MICs, MACs, RACs and ZPICs: Latest Developments, Emerging Legal Issues and Successful Appeal Strategies for Long Term Care Providers.

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1 MICs, MACs, RACs and ZPICs: Latest Developments, Emerging Legal Issues and Successful Appeal Strategies for Long Term Care Providers Presented by: Mark Reagan, Esq. Andrew B. Wachler, Esq. Hooper, Lundy & Bookman, P.C. Wachler & Associates, P.C. 575 Market St., Suite E. Third St., Suite 204 San Francisco, CA Royal Oak, MI I. The Current Audit Landscape a. While most long term care providers are aware of the Medicare and Medicaid contractors, it is important to be knowledgeable of the most recent changes to the audit landscape. The current audit landscape includes: i. Medicare Administrative Contractors (MACs); ii. Zone Program Integrity Contractors (ZPICs); iii. Recovery Audit Contractors (RACs); 1. Medicare RACs 2. Medicaid RACs iv. Medicaid Integrity Contractors (MICs) b. Medicare Administrative Contractors (MACs) i. Pursuant to the Medicare Prescription Drug Improvement and Modernization Act of 2003, CMS is transitioning and consolidating the roles of intermediaries and carriers into MACs. 1 ii. The MACs are assuming all functions of the current intermediaries and carriers, including: 1. Determining payment amounts; 2. Making payments; 3. Providing education and outreach to beneficiaries; 4. Providing consultative services to institutions and agencies to enable them to establish and maintain necessary fiscal records; 5. Communication with providers and supplies any information furnished to the MAC by the Secretary; and 6. Provide education to providers and technical assistance. 2 iii. A/B MAC Jurisdictions Consolidation 1. During the initial series of A/B MAC contract procurements, CMS realized that consolidating some of the smaller A/B MAC workloads to form larger A/B MAC jurisdictions, allowed the MACs to be more efficient and effective. 2. Over the next several years, CMS will consolidate the following ten A/B MAC workloads to form five consolidated A/B MAC contracts 3 1

2 a. A/B MAC Jurisdictions 2 and 3: (Alaska, Washington, Oregon, Idaho, North Dakota, South Dakota, Montana, Wyoming, Utah and Arizona): Jurisdiction F b. A/B MAC Jurisdictions 4 and 7: (Louisiana, Arkansas, Mississippi, Texas, Oklahoma, Colorado, and New Mexico): Jurisdiction H c. A/B MAC Jurisdictions 5 and 6: (Minnesota, Wisconsin, Illinois, Kansas, Nebraska, Iowa, and Missouri): Jurisdiction G d. A/B MAC Jurisdictions 8 and 15: (Kentucky, Ohio, Michigan, and Indiana): Jurisdiction I e. A/B MAC Jurisdictions 13 and 14: (New York, Connecticut, Massachusetts, Rhode Island, Vermont, Maine, and New Hampshire): Jurisdiction K 3. The following A/B MAC jurisdictions will not be further consolidated 4 a. A/B MAC Jurisdiction 1: (California, Hawaii, Nevada, Pacific Islands): Jurisdiction E b. A/B MAC Jurisdiction 9: (Florida, Puerto Rico, US Virgin Islands): Jurisdiction N c. A/B MAC Jurisdiction 10: (Alabama, Georgia, Tennessee) d. A/B MAC Jurisdiction 11: (North Carolina, South Carolina, Virginia, West Virginia): Jurisdiction M e. A/B MAC Jurisdiction 12: (Delaware, Maryland, Pennsylvania, New Jersey, Washington DC): Jurisdiction L Figure 1: Map of Consolidated Parts A/B Medicare Administrative Contractors 5 iv. Home Health Jurisdictions 1. While four separate specialty MAC jurisdictions were defined to service home health and hospice claims, CMS is not awarding four 2

