, 2022):  The False Claims Act is the primary civil enforcement tool utilized by our government today. In Fiscal Year (FY) 2021, the U.S. Department of Justice (DOJ) won or negotiated over $5.6 billion in False Claims Act (FCA)[i] settlements and judgments.  Of that amount, more than $5 billion[ii] resulted from matters involving the health care industry.[iii]  Since 1986, more than $702 billion has been recovered under the False Claims Act. In recent years, Federal prosecutors investigating False Claims Act matters and cases have increasingly relied on Civil Investigative Demands to evaluate the allegations that have been raised. This article examines the government’s use of Civil Investigative Demands in more detail and discusses issues you should consider if you and / or your practice is issued a Civil Investigative Demand in connection with a False Claims Act investigation. 

I.        What is a Civil Investigative Demand?

         The phrase “Civil Investigative Demand” is a broad phrase that is used by a number of Federal and State investigative and law enforcement agencies to describe one of the compulsory process investigative tools at their disposal when investigating civil fraud and related misconduct.[iv] This article focuses solely on Civil Investigative Demands issued pursuant to alleged violations of the civil False Claims Act, 31 U.S.C. §3729. Simply stated, Civil Investigative Demands used in False Claims Act investigations are essentially subpoenas authorized under 31 U.S. Code §3733.

• How Can a Civil Investigative Demand be Used by the DOJ?

Under 31 U.S.C. § 3729-3733(1)(A)-(D), the government can use a Civil Investigative Demand to require a person:

1. To produce such documentary material for inspection and copying,
2. To answer in writing written interrogatories with respect to such documentary material or information,
3. To give oral testimony concerning such documentary material or information, or
4. To furnish any combination of such material, answers, or testimony. (Emphasis added).

As this list of permissible uses reflects, a Civil Investigative Demand is an invaluable discovery tool that can be used by Federal prosecutors to decide whether to file a DOJ initiated case or to interview in a False Claims Act case that has already been filed by a whistleblower.

• Who is Authorized to Issue a Civil Investigative Demand?

Civil Investigative Demands were legislatively authorized as part of the 1986 amendments to the False Claims Act.[v]  At that time, their use as an investigative tool was quite limited due to the administrative burden of having to be approved for issuance. At that time, a Civil Investigative Demand can only be authorized by the Attorney General himself [E1] (or herself). For many years this tool was only used in significant False Claims Act cases.

The Fraud Enforcement Recovery Act of 2009 (FERA) included several substantive changes to established legal principles associated with the civil False Claims Act.[vi] FERA also significantly expanded the ability of the DOJ to conduct civil health care fraud investigations by allowing the delegation, and subsequent re-delegation of the authority to issue Civil Investigative Demands. As a result of that change, the Attorney General immediately delegated his authority to the Assistant Attorney General (AAG) for the Civil Division, who, in turn, re-delegated the authority to issue Civil Investigative Demands to the 93 U.S. Attorneys (there are 94 judicial districts but only 93 U.S. Attorneys – one handles two judicial districts).[vii] From a practical standpoint, U.S. Attorneys have effectively further re-delegated the authority to issue Civil Investigative Demands to the Assistant U.S. Attorneys investigative False Claims Act cases in their district. [E2] 

• When Can a Civil Investigative Demand be Issued in a DOJ Initiated Matter?

The government’s authority to issue a Civil Investigative Demand in a DOJ initiated False Claims Act investigation is limited to the point that DOJ files a lawsuit.  Once the DOJ has filed suit under the False Claims Act, it is not permitted to use Civil Investigative Demands as an investigative tool.[viii]  If the DOJ issues a Civil Investigative Demand after a lawsuit has been filed, you should object to the Civil Investigative Demand.  To be clear, there are a full range of standard post-filing civil discovery tools at the DOJ’s disposal – but a Civil Investigative Demand isn’t one of them.

• When Can a Civil Investigative Demand be Issued by the DOJ in a Qui Tam Case?

Once a False Claims Act case is filed, the Attorney General has a statutory obligation to investigate the False Claims Act violations that have been alleged by whistleblower.[ix] Civil Investigative Demands are now commonly used by Federal prosecutors to assess the viability of a whistleblower’s case. Once the government makes an intervention decision, it may no long issue Civil Investigative Demands in a qui tam.[x] If the government decides to intervene in a case, it must rely on traditional discovery tools to build and prove its case.      

• Why Are Federal Prosecutors Increasingly Relying on Civil Investigative Demands in Health Care False Claims Act Cases?

Since the authority to issue Civil Investigation Demands has been redelegated to U.S. Attorneys, the use of this investigative tool has greatly increased.  Assistant U.S. Attorneys often rely on Civil Investigative Demands to obtain the necessary documents, testimony and information needed to decide whether the government should intervene in a qui tam.  During FY 2021, a total of 801 new False Claims Act matters were opened.  Of this total, 598[xi] (74.6%) were filed by whistleblowers under the False Claims Act’s qui tam provisions by private persons.[xii] These whistleblower-generated cases are handled by DOJ Civil Division attorneys and or Assistant U.S. Attorneys around the country. Civil Investigative Demands are often at the center of the government’s investigative efforts prior to deciding whether to intervene in a qui tam.    

II.       Parallel Proceedings in a False Claims Act Case:

The term “Parallel Proceedings” refers to the concurrent investigation and / or litigation of separate administrative, civil and / or criminal proceedings by the government[xiii] based on a common set of facts. For example, the civil Assistant U.S. Attorney in the U.S. Attorney’s Officer may pursue civil violations along one track while a criminal Assistant U.S. Attorney in the same office investigates criminal allegations. In 2012, Attorney General Holder issued a statement (Holder Memo) outlining the DOJ’s policy on coordinating parallel civil and criminal proceedings to enforce against fraud. At that time, he stated that the DOJ’s policy is as follows:

“. . . that criminal prosecutors and civil trial counsel should timely communicate, coordinate, and cooperate with one another . . . whenever an alleged offense or violation of federal law gives rise to the potential for criminal, civil, regulatory, and/or agency administrative parallel (simultaneous or successive) proceedings.”[xiv] 

To be clear, parallel proceedings aren’t new,[xv] but there is no debate that their use has greatly increased in recent years.  The Holder Memo further emphasized the need for cooperation between criminal and civil prosecutors. The goal of the Holder Memo was to implement policies and procedures which would allow information sharing between the civil and criminal sides of the office (to the extent that the information can legally be shared).[xvi] To a significant extent, this directive was again re-emphasized in a Memorandum issued by Deputy Attorney General Sally Quillian Yates in 2015 (Yates Memo).[xvii]  The Yates Memo also emphasized the importance of holding the specific individuals who are responsible for the improper conduct accountable for their actions, rather than solely pursue pursuing an offending corporation.

• Evidence Obtained Using a Civil Investigative Demand May be Shared with a Federal Criminal Prosecutor for Use in a Possible Parallel Criminal Investigation.

Any information gathered via a Civil Investigative Demand is effectively eligible for legal use in a criminal investigation at the time it is shared with the civil attorney. Both government-initiated False Claims Act matters, and whistleblower filed False Claims Act cases are often assessed using Civil Investigative Demands.  Consistent with the DOJ’s policy of cooperation, documents, answers to interrogatories and transcripts of oral testimony produced in response to a Civil Investigative Demand are often shared with criminal side of the office so that a separate evaluation of possible criminal culpability can be made. By statute, Civil Investigative Demands expressly permit the DOJ to utilize the information obtained in criminal proceedings.   31 U.S.C. §3733(i)(3) provides:

“(3) USE OF MATERIAL, ANSWERS, OR TRANSCRIPTS IN OTHER PROCEEDINGS-

Whenever any attorney of the Department of Justice has been designated to appear before any court, grand jury, or Federal agency in any case or proceeding, the custodian of any documentary material answers to interrogatories, or transcripts of oral testimony received under this section may deliver to such attorney such material, answers, or transcripts for official use in connection with any such case or proceeding as such attorney determines to be required.”

In essence, you should assume that any information you produce in response to a Civil Investigative Demand is being shared with criminal prosecutors. As an aside, regardless of whether the DOJ has issued a Civil Investigative Demand, most U.S. Attorney’s Offices automatically share a copy of all False Claims Act qui tam Complaints filed under seal with an Assistant U.S. Attorney in the office’s Criminal Division.

III.      How Easy is it to Turn a Civil False Claims Act Case into a Criminal Prosecution?

As we have discussed, a Civil Investigative Demand issued pursuant to the investigation of a False Claims Act matter may be used by the DOJ to obtain relevant documents, written responses to interrogatories, and oral testimony from potential witnesses.  Depending on the facts, any of these items may provide evidence to the government of criminal wrongdoing.  Several areas of particular concern are discussed below.

• Kickbacks and Improper Inducements.

            Simply stated, the Federal Anti-Kickback Statute [xviii] criminalizes the payment of any funds or giving something of value in an effort to induce referrals that are paid for by the Medicare or Medicaid programs. Both a party offering a kickback and the intended recipient can be held criminally liable under the Anti-Kickback Statute. A party found guilty of violating the statute can be fined up to $100,000 and imprisoned up to 10 years, or both, for each violation of the law. [xix]

            Among its various provisions, the Affordable Care Act amended the Federal Anti-Kickback Statute so that a violation of the law automatically qualifies as a violation of the civil False Claims Act:

“In addition to the penalties provided for in this section or section 1320a–7a of this title, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of title 31.”

