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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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.  

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. 

ZPIC Contractors are Turning Up the Heat.

(September 1, 2010):

I.     Introduction — ZPIC Contractors Are Likely to Participate in Your ALJ Hearing:

As previously discussed, after representing health care providers for many years in administrative hearings, involving well over 10,000 Medicare claims this year alone, it has been our experience that Administrative Law Judges (ALJs) remain a provider’s single best opportunity to present its legal, regulatory and factual arguments in support of payment.  While there are no guarantees, the ALJs we have practiced before have been attentive, knowledgeable, willing to listen to the provider’s viewpoint, and perhaps most importantly, FAIR.  In recent years though, it has become more complicated for a health care provider to present it case during an ALJ hearing.  This is due, at least in part, to the fact that ZPIC auditors are now often showing up at the ALJ hearing to advise the Judge the reason(s) they decided to deny your Medicare claims.

 II.     The Medicare Appeals Hearing Process:

 Once a request for an ALJ hearing is filed, the Court generally takes one of three actions.  It either:\

Conducts the hearing and issues a decision (either Favorable, Partially Favorable or Unfavorable),

Issues an order of dismissal of the appellant’s request for ALJ hearing, or

Remands a case back to the Qualified Independent Contractor (QIC) for additional necessary action.

When appealing individual claims, a Court may choose to rule on behalf of the provider, without the necessity of a hearing.  However, in “big box,” multiple-claim, high dollar cases, a hearing is almost always held unless the appellant requests that the Court base its decision solely on the record, without the benefit fo testimony.  When hearings are held, they are usually conducted by teleconference or video-teleconference.  Upon request, the Court may (but is not required to) grant an “in-person” hearing.  However, it has been our experience that ALJs prefer to conduct hearings by other means.

If a favorable (or, for that matter, unfavorable) ruling is issued by the Court, a number of steps remain before the decision can be effectuated.  Medicare contractors (such as Intermediaries and Carriers — now, combined into entities known as “Medicare Administrative Contractors” (MACs)) do not immediately take action based the decision of the Court.   Instead, once an ALJ issues the Court’s decision regarding a case, a copy of the ruling is sent by the respective Office of Medicare Hearings and Appeals (OMHA) to an organization known as the “Administrative Qualified Independent Contractor” (AdQIC).  The AdQIC is then responsible for reviewing the decision and sending it to the responsible MAC for effectuation.

 III.     Rise of the AdQIC — A New Factor to Consider in the Medicare Appeals Process:

In 2004, Q2 Administrators (Q2A) was awarded the first task order to serve as an AdQIC under the new administrative appeals process by the Centers for Medicare and Medicaid Services (CMS).  As Q2A’s website reflects, in its capacity as an AdQIC, the contractor is required to develop training and standard work protocols, analyze appeal outcomes, recommend improvements to the appeals process and manage case files.

 While the AdQIC does, in fact, perform all of the above functions, the likelihood of their involvement in your case appears to have greatly increased over the past year.  In a number of the cases we have handled, the AdQIC has aggressively sought to overturn both favorable legal arguments and holdings by ALJs invalidating fatally flawed statistical extrapolations applied by a Zone Program Integrity Contractor (ZPIC) or Program SafeGuard Contractor (PSC) in a case.  While AdQICs do not have the authority to file an  appeal with the Medicare Appeals Council (also referred to as the “MAC”  — but not to be confused with Medicare Administrative Contractors which are are referred to by CMS as a “MAC”), they have gotten around this pesky issue by sending notices to the MAC outlining their concerns.  The MAC has then been reviewing the decisions on its own authority.  As a result, the AdQIC has effectively been granted administrative appeal authority, despite the fact that this function is not one of the enumerated tasks outlined for the entity by CMS or by statute.

In light of these developments, it is imperative that you retain counsel who is experienced responding to AdQIC notices (de facto appeals) to the MAC.  Unlike other steps in the administrative appeals process, if your ALJ’s decision is challenged by an AdQIC to the MAC, you will have a short, limited amount of time to respond to the AdQIC’s arguments.  It is strongly recommended that you work with an attorney who is experienced responding to an AdQIC challenge.  An attorney who is knowledgeable of the MAC appeals process can properly advise you of your options at this point in the appeals process.