3 separate specialty MAC contracts for this purpose. Instead, the home health and hospice workloads are consolidated into four A/B MAC workloads. 6 a. HH MAC Jurisdiction A: National Heritage Insurance Corporation (A/B MAC Jurisdiction K). b. HH MAC Jurisdiction B: CIGNA Government Services (A/B MAC Jurisdiction I). c. HH MAC Jurisdiction C: Palmetto Government Benefits Administrator (A/B MAC Jurisdiction M). d. HH MAC Jurisdiction D: Noridian Administrative Services (A/B MAC Jurisdiction G). Figure 2: Home Health/Hospice MAC Jurisdictions and Contractors 7 c. Zone Program Integrity Contractors (ZPICs) i. ZPICs and Program Safeguard Contractors (PSCs) are contractors responsible for the implementation of the Medicare Benefit Integrity Program. As PSC umbrella contracts expire, CMS will assign all PSC functions to seven ZPICs Seven ZPIC geographic zones: a. Zone 1: California, Nevada, American Samoa, Guam, Hawaii and the Mariana Islands b. Zone 2: Alaska, Washington, Oregon, Montana, Utah, Arizona, North Dakota, South Dakota, Nebraska, Kansas, Iowa and Missouri c. Zone 3: Minnesota, Wisconsin, Illinois, Indiana, Michigan, Ohio and Kentucky d. Zone 4: Colorado, New Mexico, Oklahoma and Texas e. Zone 5: Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia 3

4 f. Zone 6: Pennsylvania, New York, Maryland, Washington D.C., Delaware, Maine, Massachusetts, New Jersey, Connecticut, Rhode Island, New Hampshire and Vermont g. Zone 7: Florida, Puerto Rico and Virgin Islands ii. PSCs and ZPICs are responsible for preventing, detecting and deterring Medicare fraud: 9 a. Prevent fraud by identifying program vulnerabilities. b. Proactively identify incidents of potential fraud that exist within service areas and take appropriate action on each case. c. Investigate allegations of fraud made by beneficiaries, providers, CMS, OIG and other sources. d. Explore all available sources of fraud leads in their jurisdictions, including the MFCU and its corporate antifraud unit. e. Initiate appropriate administrative actions to deny or to suspend payments that should not be made to providers where there is reliable evidence of fraud. f. Refer cases to the Office of Inspector General/Office of Investigations (OIG/OI) for consideration of civil and criminal prosecution and/or application of administrative sanctions. g. Refer any necessary provider and beneficiary outreach to the POE staff at the AC or MAC. iii. PSCs and ZPICs identify potential claim payment errors through referrals from other contractors or through their own data analysis Leads may also be identified through other contractor functions including claims processing, data analysis, audit and reimbursement, appeals, medical review and enrollment. 11 iv. PSCs and ZPICs refer an identified overpayment to the affiliated MAC which sends the provider a demand letter and institutes recovery efforts. 12 v. PSCs and ZPICs may also make referrals to the Office of the Inspector General (OIG) or the Department of Justice (DOJ) for further investigation and consideration of civil or criminal penalties. 13 d. Medicare Recovery Audit Contractors (RACs) i. Who are the RACs? Region A: Diversified Collection Services, Inc. a. Connecticut, Delaware, Washington, D.C., Massachusetts, Maryland, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont b. Current contingency fee: 12.45% Region B: CGI Technologies and Solutions, Inc. a. Kentucky, Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. b. Current contingency fee: 12.50% 16 4

5 3. Region C: Connolly Consulting, Inc. a. Alabama, Arkansas, Colorado, Florida, Georgia, Louisiana, Mississippi, North Carolina, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia b. Current contingency fee: 9% Region D: HealthDataInsights, Inc. a. Arkansas, Arizona, California, Iowa, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington, Wyoming, Guam, American Somoa, and Northern Marianas. b. Current contingency fee: 9.49% 18 ii. RAC Demonstration Program 1. The demonstration began in 2005 and based on the success of the program, Congress passed legislation in 2005 to establish the permanent RAC program. 19 a. The demonstration program initially involved three states: California, Florida and New York. 20 b. These states were selected because they had the highest Medicare expenditures. 21 iii. RAC Details 1. The RACs are paid on a contingency fee basis, but are required to refund the contingency fee if an overpayment determination is overturned at any level of the appeals process. 2. The RACs are prohibited from identifying improper payments on claims more than three years past the date of the initial determination with a maximum look-back date of October 1, In identifying overpayments, the RACs must comply with the reopening regulations set forth at 42 C.F.R In accordance with the regulations, RACs must have good cause to reopen a claim more than one year after its initial determination and must document good cause accordingly RAC reviews may consist of either automated or complex reviews RACs are required to submit all proposed new audit issues to the RAC Validation Contractor for approval. 25 a. Upon approval of a new issue, CMS reserves the right to share new issues with all CMS review entities including Medicaid RACs, MACs, CERT contractor and ZPICs Beginning January 1, 2012, providers will receive demand letters from MACs instead of RACs. MACs are now responsible for the administrative concerns of RACs, such as timeframes for recoupment and the appeals process. 27 5