            A significant portion of the whistleblower cases currently filed include one or more allegations that the defendants have violated the Anti-Kickback Statute. Similarly, it isn’t uncommon for government-initiated False Claims Act investigations to include a kickback component.  In both scenarios, when issuing a Civil Investigative Demand, the government would likely seek documents, answers to interrogatories and / or oral testimony exploring the kickback allegations that have been raised.  To the extent that your testimony is being sought in a civil False Claims Act investigation, if you believe that your statements could expose you to criminal liability, you can assert your right to remain silent under the 5^th Amendment of the Constitution.[xx]  Unfortunately, should you assert your 5^th Amendment rights in a civil matter, a court may draw an adverse interference from your silence. [xxi]

• False Statements and Misrepresentations.

            A Civil Investigative Demand seeking your testimony is a serious matter.  During your questioning, should you make a false statement, conceal a material fact or make a material misrepresentation, you may be criminally prosecuted under 18 U.S.C. §1001.  Don’t turn a civil matter into a criminal prosecution – consult experienced legal counsel before making statements to a government agent or prosecutor.

• Destruction, Alteration of Falsification of Records in a Federal Investigation.

            Upon learning of a Federal investigation, or upon receipt of a Civil Investigative Demand (whichever happens first), we recommend that you take steps to ensure that no evidence is destroyed, and no records are falsified.  Under 18 U.S.C. §1519:

“Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States .. . shall be fined under this title, imprisoned not more than 20 years, or both.”

            As these examples illustrate, targets of False Claims Act investigations may have significant criminal exposure.  There is no easy answer when addressing these risks.  Should you fail to comply with the requests for production or to the answer interrogatives in a Civil Investigative Demand, the government will likely first file a Motion to Comply with the court. Should you still refuse to turn over documents or answer the questions posed, you may be held in contempt by the court.  Additionally, the government will likely use one of the other, more intrusive discovery tools at its disposal. More than likely, the government will ultimately prevail and will get the information it is seeking.  It is therefore essential that you engage experienced health law counsel as early in the process as possible.  For more information on the possible collateral consequences of responding to a Civil Investigative Demand, you may wish to review our article titled, “The Collateral Enforcement Risks of DOJ Civil Investigative Demands (CIDs) Issued in False Claims Act Matters and Cases”.

IV.     Responding to a Civil Investigative Demand:

Upon receipt of a Civil Investigative Demand, you should immediately seek an experienced health law attorney to guide you in responding to the government’s subpoena. You want to ensure that this individual or firm is experienced and knowledgeable regarding Civil Investigative Demands and their use in False Claims Act investigations and cases. Questions to ask include, but are not limited to:

• Was the attorney a former Assistant U.S. Attorney?  If so, did he or she handle False Claims Act cases on behalf of the government?
• Has the attorney handled a wide variety of Civil Investigative Demands in other False Claims Act health care matters and cases?
• Is the attorney experienced in negotiating the scope and timing of Civil Investigative Demands with DOJ prosecutors?
• Is the attorney sensitive to the multitude of administrative, civil and criminal collateral consequences that can arise out of a False Claims Act investigation?
• Does the attorney have a firm understanding of the fundamental requirements of medical necessity, coding and billing?
• If kickback allegations are a component of the case, is the attorney experienced in analyzing the conduct in light of the many Safe Harbors that have been established under the Federal Anti-Kickback Statute?  There are currently 11 Statutory Safe Harbors and 34 Regulatory Safe Harbors.  Depending on the facts, your conduct may qualify for the protection of one of these Safe Harbors.
• Is the attorney experienced handling complex document production projects and assisting health care providers assemble their responses to interrogatories?

If you or your practice receives a Civil Investigative Demand, you should immediately contact your legal counsel and take steps to ensure that no spoilation of the evidence takes place. It cannot be stated enough that the information gathered using this investigative tool can give rise to administrative sanctions, civil liability and / or criminal prosecution. Questions? Give us a call for a free consultation. We can be reached at: 1 (800) 475-1906.Robert W. Liles, Esq. is Managing Partner at the health law firm, Liles Parker PLLC.  He is a former Federal prosecutor and have extensive experience with the False Claims Act. We represent health care providers around the country in connection with Civil Investigative Demands and False Claims Act matters and cases. Should you have any questions, please call us for a free consultation. Robert can be reached at: 1 (800) 475-1906

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[i] See 31 USC §3729.

[ii] These recoveries were in addition to administrative impositions spearheaded by the Department of Health and Human Services, Office of Inspector General (OIG), the Centers for Medicare and Medicare Services (CMS), and the various contractors working for CMS (for example, Unified Program Integrity Contractors (UPICs) and Supplemental Medical Review Contractors (SMRCs)). 

[iii] Office of Public Affairs, Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 2021 (2022). Department of Justice. https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year.

[iv] Statutory and regulatory provisions authorizing CIDs have been implemented at both the Federal and State level.  The purpose and scope of each CID varies from one to another.  For example, three of the most common CID’s used by Federal law enforcement and investigators include:

• 15 U.S.C. §57b-1 – Civil Investigative Demands. Used by attorneys and investigators employed (or representing) the Federal Trade Commission to ascertain whether a person is (or has been) engaged in any unfair or deceptive acts or practices in or affecting commerce OR in any antitrust violations.
• 18 U.S.C. §1968 – Civil Investigative Demand.  Used by Federal prosecutors to demand the production of documentary materials relevant to a racketeering investigation.
• 31 U.S.C. §3733 – Civil Investigative Demands.  Used by the Attorney General, or a designee (usually an Assistant U.S. Attorney) to obtain documentary evidence, interrogatories and / or oral testimony, in connection with the investigation of a False Claims Act matter (or case, if a qui tam has been filed by a whistleblower).

[v] See, Public Law 99-562, October 27, 1986.

[vi] Among other changes, FERA largely legislatively overturned the U.S. Supreme Court’s decision in Allison Engine Co. United States ex rel. Sanders, 553 U.S. 662 (2008); and it made overpayments “obligations” thereby vastly expanding the ability of the government to bring “reverse false claims” actions.

[vii] See: Redelegation of Authority of Assistant Attorney General, Civil Division, to Branch Directors, Heads of Offices and United States Attorneys in Civil Division Cases. Section 5. 75 Fed. Reg. 14070 (Mar. 24, 2010).

[viii] See 31 USC §3733(a)(1).  As this provision provides:

Whenever the Attorney General, or a designee (for purposes of this section), has reason to believe that any person may be in possession, custody, or control of any documentary material or information relevant to a false claims law investigation, the Attorney General, or a designee, may, before commencing a civil proceeding under section 3730(a) or other false claims law, or making an election under section 3730(b),  (Emphasis Added).

[ix] See 31 USC §3730(a).

[x] Ibid.

[xi] DOJ Fraud Statistics – Overview (October 1, 1986 – September 30, 2021).

[xii] See 31 USC §3730(b)(1).

[xiii] Although we tend to think of “Parallel Proceedings” as the simultaneous pursuit of civil and criminal claims by the DOJ, that isn’t always the case.  It can also involve CMS pursing administrative sanctions at the same time that the DOJ is pursuing a defendant for civil or criminal violations.  It may also include situations where a State enforcement agency is pursuing a defendant for civil or criminal violations of State law at the same time that the DOJ is pursing the same defendant based on the same operative facts. 

[xiv] Memorandum from Eric H. Holder, Attorney Gen., Dep’t of Justice, to all US Attorneys, et al., “Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings” (Jan. 30, 2012), available at: https://www.justice.gov/usam/organization-and-functions-manual-27-parallel-proceedings (Holder Memo).

[xv] For example, there is a long history of the Internal Revenue Service (IRS) pursing administrative claims against wrongdoers at the same time that the DOJ is investigating a defendant for mail or wire fraud, based on the same operative facts.

[xvi] For example, information and evidence obtained in a criminal case pursuant to a Grand Jury Subpoena cannot be shared with civil prosecutors unless the criminal prosecutor obtains what is known as a “6(e) Waiver” from the Court.  See the Federal Rules of Criminal Procedure, Rule 6(e).  To avoid this, Federal criminal prosecutors may utilize an Authorized Investigative Demand (AID) rather than the Grand Jury process to obtain documents in a health care fraud case. Information obtained with an AID can readily be shared with a civil prosecutor.

[xvii] Memorandum from Sally Quillian Yates, Deputy Attorney Gen., Dep’t of Justice, to all U.S. Attorneys et al., “Individual Accountability for Corp. Wrongdoing” (Sept. 9, 2015), available at: https://www.justice.gov/archives/dag/file/769036/download (Yates Memo).

[xviii] 42 U.S.C. § 1320a-7b.

[xix] Under the Bipartisan Budget Act of 2018, Pub. L. 115-123, 132 Stat. 64(2018):

• Under Subtitle B, Section 50412(a)(2), Criminal penalties for acts involving federal health care programs under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased from $25,000 to $100,000.
  • Under Subtitle B, Section 50412(b)(2), Additionally, the maximum sentences for felonies involving Federal health care program fraud and abuse under 42 U.S.C. § 1320a–7b(b), including but not limited to the Anti-Kickback Statute, were increased from Five to Ten years.

[xx] Courts have long held that the Fifth Amendment privilege “can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory.” Kastigar v. United States, 406 U.S. 441, 445 (1972).

[xxi] See SEC v. Susman, 2010 WL 532060, at *5 (S.D.N.Y. Feb. 11, 2010). See also Commodity Futures Trading Comm’n v. Int’s Fin. Servs., 323 F.Supp.2d 482, 505 (S.D.N.Y.2004).

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False Claims Act Penalties Have Risen for the Second Time Within the Last Year

(March 30, 2017):  The False Claims Act is the primary civil enforcement tool utilized by the U.S. Department of Justice to address false claims submitted to government programs and contracts by individuals and entities.  The statute was first passed during the Civil War in 1863 in an effort to address the wrongful conduct of was profiteers.  Among its various provisions, the False Claims Act includes specific measures intended to encourage the disclosure of fraud by private persons through the filing of a whistleblower suit. Under these provisions, a private person (often referred to as a “relator”) can may bring a False Claims Act lawsuit on behalf of, and in the name of, the United States.  If a recovery is made, the relator may be eligible to a share of these monies.