 While the AdQIC’s new perceived role – as overseer and critic of the ALJs – can make the process even more costly and frustrating than usual, it has been our experience that the AdQIC’s legal arguments often mimic the positions taken by other contractors earlier in the process.   Notably, we have yet to see (or even hear) of an AdQIC “appeal” of an ALJ decision that was unfavorable to the provider.  As a result, we believe it is quite clear that the AdQIC is far from being a “disinterested” party.

 IV.     Don’t Handle a Medicare Appeals Hearing Alone – Hire an Experienced Attorney:  

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 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.  Even if you prevail before an ALJ, depending on the reasons relied on by the Court, there is a real chance that the AdQIC may seek to have the Court’s decision overturned by the MAC.  When hiring an attorney, be sure and ask him the following:

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.

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

How often have you handled MAC appeals?

Can you provide provider references?

V.     Conclusion:

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.

Robert W. Liles and other Liles Parker attorneys have extensive experiences representing Part A and Part B health care providers in connection with Medicare appeals.  Should you  require additional information regarding these issues, call Robert for a free consultation.  He can be reached at: 1 (800) 475-1906.

Health Data Insights Begins Medical Necessity Reviews

(August 30, 2010):

I.      Introduction — “Medical Necessity” Issues Presented:

Health Data Insights (HDI), the Centers for Medicare & Medicaid Services (CMS) Recovery Audit Contractor (RAC) responsible for auditing health care providers in Region D, has announced it will immediately begin reviews on previously approved projects which involve the medical necessity of selected inpatient DRG payments.  A complete list of the medical necessity “issues” currently being examined by HDI can be found on its Website.

 II.     Scope of Responsibilities Assigned to Health Date Insights:

RACs, such as HDI, contract with the CMS to perform post-payment reviews of Medicare claims to find overpayments (and theoretically, underpayments in return for a percentage (from 9 percent to 12.5 percent) of the amounts recovered. Put simply, they “eat what they kill.” HDI was awarded responsibility for handling Region D audits.  Region D consists of 17 States and 3 U.S. territories (Alaska, Arizona, California, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington, Wyoming, Guam, American Samoa and Northern Marianas).  HDI’s contingency fee contract award dollar amount is 9.49% according to CMS.  The 29 DRGs where HDI will be examining “medical necessity” requirements, include certain procedures related to:

Nervous System Disorders

Respiratory

Cardiac Procedures

Cardiovascular Diseases

Cardiovascular, Other

Gastrointestinal Disorders

Musculoskeletal Disorders

Endocine, Nutritional & Metabolism Disorders

Kidney & Urinary Tract Disorders, and

Blood & Immunological Disorders

III.     Provider Concerns:

A continuing concern of health care providers is that the RAC determinations of medical necessity will be performed by personnel with little, if any, specific knowledge of the specific claims at issue. Given the RAC business model, providers remain worried that audits will not reflect a fair and reasonable application of applicable coverage requirements. This is especially worrisome in light of the fact that approximately 41 percent of overpayments in the demonstration project were due to medical necessity determinations.

III.      Audit and Appeal Considerations:

As set out CMS’ June 2010 reported entitled “The Medicare Recovery Audit Contractor (RAC) Program — Update to the Evaluation of the 3-Year Demonstration,” as of 03/09/10, the cumulative number of claims with overpayment determinations identified by RACs has grown to 598,238.  Notably, only 76,073 of these overpayments were appealed by health care providers.  Of the claims appealed, over half were decided in favor of the health care provider.  Interestingly, HDI had one of the highest number of claims denials overturned on appeal, in favor of the appealing provider. Four basic steps to be taken when preparing for a RAC audit include:

(1)               Monitor issues of interest to the government and its contractors.  Are the services you provide currently under scrutiny by RACs and other Medicare contractors?  You should keep abreast of current enforcement initiatives and mistakes made by other providers.  Learn from their mistakes. 