6 a. RACs will continue to be responsible for audit-specific communications, including questions about a reviewer s rationale. 28 iv. RAC Approved Issues Affecting Long Term Care providers 1. Region B: Skilled Nursing Facility (SNF) Consolidated Billing 29 a. States affected: Minnesota, Wisconsin, Michigan, Illinois, Ohio and Kentucky b. Type of Review: Automated c. Description: Services are being billed separately that should be included in the SNF consolidated billing. Consolidated billing is when services provided during the resident s stay in a skilled nursing facility (SNF) are bundled into one package and billed by the SNF. Under the consolidated billing requirement, a SNF itself must submit all Medicare claims for the services that its residents receive (except for specifically excluded services). 2. Region C: Incorrect Billing of Home Health Partial Episode Payment Claims a. States affected: Alabama, Arkansas, Colorado, Florida, Georgia, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virgin Islands, Virginia and West Virginia b. Type of Review: Automated c. Description: Incorrect billing of Home Health Partial Episode Payment (PEP) claims identified with a discharge status 06 and another home health claim was not billed within 60 days of the claim from date. Additionally, MCO effective dates are not within 60 days of the PEP claim. 3. Region B: Skilled Nursing Facilities: test claims for Ultra High RUGs e. Medicaid Recovery Audit Contractors i. Implementation of the Medicaid RACs 1. Section 6411(a) of the Patient Protection and Affordable Care Act (PPACA) amended Section 1902(a)(42) of the Social Security Act to include a requirement that all states must have contracted with at least one RAC entity by no later than December 31, On October 1, 2010, CMS issued a letter to State Medicaid Directors which required states to submit a State Plan Amendment (SPA) to CMS by December 31, 2010 attesting that the state would establish a Medicaid RAC program or indicate that it would seek an exception from the requirement The CMS Final Rule for the Medicaid RACs was released on September 16, It required that all states implement a RAC program by January 1,

7 ii. Medicaid RACs Eligibility Requirements 1. The Medicaid RAC Final Rule established 42 C.F.R which requires an entity to meet specific requirements before a state may enter into a contract with an entity as a Medicaid RAC. a. Entity must have the technical capabilities to carry out the Medicaid RAC tasks. 33 b. The entity must hire a minimum of 1.0 full-time equivalent (FTE) Contractor Medical Director who is either a Doctor of Medicine or a Doctor of Osteopathy in good standing with the relevant state licensing authorities and has relevant work and experience. 34 c. The entity must hire certified coders unless the state determines that certified coders are not required for the effective review of Medicaid claims The CMS Final Rule does not require states to provide coding/billing guidelines to providers. 36 iii. Scope of Medicaid RAC Audits 1. The scope of the Medicaid RAC audits will be similar to the scope of those conducted by the Medicare RACs Medicaid RAC medical necessity reviews will be performed within the scope of state laws and regulations. 38 a. CMS will only encourage states to form review teams for Medicaid RACs proposed new issues similar to the Medicare RAC program s New Issue Review Board Medicaid RACs are required to accept electronic submissions of medical records to facilitate provider response to RAC audit record requests, unless a state requests and receives an exception from CMS CMS also requires states to establish limits on the number and frequency of medical records to be reviewed by the RACs. 41 a. The limits may be subject to exceptions requested by the RAC States and Medicaid RACs are required to use a mechanism to coordinate Medicaid RAC audits with other audit entities and initiatives. 43 iv. Medicaid RAC Appeals Process 1. CMS did not mandate a single appeals process for all states to use for Medicaid RAC appeals The appeals processes developed by the states will be subject to CMS approval CMS recognized that it may be difficult for providers to potentially interact with more than one state appeals process, but that regardless of the difficulty it wanted to maintain a flexible approach for states to determine their own appeals process. 46 7