I. Recoveries Under the False Claims Act in 2016 Were Substantial:

Most of the False Claims Act cases brought against health care providers are filed by whistleblowers. As set out in a December 2016 DOJ Press Release, during Fiscal Year 2016 the federal government obtained more than $4.7 billion in False Claims Act settlements and judgments. Of this total, $2.5 billion came from individuals and entities in the health care industry.

II. The Penalties That May be Assessed Under the False Claims Act Vary, Depending on the Date a False Claim or Statement to the Government Was Made:

A person found to have violated the False Claims Act may be liable for both civil penalties and treble damages. Under the 1986 amendments to the False Claims Act the range of civil penalties for violations of the False Claims Act from $5,000 to $10,000.  Since that time, the following additional adjustments have been made:

• For false claims or statement made after October 23, 1996, but before August 1, 2016, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $5,500 and the maximum penalty is $11,000, per false claim or statement.

• For false claims or statements made on or after August 1, 2016, but before February 3, 2017, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $10,781 and the maximum penalty is $21,563, per false claim or statement.

Although the amount of civil penalties assessed in False Claims Act cases almost doubled in August 2016, additional increases were recently announced.  On February 3, 2017, DOJ issued a Final Rule further adjusting the amount of civil monetary penalties that may be assessed under the False Claims Act to account for inflation.  For false claims or statements made after February 3, 2017, the minimum penalties which may be assessed under 31 U.S.C. 3729 is $10,957 and the maximum penalty is $21,916, per false claim or statement.

III. Health Care Providers Must Ensure that Their Claims to Medicare and / Medicaid Meet Statutory and Regulatory Requirements for Coverage and Payment:

In today’s health care billing environment, where the number of electronic claims submitted to Medicare can be significant, the potential penalties an organization could face for the submission of false claims can add up quickly. In light of the increases in penalty amounts implemented in August 2016 and in February 2017, we should expect to see future challenges under the Eighth Amendment of the Constitution.  As you will recall, the Eighth Amendment prohibits the imposition of “excessive fines,” or fines that are grossly disproportional to the gravity of an offense.

Liles Parker attorneys have extensive experience working on False Claims Act cases.  If your practice or health care organization has questions regarding the False Claims Act, give us a call.  For a free consultation, call Robert W. Liles.  He may be reached at:  (202) 298-8750.

Application of the “60-Day Overpayment Rule” Under the False Claims Act

(September 14, 2016):  On March 23, 2010, the Affordable Care Act (ACA) was signed into law. Among its various provisions, §6402(a) of the ACA established new requirements under the Social Security Act.  Under §1128J(d)(1) of the Social Security Act if a person[1] receives a Medicare overpayment, it must be reported and returned to the appropriate contractor.  Moreover, the appropriate Medicare contractor must be notified in writing of the reason for the overpayment.  Importantly, an overpayment must be reported and returned by the later of:

 

(A)     the date which is 60 days after the date on which the overpayment was identified; or

(B)     the date any corresponding cost report is due, if applicable.[2] (emphasis added).

I.  Penalties Under the False Claims Act:

Under §1128J(d)(3) of the Social Security Act, if a Medicare overpayment were to be retained by a health care provider or supplier after the deadline for reporting and returning an overpayment, it would be considered to be an “obligation”[3] and could give rise to liability under the civil False Claims Act.[4]  A person found to have violated this statute may be liable for both civil penalties and treble damages. The amount of civil penalties that may be imposed for each false claim depends on when each was made:

(a) For claims or statements made after October 23, 1996, but before August 1, 2016, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $5,500 and the maximum penalty is $11,000.

(b) For claims or statements made on or after August 1, 2016, but before January 1, 2017, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $10,781 and the maximum penalty is $21,563.[5]

II.  When is an Overpayment “Identified”?

On February 13, 2012, the Centers for Medicare and Medicare Services (CMS) first published a Proposed Rule outlining how the provisions of §1128J(d)(1) of the Social Security Act would be implemented.[6]  CMS issued its Final Rule on Final Rule on February 12, 2016.[7]  At that time, the agency commented that:

The 60-day time period begins when either the reasonable diligence is completed or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment.” [8]

The Final Rule further notes that a provider can establish that it demonstrated reasonable diligence in assessing a potential overpayment if it conducted a “timely, good faith investigation of credible information, which is at most 6 months from receipt of the credible information, except in extraordinary circumstances.”[9]

III.  Meaning of “Reasonable Diligence”

CMS’ final rule still leaves questions unanswered as to what exactly represents “reasonable diligence” by a provider. The final rule explains that the 60-day window starts while the healthcare provider is executing “reasonable diligence” as to whether the provider has received any overpayments and the total amount of overpayments. Furthermore, the preamble of the final rule discusses a six-month interval as a goal for providers to conduct reasonable diligence into potential overpayments absent extraordinary circumstances.

IV.  Application of the 60-Day Overpayment Rule in a False Claims Act Case:

While it has only been a little more than six months since the Final Rule on the 60-day overpayment rule has been published, the first case dealing directly with this issue, United States ex rel. Kane v. Healthfirst, Inc., et al., recently settled for $2.95 million on August 23, 2016.

The case arose out of a qui tam action, which alleged that the Mount Sinai Health System violated the False Claims Act (FCA) because it did not fulfill its repayment obligation until nearly two years after it was notified about the potential overpayments. One of the main issues in the case was the meaning of “identify” as used in the ACA. In this case, the court held that an overpayment is identified at the moment a provider is put on notice of a potential overpayment; rather then when the full extent of an overpayment is conclusively ascertained.

V.  Conclusion:

The recent Healthfirst settlement is merely the first of what will likely be many cases brought against a health care provider or supplier under the False Claims Act for the failure to report and return an alleged overpayment in a timely fashion.  Now, more than ever, it is imperative that your organization have an effective Compliance Program in place so that any potential overpayments can be promptly identified, investigated, and repaid to the government, as necessary.

Robert W. Liles, M.B.A., M.S., J.D., serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law. Liles Parker is a boutique health law firm, with offices in Washington DC, Houston TX, San Antonio TX, McAllen TX and Baton Rouge LA. Robert represents physicians and other health care providers around the country in connection with Medicare revocation actions. Our firm also represents health care providers in connection with federal and state regulatory reviews and investigations. For a free consultation, call Robert at: 1 (800) 475-1906.

[1] The term ‘‘person’’ as a provider (as defined in 42 C.F.R. §400.202) or a supplier (as defined in 42 C.F.R.§400.202).

[2] Section 1128J(d)(2).

[3] As the term “obligation: is defined in 31 U.S.C. §3729(b)(3) for purposes of liability under the False Claims Act.

[4] In addition to liability under the False Claims Act (31 U.S.C. §3729), should a provider or supplier fail to properly report and return an overpayment, the provider could also be subject to civil monetary penalties and / or exclusion from participation in the Medicare program.

[5]   81 Fed. Reg. 26127, 26129 (May 2, 2016).

[6] 77 Fed. Reg. 9179 (February 16, 2012), titled Medicare Program; Reporting and Returning of Overpayments.

[7] 81 Fed. Reg. 7654 (February 12, 2016), titled, Medicare Program; Reporting and Returning of Overpayments.

[8]  81 Fed. Reg. 7654, 7661 (February 12, 2016).

[9] 81 Fed. Reg. 7654, 7662 (February 12, 2016).

ZPIC Audits Involving Extrapolated Damages Can Bankrupt Your Practice.

(January 30, 2013): The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (also referred to as “BIPA”), amended Section 1869 of the Social Security Act, resulting in a number of significant changes to the way administrative appeals of denied Medicare claims are handled. One change in particular has greatly simplified the Medicare appeals process.  BIPA established a uniform process for handling both Medicare Part A and Part B administrative appeals.

I.          ZPIC Audits Involving Extrapolated Damages Have Become Quite Common.

Unlike the Medicaid administrative claims appeal process (which varies from state to state), thanks to BIPA, the Medicare administrative appeals process is relatively straightforward in terms of its applicable deadlines and its filing procedures.  Unfortunately, a number of potential pitfalls remain, especially if a health care provider is inexperienced and has been subjected to an audit involving multiple claims where the Zone Program Integrity Contractor (ZPIC) has engaged in statistical sampling and has “extrapolated” the alleged damages in order to arrive at a projected overpayment.  Although most providers can handle the appeal of individual (or even a handful) of claims, if you are facing a “big-box”[1] appeal where alleged damages have been extrapolated, it is strongly recommended that you obtain the assistance of experienced legal counsel to represent you in the proceedings.

II.          How Are ZPIC Audits Initiated?

A ZPIC may initiate a post-payment audit of your Medicare claims for a variety of reasons. After handling the administrative appeal of literally tens of thousands of claims, we have found that the two most common reasons for an audit are:  (1) Data-Mining and (2) Complaints. 

Data-mining  may result in a provider being targeted based on the number of patients he or she is allegedly seeing each day, the frequency that a specific Code Procedural Terminology (CPT) code is being billed, or countless other factors examined by a contractor when assessing coding and billing practices.  Alternatively, a provider may be reviewed as a result of a complaint filed by a former employee, a dissatisfied patient, or even a competitor.  Regardless of the source, once a provider is targeted and an audit has been initiated, it is imperative that the provider diligently work to address any operational, coding, or billing concerns that may arise.