(2)               Know where your current weaknesses are and fix them.  This typically requires that you conduct an internal audit of your coding, billing and operational practices.  Take care when engaging an outside “consultant.”  We have seen numerous cases where the consultant conducts an internal assessment and identifies multiple problems with the provider’s prior and current practices. Unfortunately, few consultants consider the fact that their adverse report to the provider will likely not be privileged.  As a result, if the provider is ever investigated, the report could easily serve as a roadmap for the government. Prior to conducting an internal audit – call your attorney!   

(3)               Know your rights. If your practice is audited, know your rights both during the audit and once the audit results are issued by the contractor.  There is a fine line between exercising your rights as a provider and being perceived by a contractor as refusing to cooperate in their review.  You should immediately call your attorney to clarify which actions must be taken if your practice is subjected to a site visit by a Medicare contractor.  The best practice would be for you to call your attorney today and discuss how you should respond in the event of a site visit.  CMS takes allegations of non-cooperation very seriously.  Should the contractor argue that you refused to cooperate in their efforts, you could find the action taken by the contractor is to seek a revocation of your Medicare number.  This is an especially sensitive issue.

(4)               Have a firm understanding of how the Medicare appeals process works.  Depending on the amount in controversy, you may choose to handle Medicare claims denials internally.  As the use of data-mining increases, Medicare contractor reliance on provider profiling will continue to increase.  While mere errors or mistakes should be returned to the government (or not appealed is properly denied by the contractor), should you find that claims were improperly denied, we recommend that you appeal such denials. RACs and other Medicare contractors will likely focus on providers with high error rates.

While every case is different, health care providers should consider the following when faced with a RAC audit:

• The scope of RAC audits is expanding.  In the past, hospitals and other “low-hanging fruit” were the focus of HDI and other RACs around the country.  As a result, some physicians, small practice groups, clinics and other smaller providers have grown complacent in their compliance efforts.  This is a mistake, as more issues are identified and approved, the RACs will be expanded the scope of their reviews.  Now is the time to get your practice in order.

• ZPICs and PSCs continue to represent a greater danger to small physician practices and health care provider groups. Zone Program Integrity Contractors (ZPICs) and Program SafeGuard Contractors (PSCs) are not subject to the time, audit and service scope limitations imposed on RACs.  The implementation of effective compliance efforts will help reduce the likelihood of liability should the practice be audited by a ZPIC, PSC or RAC.

• Beware of “canned” consultant solutions.  As a search on Google will readily attest, consulting firms around the country are touting the latest RAC audit “tool” or audit response “template.”   We recommend that you exercise caution when retaining any organization that “guarantees” results or seeks to dissuade you from engaging legal counsel support.

• Retain experienced health care counsel. Under the current appeal structure, there is a significant likelihood that your case will eventually be heard by an Administrative Law Judge (ALJ).  Importantly, ALJs are lawyers — not typically clinicians.  In defending your case, it is strongly recommended that you retain legal counsel, regardless of whether you ultimately decide to work with a consultant or employ a clinician as an expert witness.  Legal counsel will be best situated to understand and argue the various legal arguments which may prove essential in winning your case.

While RACs have not represented much of a threat to individual physicians and small practice groups in the past, the future is likely to be quite different.  Physicians must already contend with audits by ZPICs, PSCs, Medicaid Integrity Contractors (MICs), Medicaid Fraud Control Unit (MFCU) investigators and Comprehensive Error Rate Testing (CERT) contractors.  The expansion of the RAC program will further increase the need for statutory and regulatory compliance.  Physicians and small practice groups and organizations should avoid the misconception that their limited size and / or relative billings will keep them “off the radar,” thereby limiting their chances of being audited.

IV.     ZPICs and PSCs are Continuing to Rely on Statistical Sampling in an Effort to Extrapolate Damages:

In our practice, we have seen a marked increase in the number of solo physicians and small providers groups who have been subjected to pre-payment and post-payment audits of their Medicare billings.

In the case of post-payment reviews, the vast majority of Medicare audits we have worked on have included the statistical extrapolation of damages by ZPICs and PSCs.  We expect RACs to follw suit as the number of their audits increase.  In defending a post-payment audit, it is essential that you examine the statistical methodology utilized and identify any flaws in the contractor’s approach.  We have successfully convinced both Qualified Independent Contractors (QICs) and ALJs to invalidate statistical extrapolations based on mistakes in the process committed by the ZPIC or PSC.  Arguments can be legal and / or methodology-based.  In many cases, it is necessary to engage the assistance of a qualified statistical expert.  Should you succeed – be ready to defend this decision before the Medicare Appeals Counsel (MAC).  Over the past year, practically every invalidation of the statistical extrapolation of damages was appealed to the MAC by the Administrative QIC (AdQIC).