8 v. States have the discretion to determine whether a provider may re-bill a corrected claim after a Medicaid RAC identifies an improper payment as a result of a medical necessity review. 47 vi. In addition, states have the discretion to determine when and how Medicaid RACs may re-open claims. Medicaid RACs are not required to comply with the reopening regulations as set forth in the Medicare RAC program. 48 vii. Medicaid RACs will be paid through a contingency fee method, based upon the overpayments recovered States have discretion to determine whether to pay the Medicaid RAC once the overpayment is identified and recovered or not until after any and all provider appeals are fully adjudicated. 50 f. Medicaid Integrity Program Medicaid Integrity Contractors (MICs) i. Section 6034(e)(3) of the Deficit Reduction Act of 2005 mandated the creation of the Medicaid Integrity Program (MIP) including the hiring of the Medicaid Integrity Contractors (MICs) to perform review, audit and education functions. 51 ii. The goal of the MIP is to prevent, identify and recover inappropriate Medicaid payments. The MIP also supports the program integrity efforts of state Medicaid agencies through a combination of oversight and technical assistance. 52 iii. There are three types of MIC contracts: Medicaid Integrity Review Contracts (Review MICs) a. ACS Healthcare Analytics, Inc. b. AdvanceMed Corporation c. IMS Government Solutions d. Safeguard Services, LLC e. Thomson Reuters 2. Medicaid Integrity Audit Contracts (Audit MICs) a. Booz Allen Hamilton b. Fox Systems, Inc. c. Health Integrity, LLC d. Health Management Systems (HMS) e. Island Peer Review Organization 3. Medicaid Integrity Education Contracts (Education MICs) a. Information Experts b. Strategic Health Solutions iv. Audit MICs Audit Review Process 1. Audit MICs send providers a notification letter setting forth the records being requested from the provider Audit MICs have the discretion to perform a field or desk audit depending on which is more efficient in a given situation. 55 Audit MICs may also interview providers and their staff, and may enter provider facilities. 8

9 3. If the Audit MIC concludes that there is a potential overpayment, the Audit MIC will prepare a draft report, which is shared with the State and the provider for comment. 56 a. The provider has 30 days to comment and submit additional supporting information. 57 b. CMS will then prepare a draft report taking these comments into consideration. The draft report is then reviewed again by the state for comment. c. After taking the state s comments into consideration, the MIC will submit a final report to the state. 4. Audit MICs are not tasked with collecting overpayments from providers. Rather, the federal government will collect its share directly from the state and the state is responsible for recovering the overpayments from the providers. v. Medicaid Integrity Contractors Recent Policy Changes 1. Effective October 1, 2010, the look back period when Audit MICs request records must be 5 years from the start of the audit (date the engagement letter is sent to the provider) In addition, Audit MICs must allow a provider 30 days to produce the medical records, with a permissible 15-day extension if requested by the provider. 59 II. Recent Developments of Significance a. Skilled Nursing i. Region B RAC test claims of ultra high therapy scores: CMS must approve audit issues before the RACs may pursue them. However, under the Statement of Work ("SOW"), RACs may audit a limited number of "test claims" in order to seek CMS approval of proposed issues. Recently, the Region B RAC began to submit record requests for "test claims" associated with the issue of ultra-high therapy scores for Part A SNF charges. We believe that the interest for this issue ties to the recent OIG report criticizing the handling of Part A charges by SNFs and the CMS rulemaking on Part A payments for FY ii. ZPIC Audits of Part A Claims: There are also a number of ZPIC audits on Part A claims with an emphasis on ultra-high therapy scores. We are also aware of OIG/DOJ investigations in this area. We believe that this issue (along with Part A charges generally) will become a significant audit issue for the Medicare Integrity Program going forward. iii. Region A & C RAC audits of crossover bad debt: We have recently learned that RACs from Regions A and C have begun auditing SNF "bad debt" claims made under Part A for "dual eligible" beneficiaries. These audits arise in the context of states that have effectively eliminated their Medicaid programs paying for Part A co-insurance. b. Home Health i. Audits often focus on the alleged failure: 9