While the nature of a contractor’s initial contact with a Medicare provider can vary (it often is made by an unannounced site visit), a provider may also receive a written request for information from the ZPIC. In past years, written requests were primarily focused on supporting medical documentation related to specific claims for services or devices billed to Medicare.  This focus has seemingly changed over the past few years. Although many requests continue to seek only supporting medical documentation, we have seen an appreciable increase in the number of requests for business records sent out by Medicare contractors such as ZPICs.  These requests often seek copies of contracts, medical director agreements, and copies of accounting records.  Essentially, these document requests are meant to provide the contractor with an accurate picture of the provider’s business and referral relationships.  Should the contractor identify any questionable relationships, they will then refer their findings to the Inspector General of the Department of Health and Human Services (HHS-OIG) and / or the Department of Justice (DOJ) for further consideration.

After you have received a request for supporting documentation (either in writing or as a result of an unannounced visit) and have submitted the information sought, the requesting ZPIC will subsequently send you a letter, outlining the ZPICs findings.

While practices vary from ZPIC to ZPIC, a provider typically first learns that an auditing contractor intends to extrapolate an alleged overpayment in one of two ways.  In some cases, the initial letter sent to the provider requesting medical records associated with a group of claims may expressly state that the claims identified constitute a statistically relevant sample.  As such, when the audit is completed, the ZPIC will then extrapolate the alleged damages to the universe of claims at issue in the case.  In most cases, the contractor has examined a universe which consists of a two year period of claims.  Alternatively, a provider may not learn that the contractor intended to extrapolate damages until the results of the ZPIC audit are received.

It is not uncommon for a ZPIC to take from 6 months to 2 years to complete its review of your documentation. Shortly after receiving the ZPIC results letter, you should receive a “demand letter” from your Medicare Administrative Contractor (MAC).[2]  While the letter from your ZPIC will typically lay out the audit results and discuss the reasons for denying certain claims, you should pay careful attention to see if the ZPIC has extrapolated the alleged damages in your case from the sample of claims reviewed to the universe of claims at issue.

In most cases, the ZPIC letter will expressly state that their correspondence is not a demand letter. Instead, the second letter, sent by the MAC, will state the amount of the alleged overpayment and lay out when payment is due.  Normally, the date of the MAC letter is also used to calculate the due date of the provider’s rebuttal and redetermination appeal.  While this process has become fairly uniform, we have continued to see exceptions to the general rule.  In at least one case, the demand letter was sent out in a third letter. In another case, the contractor’s demand letter language was incorporated into the first letter. As a result, it is imperative that you carefully review any and all correspondence sent by a ZPIC.

III.            What is an “Extrapolation”?

An extrapolation is the process of using statistical sampling in a review to calculate and project or extrapolate alleged overpayments made in connection with Medicare claims.  Medicare contractors seek out errors in a purported “statistically relevant sample” of the provider’s Medicare claims and then calculate and apply the “error rate” to the entire universe of claims covering a given period of time.

The practice dates back twenty years to a decision by the HHS to authorize the use of statistical sampling in lieu of engaging in onerous claim-by-claim reviews.  In Chaves County Home Health Services v.  Sullivan,[3] the Court of Appeals for the District of Columbia Circuit upheld extrapolation as within the Secretary’s discretion.

When faced with a potential case where the universe of claims to be reviewed is so large that a claim-by-claim review is not administratively feasible, CMS has authorized its contractors (including ZPICs) to use statistical sampling to arrive at a projected overpayment.  As HCFA Ruling 86-1 reflects:

“Intermediaries and carriers may use statistical sampling to project overpayments to providers, physicians and suppliers when claims are voluminous and reflect a pattern of erroneous billing or overutilization and when case-by-case review is not administratively feasible.  Providers can appeal the overpayment determination by challenging the statistical validity of the sample or the correctness of the determination in specific cases identified by the sample.”

As HCFA Ruling 86-1 expressly notes, a provider or supplier who is concerned about the correctness of the projected overpayment can challenge the “statistical validity” itself or the correctness of the “specific cases identified by the sample.”  As HCFA Ruling 86-1 further notes, statistical sampling is appropriate when:

“. . . The intermediary [has] decided that this method of determining the amount of the overpayment was not administratively feasible, given the volume of records involved and the cost of retrieving all the beneficiary records for the period in question.  The cost of identifying and calculating each individual overpayment itself would constitute a substantial portion of the amount the intermediary might reasonably be expected to recover.  Further, the allocation of sufficient staff to reexamine all individual claims for the period in question would interfere with current claims processing activities to an unacceptable degree.”

While a provider may still challenge the denial of claims in the sample reviewed, the use of extrapolation greatly increases the potential financial harm that a provider mat suffer as a result of an audit.  Moreover, the reliance of ZPICs on statistical sampling only seems to be growing.  This makes it essential for providers to involve experienced counsel and qualified experts as soon as possible in cases where damages have been extrapolated.

The use of extrapolation can greatly increase a provider’s potential liability.  It is not at all uncommon for a sample of denied claims which would normally add up to a mere $10,000, to be magnified to the universe of claims, to an extrapolated alleged overpayment of $500,000 or even more.  As we will discuss, there are a number of business reasons why everyone except the provider benefits from the use of extrapolation.  

IV.            Challenging a ZPIC’s Extrapolation of Alleged Damages.

In recent years, we have seen Medicare contractors (such as ZPICs) increasingly rely on statistical extrapolation estimates when assessing claims overpayments.  In early cases, we successfully challenged countless extrapolations by identifying relatively basic reasons for why the calculations were inconsistent with accepted statistical principles and practices.  Now, however, providers should expect ZPICs, and soon, Recovery Audit Contractors (RACs) to send a team made up a statistician, one or more clinical reviewers and an attorney, to vigorously oppose most, if not all, hearings challenging the validity of the extrapolation.

Imagine that a ZPIC or RAC hands you a claims analysis rife with alleged errors, an indecipherable list of statistical formulas, and an extrapolated recovery demand that will cripple your practice or clinic.  What steps should you take to analyze their work?  Based on our experience, providers should carefully assess the contractor’s actions, use of formulas, and application of the RAT-STATs program when selecting a statistical sample and extrapolating the alleged damages based on the sample pulled.  Over the years, we have challenged the extrapolation of damages conducted by Medicare contractors around the country, covering tens of thousands of claims.  Regardless of whether you are providing E / M, home health, physical therapy, hospice, or other services, it is imperative that you work with experienced legal counsel and statistical experts to analyze the statistical sampling and extrapolation steps taken by the contractor.

Should you succeed in invalidating the extrapolation, the whole game will change.  The question is—“How can you go about fighting an extrapolation calculation?” As your legal counsel can attest, there are a number of both legal and substantive statistical arguments that should be analyzed by your counsel and expert statistician when challenging the validity of a statistical extrapolation.  The weight given to a specific argument may vary from judge to judge.  As a result, it is often in your best interest to assert any and all legitimate arguments in support of your assertion that the statistical extrapolation is fatally flawed.

V.          Questions You Should Ask When Retaining Legal Counsel to Represent Your Interests.

When faced with extrapolated damages, it is almost always necessary to retain qualified legal counsel to represent the provider in the Medicare administrative appeals process.  Possible considerations include, but are not limited to:  

(1)  Has the law firm ever handled large, complex contractor audits before? Some firms will happily take your case, despite the fact that they have little or no experience in this area of health law.  Do not pay for your attorneys to learn how to handle your case.  While every case is different, an experienced firm will have developed a number of arguments and defenses that may be readily used in your case without having to conduct costly, extensive legal research. 

(2)   Can the firm provide client references? You should not hesitate to ask the attorney for references who can discuss the quality and cost effectiveness of the attorney’s work.

(3)   Has the attorney handled multiple hearings before ALJs hearings and / or appeals before the Medicare Appeals Council (MAC)? At the end of the day, there are few substitutes for experience.  Make sure you are comfortable with your attorney.

(4)   Inquire into who will be used as a statistical expert.  Experienced legal counsel will have likely developed solid relationships with statisticians who can be engaged to review the Medicare contractor’s statistical methodology. 

(5)   The issue of “cost” should be addressed before any final decision is made to retain an attorney to represent your practice or business.  Attorneys may be willing to handle your case on an hourly basis, as a flat rate, or on some other basis.  It is essential that you conduct an honest review of your financial condition and engage competent counsel at a cost you can afford.   

VI.           Conclusion.

Medicare appeals cases involving extrapolated damages can be quite complicated.  If you intend to challenge an extrapolation, it is essential that you work with experienced legal counsel and experts.  Not yet facing an audit?  Avoid this issue in the first place — develop, implement and adhere to an effective Compliance Plan.  Work with your staff to ensure that each of your claims fully meets applicable documentation, coverage and payment requirements before billing.

Robert W. Liles and other health lawyers in Liles Parker have extensive experience representing Part A and Part B providers in Medicare appeals cases, both with and without an extrapolation of projected damages.  Our attorneys are also experienced in setting up effective Compliance Plans and Programs for Medicare and Medicaid providers.  Should you have any questions, please give Robert a call for a free consultation.  He can be reached at: 1 (800) 475-1906.  

Medicare Appeals Have Become More Complex Than Ever.

(January 21, 2013):  Medicare appeals of denied claims for services are somewhat common.  In years past, both health care providers and members of their staff have represented themselves or their practice in the administrative process.  While the rules of participation are quite lenient, the process has significantly changed over the last decade.  Moreover, in recent years, contractors working for the Centers for Medicare and Medicaid Services (CMS) have assumed a much greater role in the Medicare appeals process.  Hearings conducted in today’s administrative appeals of alleged Medicare overpayments are likely to be quite different from those conducted even a few years ago.  Should you decide to represent yourself in a hearing before an Administrative Law Judge (ALJ), you must be prepared to respond to a number of relatively new challenges.  As set out below, the current administrative process is really the result of several consecutive legislative changes to the Medicare appeals process.