V.      Summary:

Health care providers must be proactive in their efforts to better comply with applicable Medicare coding and billing practices.  Should your practice be placed on pre-payment audit or have its post-payment Medicare claims reviewed, we recommend that you immediately contact your health care attorney for assistance.

 Robert W. Liles and other Liles Parker attorneys have extensive experience representing health care providers around the country in large Medicare administrative overpayment appeals cases.  We would be happy to discuss your case, give our initial assessment and provide client references for you to call.  Should you have questions regarding RAC, ZPIC or PSC audit processes, you may contact us for a complimentary consultation.  We can be reached at 1 (800) 475-1906.

Hang on tight — 2010 could be rough . . .

(March 1, 2010):  The number of auditors, reviewers, investigators and prosecutors going after health care providers is increasing and signals an alarming, unprecedented effort by the government to uncover and recover alleged overpayments to health care providers.

 Health care providers now face not only simple repayment demands, but also civil False Claims Act cases and criminal Medicare / Medicaid fraud claims identified by various new government contractors. Regrettably, we have seen unintentional mistakes, incomplete documentation and technical errors cited as the basis for seeking the repayment of millions of dollars, representing Medicare services rendered long ago, in some cases as many seven years before the demand letter was sent.  Perhaps most troubling is the fact that no one, including the ZPIC and / or PSC conducting the medical review, doubts that the medical services were rendered and in most cases, the Medicare beneficiary benefited from the care and treatment provided.  Today, every health care provider must beware of:

•  “RACs” or Recovery Audit Contractors.
• “ZPICs” or Zone Program Integrity Contractors.
• “MICs” Medicaid Integrity Contractors.
• “MCFU” Medicaid Fraud Control Unit.
• “HHS-OIG” Department of Health and Human Services, Office of Inspector General.
• “DOJ” U.S. Department of Justice, and
• “HEAT” Healthcare Fraud Prevention & Enforcement Task Force (in a number of U.S. Attorney’s Offices around the country).

 RACs and the havoc they are expected to wreak is old news, quite frankly. The newest players in town, ZPICs, MICs and HEAT Teams should be at the top of your current list of concerns.  As you will recall,   CMS consolidated functions of all Program Safeguard Contractors (PSCs) and Medicare Prescription Drug Integrity Control (MEDIC) contracts into ZPIC contracts.  ZPICs are designed to combine claims data (FIs, Regional Home Health Intermediary, Carrier, DMERC) and other data to create a platform for documenting complex data analysis.  While RACs (until recently) have focused solely on recovering money, ZIPCs also look for fraud.

MICs are just now revving up around the country.  Unburdened by many of the restrictions placed on RACs, providers with a heavy Medicaid beneficiary base should diligently review their Medicaid coding and billing efforts to better ensure compliance with applicable statutory and regulatory requirements. 

 HEAT Teams are made up of top level law enforcement and professional staff from DOJ and HHS.  HEAT was implemented to prevent fraud and enforce current anti-fraud laws and prevent waste that focuses on improving data and information sharing between the Center for Medicare & Medicaid Services and law enforcement agencies.  HEAT is working to strengthen program integrity activities to monitor and ensure compliance and enforcement.  HEAT’s tools to identify fraud include hotlines and web sites for healthcare workers and ordinary citizens.  Furthermore, HEAT officials are helping state Medicaid officials conduct better audits and provide better monitoring to detect fraudulent activities.

How should you respond?  The best response is to follow the rules.  If you don’t already have an effective Compliance Plan in place, we recommend you take steps to immediately implement one. 

Liles Parker attorneys represent health care providers around the country in complex Medicare overpayment appeals cases.  Should you have any questions regarding your case, give us a call.  We can you our initial assessment and provide client references.  You may call us for a complimentary consultation at:  1 (800) 475-1906.