10 1. Of documentation of physician-patient face-to-face encounters, 2. To establish medical necessity of skilled services, and 3. Of documentation by the absence of signatures on plans of care. ii. Auditors often contest whether patients were, in fact, homebound. iii. They also seek to claim that a variety of services (i.e., skilled nursing or therapies) were "repetitive" and did not require the skills of a nurse. Predominant areas include teaching and the establishment of home exercise programs. c. Hospice i. ZPIC claims and financial audits: We have recently seen ZPIC audits of hospice providers focusing on eighteen months of Medicare claims as well as their financial arrangements, among others, with physicians and skilled nursing facilities. Some of these audits have also included auditors from Medicaid programs. We have not yet seen the results of these audits. ii. Adverse government reports and FCA actions: There have been recent FCA cases against hospice providers that have focused on their marketing, admission and retention practices. These cases (brought by both qui tam relators and the United States) allege that hospice providers falsely billed the Medicare program by admitting and retaining patients that were not qualified for hospice services. III. Handling of Part A audits in Skilled Nursing a. Disputes over documentation supporting MDS scores and RUGs levels: The attack on ultra-high therapy scores and their assigned RUGs by Medicare Integrity Contractors is just truly beginning. While most of the focus has been limited to ZPICs, we expect RACs to shortly follow behind. Tracking any open investigations by multiple contractors will be key. b. Defense of existing scores/fall back position of lower scores: There is not yet a representative sample of ALJ decisions in this area but there seems to a strong prevalence of decisions supporting a downcoding of the RUG. Physician testimony (percipient and expert) would appear to be of crucial importance. c. Impact of O Connor Hospital case on Part A claims i. Lower RUG levels: In instances where the payment is downcoded but still covered by Part A, an offset to the overpayment should be made. Consider an alternative downcoding strategy when the contractor is seeking a dramatic downcode. ii. Part B therapy as alternative for Part A claims: To the extent that a contractor makes out a strong case that Part A coverage is not met, consider an alternative Part B strategy. 1. In the case of O'Connor Hospital (February 1, 2010), 60 the Medicare Appeals Council ("MAC") held that an acute hospital could receive Part B payments where the ALJ had determined (in 10

11 reviewing an appeal of a denial of a Part A claim by a RAC) that the claims were covered by Part B. 2. In doing so, the MAC cited to various provisions of the Medicare Financial Claims Management Manual and the Medicare Claims Processing Manual that provided for the processing of such claims. As long as the original claim was presented timely, there would no issue with timely billing given the rules of administrative finality. 3. In skilled nursing, a Part B strategy would only be useful in the most desperate of situations in that it would only be possible to obtain offset for the value of Part B therapies. It would need to be determined if there was any opportunity to seek the "room and board" portion from any other payor sources. IV. Medicare Appeals Process a. The current Medicare appeals process took effect on May 1, The five step appeals process is uniform for both Medicare Part A and Part B appeals. b. The Medicare appeals process gives providers direct appeal rights for all Medicare initial determinations, including RAC determinations. c. The following is a summary of the five step appeals process for Medicare and RAC appeals: i. Redetermination: Once a contractor makes an initial determination, a provider has 120 days to file a request for redetermination with the contractor. 62 In order to prevent recoupment of the alleged overpayment, the request for redetermination must be filed no later than 30 days after the date of the first demand letter. 63 ii. Reconsideration: Following the contractor s redetermination decision, and within 180 days of receiving the redetermination decision, a provider may file a request for reconsideration with the QIC. 64 In order to avoid recoupment of the alleged overpayment, the request for reconsideration must be received by the QIC within 60 calendar days of the date of the redetermination decision. 65 iii. Administrative Law Judge Hearing: Following the QIC s decision, if the amount in controversy is met, the provider may file a request for an Administrative Law Judge ( ALJ ) hearing within sixty (60) days of receiving the QIC s decision Amount in Controversy: $ iv. Medicare Appeals Council: If the provider is dissatisfied with the ALJ decision, the provider has sixty (60) days to file an appeal with the Medicare Appeals Council (MAC). 68 There is no amount in controversy requirement for the MAC. v. Federal District Court: The final level of appeal is to federal district court. In order to exhaust the final level of appeal, the provider must submit the request within sixty (60) days of the MAC decision and meet the amount in controversy requirement Amount in Controversy: $1,350 (increased $50, from $1,300, for calendar year 2012)