I.     The Enactment of “BIPA” Was the First of Many Changes to the Medicare  Appeals Process:

          The “Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000” (also referred to as “BIPA” )amended Section 1869 of the “Social Security Act” (Act), resulting in a number of changes.  Several of the changes implemented under BIPA included:

The legislation established a consistent, uniform process for handling both Medicare Part A and Part B administrative appeals;

BIPA introduced a new level of appeal for Part A claims, making it so that it now tracked the Part B claims appeals process;

The legislation revised the appeal deadlines for filing Part A and Part B claims appeals and also applied the same deadlines to both Part A and Part B claims;

The legislation identified “deadlines” for CMS contractors at the first level of appeal (Medicare Administrative Contractors, or “MACs”) to issue a “Redetermination’’ appeal decision;

BIPA also created a second level of appeal which would be heard by a type of CMS contractor known as a Qualified Independent Contractor (QIC) to conduct a “Reconsideration’’ of the MAC’s previously issued redetermination decision;

BIPA established a uniform “amount in controversy threshold” which must be met in order for a health care provider or supplier to appeal a reconsideration denial decision to the Administrative Law Judge (ALJ) level;

Required that each level of appeal conduct a de novo review of the evidence.

II.        The MMA Further Refined the Medicare Appeals Process:

Medicare appeals were further changed with the passage of the “Medicare Prescription Drug, Improvement, and Modernization Act of 2003” (MMA).  Several of the refinements made to the Medicare appeals process under the MMA included, but were not limited to:

Under the MMA, the ALJ hearing process was transferred from the Social Security Administration (SSA) to an agency reporting directly to the Secretary, HHS, known as the “Office of Medicare Hearings and Appeals” (OMHA).

The legislation established a process for a health care provider to seek and “expedited” judicial review;

The MMA required that health care providers present their evidence to be considered early in the appeals process so that it could be considered at the second level of appeals.  

Under the MMA, health care providers could not seek an administrative or judicial review of a determination by the Secretary of a “sustained or high levels of payment errors”; and 

These revisions, along with a number of other changes, have dramatically changed the way that Medicare appeals are conducted.  Equally significant, CMS contractors (including Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs) and even representative of the QIC now routinely show up at ALJ hearings (as a “participant” not as a “party”)in order to present their reasoning for denying the claims.

While the proceeding is technically “non-adversarial” in nature.  The participation in the ALJ hearing of medical and statistical experts working for ZPIC can greatly complicate your handling of a Medicare appeal.

Over the years, our attorneys have represented a wide variety of Part A and Part B providers and suppliers in Medicare hearings before an ALJ.  There are no guarantees in litigation.  Nevertheless, if you want to maximize your chances of presenting a persuasive case, we recommend that you retain experienced legal counsel to represent you as early in the process as possible.

Robert W. Liles, Esq. serves as Managing Partner at Liles Partner, PLLC.  Robert and the firm’s other attorneys have years of experience representing health care providers in the Medicare appeals process.  Should you have a question, call Robert for a free consultation:  1 (800) 475-1906.

Lose Your Medicare Appeal at Reconsideration? Don’t Throw in the Towel Just Yet — Consider the Consequences and Your Options.

(June 18, 2011):  As a review of the last several quarters of Medicare appeals statistics reflects, an overwhelming percentage of Medicare providers appealing alleged overpayments through the Medicare administrative appeals process have chosen to “throw in the towel,” so to speak, when they have lost at the reconsideration level.  As you will recall, at the reconsideration level, Medicare claims are assessed by a Qualified Independent Contractor (QIC) selected by the Centers for Medicare and Medicaid Services (CMS) to hear the second level of administrative appeals.

According to statistics kept by Q2Administrators, the contractor selected to serve as the Administrative QIC (AdQIC), most Medicare providers have chosen not to appeal claims denials issued the QIC at the reconsideration level of appeal.  Nationwide, in the last eight quarters, the percentage of Part B QIC cases not being appealed has risen to an astounding 86%. This trend is also occurring in Part A QIC cases, where the numbers of non-appealed cases have grown from roughly half to 75%. 

The purpose of this article is to examine possible reasons why Medicare providers have chosen not to appeal claims denials to the Office of Medicare Hearings and Appeals (OMHA) to be heard by an Administrative Law Judge (ALJ).  We also examine points to be considered by providers if choosing to be represented by legal counsel in the ALJ hearing process.

I.          The Third Level of Medicare Appeals — ALJ Hearings

For 2011, if at least $130 remains in controversy following a QIC’s denial decision at the reconsideration level, a Medicare provider may request an ALJ hearing within 60 days of receipt of the reconsideration denial decision. ALJ hearings are intended to be non-adversarial proceedings aimed at determining the facts so that questions of coverage and payment may be properly addressed.  It has been our experience that the ALJ level of appeal is a provider’s best opportunity to present its arguments in support of coverage and payment.

ALJ hearings are usually held by video-teleconference or by telephone, but you may also ask for an in-person hearing. While an ALJ hearing is the third level of the administrative appeals process, it is the first time that a provider is given an opportunity to testify, clarify points missed by reviewers at lower level of appeal and answer any questions that may be raised by the ALJ.

 II.        Why Are Most Providers Not Filing Medicare Appeals Past the Reconsideration Level? 

When facing an overpayment determination levied by a Zone Program Integrity Contractor (ZPIC), a Recovery Audit Contractor (RAC) or in some instances a Medicare Administrative Contractor (MAC), the first question to be addressed by a Medicare provider is:

“Based on the record and the facts, should we have been paid for the services rendered or the products / devices provided to the Medicare beneficiary?” 

The answer to this question isn’t always as easy as it may initially seem.  Having said that, the basic rule we recommend that providers follow is fairly simple – if it doesn’t belong to you, give it back.  In such a situation, a provider should examine the various reasons why the claim does not qualify for coverage and payment and should take steps to better ensure that any deficiencies are remedied. Additionally, any other overpayments noted must be promptly repaid to the government, with the 60 day period mandated under the Affordable Care Act (ACA).

In cases where a provider (or their representative) contends that a claim does, in fact, qualify for payment, it typically appeals an overpayment assessment issued by a ZPIC, RAC or MAC.  Nevertheless, as previously discussed the vast majority of providers who lose an appeal at the reconsideration level choose not to further appeal the denial. In speaking with Medicare providers, the primary reasons for not appealing any further include:

• Cost / benefit considerations. By the time a provider reaches the ALJ level, the provider has already endured the time, expense and frustration of unsuccessfully arguing its case through two levels of appeal.  By this time, many providers conclude that the amount in controversy does not justify the time and expense of further appealing the QIC’s denial to the ALJ level.  

• Many providers are intimidated by the hearing process and do not feel comfortable participating in an ALJ hearing.  Despite the fact that ALJ hearings are typically conducted by teleconference, the process can still be quite intimidating.  ALJs almost always place testifying providers and their designated “experts” under oath before taking their testimony.  Additionally, if a provider has introduced new evidence into the record, it will be required to show “good cause” for its admission at this late stage of the proceedings.  Finally, most providers find that the ALJ handling their case is quite knowledgeable and typically has extensive experience analyzing coverage requirements and assessing the adequacy of a provider’s documentation.  Providers who have failed to adequately prepare for the hearing are likely to find that the process can be quite difficult.   
• The ALJ hearing process has become considerably more complicated due to the participation of ZPIC personnel. Over the past year, the ALJ hearing process has become quite complicated when dealing with large, “big box” overpayment cases.  For instance, in cases when damages have been extrapolated, it is quite common for representatives of the ZPIC who issued the initial denial decision to attend the hearing as a “participant.”  When this occurs, ZPIC representatives often include an attorney representing the ZPIC, a statistician who will be prepared to support the extrapolation applied in the case, and a clinician (typically a Registered Nurse) who will testify why the claims allegedly do not qualify for coverage.   

• In cases where a provider’s third-party biller has agreed to handle claims appeals, few billers have agreed to pursue a denial past the reconsideration level of appeal.    

III.        Consequences of Not Taking Your Medicare Appeal to the ALJ Level

Assuming that no extended repayment plan has been established and the alleged overpayment has not already been repaid, the MAC will initiate recoupment of the alleged overpayment 30 days after the QIC issues its denial decision. Unfortunately, this will occur regardless of whether a request for ALJ hearing is filed in a timely fashion.

Should a provider choose not to further appeal, its important to recognize that its “claims denial ratio” will increase.  As the government and its contractors increasingly rely on “data mining” when identifying potential targets for audit, providers with a high error rate will likely find their practices subject to further scrutiny.

 IV.       Don’t Give Up on Properly Billed Claims – Consider Your Options Before Declining to Pursue a Medicare Appeal  

As Medicare claims audit and assessment efforts increase (through CMS’ use of ZPICs, PSCs and RACs), health care providers will be under increasing pressure to ensure that all statutory and regulatory medical necessity, documentation, coding and billing requirements are met.  Despite a provider’s best efforts to remain compliant, it may find that its practice or clinic is alleged to have been overpaid by a Medicare contractor. Should that occur, we strongly recommend that you retain qualified, experienced legal counsel to represent your interests as early in the Medicare appeals process as possible.

Should you choose to handle the appeal yourself and lose at the reconsideration level, contact experienced legal counsel before deciding to discontinue the appeal.  Depending on the facts, you may find that it is both cost-effective and advisable to have your case handled at the ALJ level by experienced legal counsel.  When retaining counsel,  there are several important questions that you should ask:

“How much of your law practice involves health law issues?

Please describe the extent of your experience handling large, complex administrative appeals of denied Medicare claims.

Please describe your experience in challenging statistical extrapolations applied to an alleged overpayment in a case.