12 V. Medicare Audit Defenses: Legal and Strategic a. Treating physician rule i. The treating physician rule involves the legal principle, and logical argument, that the treating physician, who has examined the patient and is most familiar with the patient s condition, is in the best position to make medical necessity determinations. ii. The treating physician rule s impact is not as significant as it once was due to CMS rulings and MAC decisions that erode the rule s applicability to Medicare cases. iii. CMS Ruling 93-1 established that at least with respect to Part A claims, the treating physician s opinion is considered evidence, but not presumptive evidence, of medical necessity. 1. In the Case of FM 1382 Healthcare Center, Medicare Appeals Council, October 25, a. After addressing CMS ruling, the MAC stated, a physician s opinion will be evaluated in the context of the evidence in the complete administrative record. iv. In addition, several recent Medicare Appeals Council decisions have applied CMS Ruling 93-1 to appeals of Part B claims. 1. See, Kinetic Concepts, Inc., Medicare Appeals Council, June 5, v. Despite the fact that the treating physician rule has lost some of its luster, it is still a useful argument to include in appeal position papers. 1. Although there is no presumption that the treating physician s opinion should be deferred to, a practical argument still exists that a treating physician understand the complex nature of a beneficiary s medical conditions and therefore should be afforded some deference. vi. In addition, arguments in favor of deference to the treating physician s judgment can be very effective, especially when used in conjunction with arguments challenging the credentials of a non-physician reviewer or a paper reviewer s appreciation of the patient s condition. b. Waiver of Liability i. The statutory authority for waiver of liability defense is set forth in Section 1879(a) of the Social Security Act, 71 which relieves a provider of liability for an overpayment if the provider did not know and could not reasonably have been expected to know that payment would not be made. ii. Waiver of Liability defense can be used for services denied as not medically necessary or for certain custodial care or homecare determinations. 72 iii. Pursuant to the Medicare Program Integrity Manual, sufficient notice from CMS includes: 12

13 1. Previous denials for the same service; 2. Publication by the contractor in a newsletter or other communication to the provider community that a service is considered not reasonable and necessary or constitutes custodial care; 3. Knowledge based on experience; or 4. Local standards of practice. 73 iv. Thus, it is important that both providers and their counsel are aware of all relevant publications and guidance on both the national and local level. v. Because previous denials for the same service are relevant as sufficient notice, the successful appeal of any such denials can be a very effective tool for subsequent waiver of liability arguments. c. Provider without fault i. Section 1870 of the Social Security Act states that a provider will not be responsible for refunding an overpayment where the provider was without fault with regard to causing the overpayment. 74 ii. Unlike the waiver of liability defense, the provider without fault defense is not limited to certain types of claims. 75 iii. A provider will be considered to be without fault if he or she exercised reasonable care in billing for and accepting payment for the services at issue. 76 The provider must have: 1. Made full disclosure of all material facts, 2. Had a reasonable basis for assuming the payment was correct based upon all of the information available to the provider, including without limitation, Medicare instructions and regulations; and 3. Brought the issue to the attention of the fiscal intermediary or carrier if it had any reason to question the payment. 77 d. Challenges to Statistics i. Section 935 of the Medicare Modernization Act (MMA) limits the use of extrapolation to situations in which the Secretary determines that there is a sustained or high level of payment error or in which the Secretary determines that documented educational intervention has failed to correct the error. 78 ii. In addition, the Medicare Program Integrity Manual outlines requirements for contractors to follow while conducting statistical extrapolation The instructions are provided to ensure that a statistically valid sample is drawn and that statistically valid methods are used to project an overpayment where results of the review indicate that overpayments have been made. 80 iii. In the Medicare Appeals Council (MAC) decision, Transyd Enterprises, LLC, the MAC overturned an ALJ s decision to reject the contractor s statistical extrapolation. 81 The MAC found that the ALJ erred when it found the extrapolated overpayment invalid because the contractor failed 13