How often have you responded to AdQIC appeals of favorable ALJ decisions?

How often have you handled MAC appeals?

Can you provide provider references?”

Hopefully, your practice will not face a large administrative appeal of denied Medicare claims.  However, should such an event occur, you need to be ready to respond to the contractor’s audit.

V.         Conclusion

 In addition to representing a wide variety of providers in the administrative appeals process, our Firm has been retained by a number of other law firms to assist them with large, complex administrative appeals.  After representing health care providers for many years in administrative hearings, involving literally tens of thousands of claims, it has been our experience that the ALJ level of appeal is the single best opportunity that a provider has to present its arguments in support of payment.

 While there are no guarantees in litigation, working with qualified clinical personnel, experienced legal counsel can effectively present a provider’s arguments in support to an ALJ assigned to hear the provider’s case.  Keep in mind, the trier of fact is an attorney – not a clinician or a consultant. Experience, coupled with an in-depth knowledge of the statutory and regulatory requirements may prove essential in proving your case. The ALJs we have practiced before have been attentive, knowledgeable, willing to listen to the provider’s viewpoint, and perhaps most importantly, FAIR.   Neverthless, it is the job of your legal counsel to present the facts in a concise, coherent, persuasive fashion.  If your practice is facing an ALJ hearing, consider the benefits of retaining experienced counsel when considering your options.

Liles Parker attorneys have extensive experience representing Home Health, Hospice, CMHC, DME, Ambulance, Physician Practices, Nursing Homes, SNFs, and PT / ST / OT Therapy providers in the Medicare administrative appeals process. Our attorneys also work with providers to help better ensure that their Compliance Program addresses applicable statutory and regulatory requirements.   Need assistance?  Call us for a complimentary initial consultation.  We can be reached at:  1 (800) 475-1006 

 

Is Your Medicare Appeal Now at the ALJ Level? What Should You Expect?

(February 19, 2011):  Over the years, we have represented a wide variety of health care providers in the Medicare appeals process.  Our duties have regularly included representation before Administrative Law Judges (ALJs) presiding out of the Western, Southern, Midwestern and Mid-Atlantic Field Offices of the Office of Medicare Hearings and Appeals.  (OMHA).

In the course of our work, we have routinely been asked by our health care provider clients for our opinion regarding the “independence” of ALJs from the pressures exerted by the Centers for Medicare and Medicaid Services (CMS) and its contractors (including, but not limited to the Qualified Independent Contractors (QICs), Zone Program Integrity Contractors (ZPICs) and Program Safeguard Contractors (PSCs)).  The purpose of this brief article is to examine this issue in more detail.

I.     Background:  

As many of you will recall, prior to the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Medicare appeals of denied claims and services were heard by Judges working for the Social Security Administration’s (SSA’s) Office of Hearings and Appeals.  For much of that time, the SSA was an agency of the Department of Health and Human Services (HHS).  In 1994, the SSA was officially separated from HHS and was made an independent agency.  Despite the fact that the SSA was no longer part of HHS, its Judges continued to hear Medicare administrative appeals.

Despite the fact that SSA used to a part of HHS (and for a short period was independent of HHS), in our opinion, SSA Judges were generally thought to be “independent” adjudicators of the facts, not impacted by, or bowing to, the effects of outside agency pressures.

II.     Changes to the Medicare Appeals Process After the Passage of the MMA:

With the enactment of the MMA, the responsibility for hearing Medicare appeals of claims denied by ZPICs and PSCs was transferred over to HHS, with the OMHA reporting solely to the Secretary, HHS.  In doing so, the OMHA was placed completely outside of CMS’ organizational structure, ostensibly free from any agency pressures that CMS might informally care to exert.  This also placed the OMHA independent of the various contractors working for CMS.  As a review of the Congressional Record reflects, the issue of independence was carefully considered by Congress and the separation of the OMHA from CMS was consistent with their concerns. (See Congressional Record, V. 149, Pt. 22, November 20, 2003 to November 23, 2003, Page 30400). As set out in the June 23, 2005 issuance of the Federal Register (70 Fed.Reg. 36386), titled “Office of Medicare Hearings and Appeals; Statement of Organization, Functions, and Delegations of Authority,” the OMHA is under the direction of a Chief Administrative Law Judge who reports directly to the Secretary, HHS.  This organizational structure was specifically intended to meet the “independence” requirements of the Section 931(b)(2) of the MMA.

III.     What Should You Now Expect When Pursuing a Medicare Appeal Before an ALJ?

In terms of functional authority, ALJs are comparable in many respects, to that of an Article III Judge, who is appointed by the President and confirmed by the Senate.

While ALJ’s are not Article III Judges, it has been our experience that they are strongly independent, adjudicating over Medicare proceedings in a formal, professional fashion, similar to what you would expect to encounter in a Federal District Court proceeding.

Pursuant to 42 C.F.R. § 405.1026, ALJs cannot even conduct a hearing if they are prejudiced or partial to any party, or if they have an interest in the matter pending for resolution.  To date, we have not seen an ALJ that has been “prejudiced or partial to any party.”

IV.     What Are Your Chances of Winning?

To be clear, health care providers do not always prevail — every case stands or falls based on its merits.   Moreover, just because you have experienced a positive outcome with a particular ALJ on one occasion does not mean that you should expect a similar result when you are next in front of the same judge.  ALJs are trained to weigh the facts and the evidence.

While in past years it was rare for CMS or its contractors to participate in a Medicare appeals hearing, it is now commonplace for representatives of the Zone Program Integrity Contractor (ZPIC) or the Program Safeguard Contractor (PSC) to now attend the hearing and seek to provide support for their initial denial actions.  As a result, the job of ALJ is now more complicated than ever. Although the proceeding is not supposed to be “adversarial,” it can get quite heated when ZPIC representatives are there trying to defend their denial decisions.  Be prepared.  Have experienced legal counsel represent your interests. 

V.     Conclusion:

The current administrative Medicare appeals system has been specifically designed to insulate ALJs from the actual and / or implied pressures which could conceivably be exerted by CMS and its various contractors.  When appearing before an ALJ, it is important to remember that the process has become significantly more complicated now that CMS contractors are now regularly attending and participating in the process.  In light of these changes, it is recommended that you engage experienced legal counsel to represent your interests in an ALJ hearing.  Although the system and its Judges are set up to provide a fair opportunity for you to present your case and be heard, it is much more difficult to prevail when up to three representatives of the ZPIC (a lawyer, a statistician and a clinician) are also participating in the proceedings, providing support and explanations for their prior Medicare claim denial decisions.

Robert W. Liles and other Liles Parker attorneys have extensive experience representing both Part A and Part B providers and suppliers in the Medicare appeals process, including hearings at the ALJ stage of appeal.  Please feel free to contact Robert for a complimentary consultation.  He can be reached at: 1 (800) 475-1906.

 

 

 

 

Be Prepared — ZPIC and QIC Representatives Are Increasing their Participation in ALJ Appeal Hearings.

(February 12, 2011):  Over the last year, we have noted an important trend when representing Medicare providers in post-payment overpayment cases at the Administrative Law Judge (ALJ) level of appeal.   Medicare contractors are actively attending and participating in many ALJ hearings.  The virtual “Courtroom” where ALJ hearings are typically held (most ALJ hearings are now held by teleconference or video-teleconference — few are conducted in person) are no longer attended by only a provider, its attorney and the Judge.   Instead, it is now relatively crowded, requiring the scheduling of experts and the testimony of various clinical specialists — representing not only the provider, but also one or more government Medicare contractors.  Although mostly limited to “big-box” cases where the amount at issue ranges from $100,000 to several million dollars, we have even had Medicare contractors attend ALJ hearings involving alleged overpayments of only a few thousand dollars.

This proverbial “sea change” in how the government and its contractors view their role in working to help ensure that alleged overpayments stay in place demands that providers reconsider their decision to represent themselves in ALJ appeals hearings.  While many health care providers feel comfortable handling an ALJ hearing on their own when the only parties on the teleconference or on the video-teleconference are the Judge and the Medicare providers themselves, it is a completely different situation when one or more contractors elects to participate in the hearing and present their denial reasons to the ALJ.  The purpose of this article to examine this trend and discuss a number of considerations that Medicare providers should be taking into account when deciding whether or not to represent themselves at ALJ hearing, without an attorney.

I.          Rights / limitations of a ZPIC or other contractor when acting as a “participant” in an ALJ hearing.

Pursuant to 42 C.F.R. § 405.1010, both representatives from the Centers for Medicare and Medicaid Services (CMS) and its contractors may participate in an ALJ hearing.  Moreover, an ALJ may request that CMS or its contractors participate in a hearing.  As the regulatory provisions provide:

“(a) An ALJ may request, but may not require, CMS and/or one or more of its contractors to participate in any proceedings before the ALJ, including the oral hearing, if any. CMS and/or one or more of its contractors may also elect to participate in the hearing process.

(b) If CMS or one or more of its contractors elects to participate, it advises the ALJ, the appellant, and all other parties identified in the notice of hearing of its intent to participate no later than 10 calendar days after receiving the notice of hearing.

(c) Participation may include filing position papers or providing testimony to clarify factual or policy issues in a case, but it does not include calling witnesses or cross-examining the witnesses of a party to the hearing. (emphasis added).

(d) When CMS or its contractor participates in an ALJ hearing, the agency or its contractor may not be called as a witness during the hearing.

(e) CMS or its contractor must submit any position papers within the time frame designated by the ALJ.

(f) The ALJ cannot draw any adverse inferences if CMS or a contractor decides not to participate in any proceedings before an ALJ, including the hearing.”

While ZPICs and other contractors may not “cross-examine” a Medicare provider or its witnesses during an ALJ hearing, contractors have easily worked around this regulatory obstacle.  Rather than confront a provider directly, a contractor will merely point out their concerns or make a specific point to the Judge.  The presiding ALJ will often then merely ask the provider the same questions first raised by the ZPIC.  As a result, a Medicare contractor never has to cross-examine the provider but his points and questions are still ultimately answered.  For instance, the following very simple exchange might occur during an ALJ hearing:

“ALJ:  I would like to hear the Medicare contractor’s views regarding the medical necessity of this E/M claim.

ZPIC:  Your honor, the 1997 E/M Guidelines clearly reflect the types of situations which would qualify as “High Complexity.”  We don’t believe that the facts here represented that level of complexity.  Additionally, the physician is now alleging that the patient suffered from multiple serious co-morbities which complicated the medical decision-making required.  Where is there proof that the patient had these conditions?

ALJ:  Dr. Smith, can you point out where these medical conditions are documented in the medical records submitted?”

In most instances, a provider should expect the ZPIC’s challenge to be much more pointed that the example cited above.  In any event, the bottom line is simple, under the current rules, it remains quite easy for a ZPIC to point out weaknesses in the provider’s case.  ALJ’s are seeking to determine the facts and decide whether the claims at issue qualify for coverage and payment.  When a ZPIC raises a concern, most ALJ’s will want to follow-up with the provider in order to obtain an answer regarding the points raised.

Over the last year, we have also seen a marked  increase in the number of cases where a ZPIC has chosen to file a post-hearing brief with the Court.  This can be especially problematic for providers who choose to represent themselves at hearing because the ZPICs have used this as an opportunity to present new evidence and/or new arguments that were never introduced at lower levels of the case or at ALJ hearing.  As a result, the provider is often placed in the position of trying to respond to new arguments, never before presented by the ZPIC or other contractors, at the last minute in the ALJ hearing process.

II.          Who will show up from the ZPIC’s or PSC’s office?

Medicare providers should keep in mind that both ZPICs and Program Safeguard Contractors (PSCs) are quite sophisticated and are becoming more and more active in the ALJ hearing process, often replying to arguments presented to the Judge by a Medicare provider.  Moreover, it is not uncommon for a ZPIC to send as many as three professionals to participate in an ALJ hearing — all of whom may ultimately defend the ZPIC’s initial denial of the provider’s Medicare claims.  One of the ZPIC representatives very well may be an attorney.  A ZPIC contractor against whom we regularly litigate often sends a licensed attorney to respond to pro-provider arguments that the claims qualify for payment because they were not reopened in a timely fashion or that even if the claims do not meet all of the applicable coverage requirements, any overpayment would still qualify for “waiver.”  The ZPIC’s attorney may also respond to a number of limited arguments presented by a provider when trying to get a statistical extrapolation declared invalid by an ALJ.   It has been our experience that the ZPIC’s attorney is typically polished, smart and prepared.  When facing an unrepresented physician, the ZPIC’s lawyer would likely easily address any non-medical arguments presented by a Medicare provider.  A second ZPIC or PSC representative likely to participate in an ALJ hearing is the contractor’s statistician.  He is responsible for defending the legitimacy of the statistical sampling and extrapololation methodology employed by the ZPIC or PSC when extrapolating the damages in a case.  While a significant number of physicians and other health care providers are knowledgeable in statistics and mathematics, few know or understand the regulatory requirements which must be met before a contractor may engage in statistical sampling and seek to extrapolate damages.  As a result, few unrepresented providers have been able to convince an ALJ that an extrapolation is invalid.  While the additional cost of engaging a statistical expert to review a ZPICs extrapolation actions can be costly, it is likely required if a provider hopes to have a reasonable chance of challenging an extrapolation.   Finally, it is quite common for a ZPIC to send a third representative (typically a Registered Nurse) to provide clinical testimony in support of the ZPIC’s decision not to cover and pay certain claims, often citing the ZPIC’s own unique interpretation of LCD and LMRP requirements (an interpetation withwhich we often disagree).  Overall, an unrepresented provider is often unprepared to address and respond to the many legal, statistical and clinical arguments presented by the various ZPIC participants in an ALJ hearing.

While ZPIC and PSC representatives are now regularly participating in ALJ hearings, they are not the only contractors who are prepared to rise to the challenge.   Representatives of the Qualified Independent Contractor (QIC) have also been participating in some ALJ hearings.   In cases we are aware of, the QIC representative has been an attorney working for the contractor.  Nevertheless, there is nothing to prevent a clinician working for the QIC from attending the ALJ hearing and presenting the QIC’s arguments why certain claims did not qualify for coverage and payment.  Additionally, in at least one fairly recent case we handled on behalf of a provider, a Medicare Administrative Contractor (MAC) clinical reviewer chose to participate in the ALJ hearing.

III.          What are the differences between a “party” to a hearing and a “participant” in a hearing?

As 42 C.F.R. § 405.1010(c) reflects, there are significant differences between a “party” to an ALJ hearing and a “participant” in an ALJ hearing.   As we previously discussed, a “participant”  does not have the right to call witnesses or cross-examine parties or their witnesses.  Additionlly, participants do not have the right to object to the issues described in the ALJ’s “Notice of Hearing.”  As CMS has argued, these elements are “cornerstones” of the adversarial process.  In the absence of these cornerstones, a proceeding is not considered to be adversarial, even though multiple Medicare contractor representatives may participate in an ALJ hearing.  As a result, since the proceeding was not adversarial in nature, a provider will be precluded from seeking to have its attorney’s fees paid under the “Equal Access to Justice Act,” even though it ultimately prevailed at hearing.   While perhaps technically correct, the idea that ALJ hearings are truly “non-adversarial” when Medicare contractors choose to join as a “participant” is flatly untrue.   ZPIC lawyers, clinical reviewers and expert statisticians have proven themselves to be highly capable and effective when arguing their positions, despite the fact that their role in the hearing was considered to be “non-adversarial” in nature.  To their credit, even though both sides may be passionate about their position on the issues, all of the ALJs we have practiced before have kept a strict rein on the proceedings.

IV.          Depending on the specifics of a case, many providers would be better off engaging experienced legal counsel to represent their interests in an ALJ appeal.

When faced with an administrative overpayment case that is highly complex, involves a significant alleged overpayment or is based on a statistical extrapolation of damages, we recommend that a Medicare provider retain experienced legal counsel to represent the provider’s interests.  While it is possible for an experienced attorney to step in and handle a case at a later level of administrative appeal (such as the QIC and ALJ levels), it becomes more and more difficult to do so in an effective fashion as the case progresses.  We have seen a number of cases where a provider has failed to properly establish the record in a case and important supportive documentation stood the chance of not being admitted in the record because the provider failed to introduce it at lower levels of appeal.  An experienced attorney can help ensure that the record is properly constructed and no important legal defenses or payment arguments have been left out of the case.  Additionally, legal counsel will be able to assess the coverage requirements, identify possible holes in the provider’s case and work with the provider to identify witnesses and obtain supportive evidence to hopefully fill any gaps in the provider’s case.

V.          Conclusion.

As a final point, it essential to remember that the trier of fact, the ALJ responsible for presiding over the provider’s case, is a lawyer, not a clinician.  Arguably, an experienced defense lawyer — rather than a clinician — is uniquely trained to analyze the legal issues presented, organize the provider’s facts and present the relevant evidence to the ALJ (another attorney).  Together, a supporting clinician and a skilled attorney can be a formidable team when presenting a Medicare provider’s case.  Moreover, this team is best equipped to respond to any arguments raised by participating ZPIC representatives during the overpayment hearing.

Robert W. Liles and other Liles Parker attorneys in the Firm’s Health Law Practice have extensive experience representing Part A and Part B health care providers and suppliers around the country in ZPIC, PSC and RAC overpayment appeals cases .  Should you have any questions about your case or the overpayment appeals process, please feel free to call Roberts for a complimentary consultation.   He can be reached at 1 (800) 475-1906.

Has Your “Win” Before an ALJ Been Referred to the Medicare Appeals Council by the AdQIC?

(December 29, 2010): 

I.    Introduction: 

Many health care providers are familiar with the revised administrative appeals process for contesting denied Medicare claims.  In exercising their appeal rights, many providers (or their legal counsel) have appealed denied claims through the second level of appeal, submitting their claims and arguments in support of payment to the Qualified Independent Contractor (QIC) responsible for hearing reconsideration appeals. Q2 Administrators (Q2A) is one of the contractors selected by the Centers for Medicare and Medicaid Services (CMS) to serve as a QIC.

Notably, Q2A has also been awarded the first task order to serve as Administrative Qualified Independent Contractor (AdQIC). Q2A’s responsibilities as AdQIC are separate and distinct from its responsibilities as one of the general QICs chosen by CMS to serve as the reconsideration reviewer of denied Medicare claims.

III.    Official Duties of an AdQIC: 

The role played by Q2A as AdQIC is often misunderstood by both health care providers and attorneys alike.  Officially, Q2A performs its AdQIC duties out of its headquarters in Columbia, South Carolina.  As Q2A’s reflects, in its role as AdQIC, is responsible for performing a number of essential administrative appeal functions.  As AdQIC, QA2 notes that the unit is responsible for:

• Developing training and standard work protocols.
• Analyzing appeal outcomes.
• Recommending improvements to the appeals process.
• Managing case files.

Sounds fairly innocuous doesn’t it?  Unfortunately, the current AdQIC system represents a major challenge for prevailing providers to overcome.  Rather than merely “analyzing appeal outcomes,” as Q2A’s website reflects, the AdQIC appears to primarily serve as CMS’ appellate counsel, challenging favorable decisions by Administrative Law Judges (ALJs) with which it disagrees.   To be clear, we have seen no evidence that the AdQIC serves as an impartial reviewer of ALJ decisions.  Instead, our review of the cases referred to the Medicare Appeals Council (MAC) by the AdQIC suggests that unit is only interested in cases where the presiding ALJ has ruled in favor of the provider.