14 to establish that the methodology was appropriate to the population of the appellant s claims. 82 CMS appealed to the MAC arguing that the ALJ erred because its analysis placed the burden of proof on the contractor to explain why it did not use a different statistical sampling methodology CMS Ruling 86-1 states that the use of statistical sampling creates a presumption of validity as to the amount of an overpayment which may be used as the basis for recoupment. 84 Further, the ruling states the burden then shifts to the provider to take the next step. 85 e. Arguing the Merits i. Merit based arguments may involve, for example, the appropriateness of the codes billed, the frequency of the services, or the medical necessity of the specific services provided. ii. To effectively argue the merits of a claim, it is important to submit all medical records and documentation supporting the claims at issue. As discussed below, absent good cause, all relevant evidence must be provided at the reconsideration level. iii. If medical records will be relied upon at the ALJ hearing, the records should be organized and presented in a manner that is helpful to the ALJ. The use of tabs and exhibit labels may be useful in this regard. In addition, medical summaries, color coding, graphs or other illustrations may be effective methods of presenting the medical evidence. f. Use of Experts i. Examples of experts that can be helpful in the defense of Medicare and Medicaid appeals include physicians, coding experts, registered nurses and statistical experts. ii. At the earliest stages of appeal, experts can help to assess the strength of the case and assist in developing a strategic plan. Experts such as registered nurses may also be helpful to assist with the interpretation and organization of medical records. iii. Experts can be used as advocates to defend the medical necessity of services or the appropriateness of codes through an affidavit at the redetermination or reconsideration levels or, even more effectively, via live testimony at the ALJ hearing. iv. Although outside experts may be viewed as more objective by decision makers, experts from within the organization, including the treating providers, can also be very effective. VI. Presentation and Preparation of the Case a. Preventing Recoupment of the Alleged Overpayment: i. Section 1893(f)(2)(a) of the Social Security Act limits the recoupment of overpayments at the initial stages of appeal

15 1. At redetermination, unless a request for redetermination is submitted by the 30 th day from the date of the first demand letter, recoupment can proceed on day At reconsideration, unless a request for reconsideration is submitted on the 60 th day from the date of the redetermination decision, recoupment can proceed on day b. Full and Early Presentation of Evidence Requirement at Reconsideration: i. Reconsideration is an independent, on-the-record review of the initial determination, redetermination and all other issues related to payment of the claim being appealed. 89 The reconsideration decision is based on a review of the findings and evidence submitted at the initial determination and redetermination levels. 90 ii. Providers must submit any additional evidence or missing documentation at this level of appeal. 1. Failure to submit all evidence prior to the issuance of the reconsideration decision will preclude consideration of that evidence at subsequent levels of appeal unless the provider can prove that he or she had good cause for the late submission Medicare and Medicaid Guide, Introduction to Medicare Contractors, CCH 13, Medicare and Medicaid Guide Explanations and Annotations, MAC Competitive Bidding and Responsibilities, 13,300. See also, 42 U.S.C. 1395kk-1. 3 Centers for Medicare & Medicaid Services, A/B MAC Jurisdictions, available at: (Last visited: Jan. 19, 2012). 4 Id. 5 Centers for Medicare & Medicaid Services, Map of Consolidated A/B MAC Jurisdictions, available at: (Last visited: Jan. 19, 2012). 6 Centers for Medicare & Medicaid Services, Specialty MAC Jurisdictions, available at: (Last visited: Jan. 19, 2012). 7 Centers for Medicare & Medicaid Services, Map of Home Health/Hospice MAC Jurisdictions and Contractors, available at: (Last visited: Feb. 11, 2012). 8 Medicare Program Integrity Manual, , Ch. 4, Section 4.1, available at: (Last visited: Jan. 23, 2012). 9 Medicare Program Integrity Manual, , Ch. 4, Section 4.2.2, available at: (Last visited: Jan. 19, 2012). 10 Id. at Id. at Id. at Id. at Centers for Medicare & Medicaid Services, RAC Contacts, available at: Program/Downloads/RACAbbr.pdf (Last visited: Jan. 23, 2012). 15

16 15 Recovery Audit Contractor (RAC), Federal Business Opportunities, available at: iew=1&cck=1&au=&ck= (Last visited: Feb. 11, 2012). 16 Id. 17 Id. 18 Id U.S.C. 1395ddd. 20 The Medicare Recovery Audit Contractor (RAC) Program: An Evaluation of the 3-year Demonstration, June 2008, p. 11, (Last visited: Jan. 23, 2012). 21 Id. at RAC Statement of Work, September 2011, p C.F.R See also RAC Statement of Work, September 2011, p RAC Statement of Work, September 2011, p RAC Statement of Work, September 2011, p Id. 27 CMS Transmittal 202, January 6, 2012, available at: (Last visited: Feb. 11, 2012). 28 Id. 29 CGI Federal Inc., Approved Issues, available at: (Last visited: Jan. 23, 2012). 30 Section 6411 of the Patient Protection and Affordable Care Act (PPACA), Pub. L (Mar. 23, 2010). 31 Letter from the Centers for Medicare and Medicaid Services regarding Recovery Audit Contractors (RACs) for Medicaid, October 1, Available at: (Last visited: Jan. 23, 2012) Fed. Reg (Sept. 16, 2011). 33 Id. at C.F.R (b) C.F.R (c). 36 Id. at 57808, Fed. Reg at Id. at Id. 40 Id. at Id. 42 Id. 43 Id. at Id. at Id. 46 Id. 47 Id. at Id. at Id. at Id. at Deficit Reduction Act of 2005, Section 6034 (e)(3). 52 Comprehensive Medicaid Integrity Plan of the Medicaid Integrity Program, FYs , July 2009, 53 Annual Report to Congress on the Medicaid Integrity Program, Center for Program Integrity, Centers for Medicare & Medicaid Services, for Fiscal Year 2010, p. 9, available at: (Last visited: Jan. 23, 2012). 54 See Medicaid Integrity Program Provider Audit Fact Sheet, June 2009, (Last visited: Jan. 23, 2012). 55 Id. 56 Medicaid Integrity Program A to Z, available at (Last visited: Jan. 23, 2012). 16

17 57 See Medicaid Integrity Program Provider Audit Fact Sheet, June 2009, (Last visited: Jan. 23, 2012). 58 Medicaid Program Integrity Program (100-15), Chapter 10- Medicaid Integrity Audits, Section 10030, available at: (Last visited: Jan. 23, 2012). 59 Id See 70 Fed. Reg (March 8, 2005) C.F.R (2008). 63 Limitation on Recoupment (935) for Providers, Physicians and Suppliers Overpayments, MLN Matters, Number MM6183 Revised, September 29, 2008, available at: (Last visited: Jan. 23, 2012) C.F.R (2008). 65 Limitation on Recoupment (935) for Providers, Physicians and Suppliers Overpayments, MLN Matters, Number MM6183 Revised, September 29, C.F.R (2008) Fed. Reg , (September 23, 2011) C.F.R (2008). 69 See 42 C.F.R (2008). See also 42 C.F.R (2008) Fed. Reg , (September 23, 2011) U.S.C. 1395pp. See also Medicare Claims Processing Manual Pub , Chapter 30, Section U.S.C. 1395pp. 73 Medicare Program Integrity Manual, Pub , Exhibit USC 1395gg. 75 Medicare Financial Management Manual, Pub , Chapter 3, Section Medicare Financial Management Manual, Pub , Chapter 3, Section Medicare Financial Management Manual, Pub , Chapter 3, Section U.S.C. 1395ddd. 79 Medicare Program Integrity Manual, , Chapter 8, Section Id. at Transyd Enterprises, LLC d/b/a Transpro Medical Transport, Medicare Appeals Council, Department of Health and Human Services, Departmental Appeals Board, case decided on September 15, Id. at Id. 84 Id. 85 Id. 86 Limitation on Recoupment (935) for Providers, Physicians and Suppliers Overpayments, MLN Matters, Number MM6183 Revised, September 29, 2008, available at: (Last visited: Jan. 23, 2012). 87 Id. 88 Id C.F.R Id C.F.R