So what does as AdQIC really do?  As Q2A’s website reflects, the company’s stated mission is to:

“[P]rovide support and services to the Federal government and other customers that reflect our ideal of ‘Quality to the Next Level.’ Q²A delivers consistent, quality outcomes and solutions for our customers by utilizing sound processes and a stringent quality assurance program. (emphasis added).

On its face, Q2A’s mission expressly reflects where its interests lie – the company’s focus is on delivering “consistent, quality outcomes and solutions” for its “customers.”  In this case, the customer is CMS — not health care providers, and frankly, that’s undersandable.  As the “Frequently Asked Questions” section Q2A’s website reflects:

Question:  What happens after I receive a favorable (emphasis added) ALJ Decision? 

Answer:  Favorable rulings by an Administrative Law Judge (ALJ) do not result in immediate payment of claims.

Once an ALJ rules favorably on an appeal, the Office of Medicare Hearings and Appeals (OMHA) forwards the decision and case file to the Administrative Qualified Independent Contractor (AdQIC).

The AdQIC subsequently has 10 days to update the appeals tracking system and to decide whether the case requires further review by the Medicare Appeal Council or is sent to the Medicare contractor for payment. The AdQIC’s review cannot begin until it receives the case file. Regulations do not require the OMHA to forward case files within a given amount of time.

If the AdQIC refers the case to the Medicare Appeals Council, the Medicare contractor that processed the original claim is notified. Effectuations (payment of claims) made by the contractor are then contingent upon the Medicare Appeal Council’s decision.

For ALJ decisions that require no further review, the AdQIC sends an effectuation notice to the contractor, who must then pay specified claim amounts within 30 days. Effectuations in which the contractor must calculate the amount may take up to 60 days.

While an AdQIC doesn’t have the authority to appeal a favorable ALJ decision to the MAC, it can (and often will) refer a case (where the provider prevailed) to the MAC and ask that the council review the decision.  Two primary points of contention have been typically been argued by the AdQIC:

(1)   Cases where the ALJ has overturned an extrapolation of damages previously imposed by a Zone Program Integrity Contractor (ZPIC), as part of its initial audit.

(2)   Cases where the ALJ has held that a provider is not liable for alleged overpayments associated with one or more claims under Section 1870 of the Social Security Act.

In many (but not all) cases, the MAC will, in fact, open and review an ALJ’s favorable decision.  The MAC may then remand the case back to the presiding ALJ for reconsideration of the contested points.

IV.     Be Prepared — Don’t Go Into this Process Alone – Retain Experienced Legal Counsel:  

As Medicare claims audit and assessment efforts increase (through CMS’ use of ZPICs, RACs and PSCs), health care providers will be under increasing pressure to ensure that statutory and regulatory coding and billing requirements are met.  Despite your best efforts to remain compliant, you may find that your practice or clinic is subjected to review.  Should that occur, we strongly recommend that you retain qualified, experienced legal counsel to represent your interests.  In a number of cases, we have been retained by other law firms to assist with administrative appeals.  When working with other law firms, the level of our involvement has varied from case to case.

V.      When is a “Win” Truly a “Win”?

Unfortunately, it is becoming more and more difficult each year to rely on a favorable ALJ ruling.  Over the past year, the AdQIC has become more aggressive than ever in challenging holdings with which it disagrees.  As a result, it is important that your counsel plan for beyond the ALJ level when asserting defenses to the government’s arguments.  While a number of arguments may be persuasive to an ALJ, the same arguments may also automatically generate a referral by an AdQIC to the MAC. When hiring an attorney to handle your Medicare claims case, be sure and ask prospective counsel the following:

• How much of your law practice is devoted to health law issues?
• Please describe the extent of your experience handling large, complex administrative appeals of denied Medicare claims.
• How often have you responded to AdQIC appeals of favorable ALJ decisions?
• How often have you handled MAC appeals?
• Can you provide provider references?

Hopefully, your practice will not face a large administrative appeal of denied Medicare claims.  However, should such an event occur, you need to be ready to respond to the contractor’s audit.  While there are no guarantees in this business, knowledge of the rules and experience handling administrative appeals may prove essential to increasing the likelihood of your success.

Liles Parker attorneys have extensive experience handling complex Medicare administrative appeals.  Our attorneys have represented Home Health Agencies, Hospice Companies, Ambulance Companies, Chiropractic Clinics, Physical / Occupational / Speech Therapy Clinics, Nursing Homes, Physian Practices (E/M Claims), Psychology Practices, DME Companies and a wide variety of other Medicare Part A and Part B providers.  Should your practice or clinic be audited by a ZPIC or RAC, give Robert W. Liles for a free consultation.  He can be reached at: 1 (800) 475-1906. 

RACs Are Auditing Your Claims — What Should Physicians and other Medicare Providers Know about Appeals and Recoupment?

(July 2, 2010):  CMS’ Recovery Audit Contractor (RAC) program is now permanent and nationwide.  As we discussed in Part I of this series, while small providers were largely ignored during the demonstration program, physicians, home health, hospice, and durable medical equipment (DME) suppliers should be on the lookout for increased attention.  In Part II, we discussed some ways providers can prepare for and respond to an audit request.

In this Part III, we will discuss a provider’s appeal options in the event that a RAC identifies an alleged overpayment as a result of its audit.  It is important to remember that RACs are paid on a contingency fee basis and so are highly incentivized to seek out overpayment errors.

CMS’ enthusiastic trumpeting of the RAC demonstration program results seems to ignore the RACs’ reputation for overly aggressive auditing.  Indeed, a June 2010 CMS program update reveals that, when providers chose to appeal a RAC determination, providers won 64.4% of the time.  CMS has since implemented a requirement that the RAC remit its contingency fee if its audit determination is overturned at any level of appeal, not just the first level.  Whether this will improve RACs dismal win rate on appeal remains to be seen.

I.          What Are the Options to Appeal a RAC Determination of Overpayment?

First, providers that want to challenge the determination should be aware they have a  very limited period of time to file for redetermination appeal if they wish to avoid recoupment.  While a provider has 120 days to file for redetermination appeal, if they wait past day 30, the Medicare contractor (not the RAC) will initiate recoupment.  Additional information regarding recoupment is discussed below.

Appealing a RAC claims denial follows the uniform Medicare Part A and Part B appeals process.    The following deadlines are strictly adhered to.

Medicare Appeal Deadlines

Level	Stage	Reviewing Entity	Filing Deadline
1st	Redetermination	Medicare Administrative Contractor (MAC)	120 days of receiving notice of initial determination
2nd	Reconsideration	Qualified Independent Contract (QIC)	180 days of receiving notice of redetermination decision
3rd	Hearing	Administrative Law Judge (ALJ)	60 days of receipt of the QIC’s decision
4th	Administrative Review (HHS)	Medicare Appeals Council (MAC)	60 days of receipt of the ALJ’s decision
5th	Judicial Review	Federal District Court	60 days of receipt of the MAC’s decision

Our experience has shown that ALJs are honest brokers who are the most willing to hear arguments from providers.  While they will follow the law and applicable coverage provisions, they tend to be much more thorough and consider the provider’s arguments in support of payment.  In many cases, this has been the first level that a fair and reasonable consideration of the evidence has occurred.

II.         What about Recoupment Issues? Are They Applicable in Connection with a RAC Audit?

Notably, the deadlines above are filing deadlines only.  Medicare begins recouping funds well before the time frame for appeal has lapsed at each stage.  Medicare begins recouping funds only 30 days after the RAC’s initial determination and only 60 days after its redetermination decision.  This puts significant pressure on providers to file for first and second level appeals more rapidly than they otherwise might.  In later stages, recoupment cannot be stayed by filing the appeal.

Recoupment Timeframes
Day One – Initial Demand of a RAC Overpayment Determination	First Level Appeal — Redetermination (Handled by a Medicare Administrative Contractor)	Second Level Appeal — Reconsideration (Handled by a Qualified Independent Contractor)	Appeals to Administrative Law Judge
The process begins when a Demand Letter, with appeal rights, is sent to the Provider by the Medicare Administrative Contractor. Don’t confuse this with the overpayment results letter sent by the RAC.If there is no appeal and the provider does not remit the demanded amount, offset begins on day 41.	To avoid recoupment starting on day 41, the Provider must request the 1st level appeal within 30 days from the date of the Demand Letter.  If a redetermination appeal request is received after day 30, recoupment will still on day 41 must will stop when the appeal letter is processed.  The recoupment process will stop until the redetermination appeal decision is issued — at that point, the clock starts again and recoupment will start up unless a reconsideration appeal is filed within 60 days of the date of the redetermination appeal decision letter.	To avoid recoupment beginning or resuming after a redetermination decision letter is received, the provider must submit the 2nd level appeal request to the QIC within 60 days from the date of the   redetermination decision letter. If an appeal request is received after day 60, the recoupment process will stop on the remaining balance after the reconsideration appeal is received and logged in by the QIC.	Limitations on recoupment end after the 2nd level appeal decision is issued.  Recoupment shall begin 30 days from the QIC appeal decision and will continue until the debt is satisfied, whether or not the provider appeals to the ALJ or subsequent levels.

Separate from and prior to the appeals process, a provider may “rebut” any proposed recoupment action within 15 days of the notice of impending recoupment.  A provider may issue a statement to the claims processing contractor providing evidence as to why the overpayment action should not take place.  This process does NOT provide an opportunity to review the medical documentation or the audit determination itself.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

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