Medicare Audits: DRG Downcoding in Hospitals: Algorithms Substituting for Medical Judgment, Part 1

This article is written by our good friend, Ed Roche. He is the founder of Barraclough NY, LLC, which is a litigation support firm that helps us fight against extrapolations.

e-roche

The number of Medicare audits is increasing. In the last five years, audits have grown by 936 percent. As reported previously in RACmonitor, this increase is overwhelming the appeals system. Less than 3 percent of appeal decisions are being rendered on time, within the statutory framework.

It is peculiar that the number of audits has grown rapidly, but without a corresponding growth in the number of employees for Recovery Audit Contractors (RACs). How can this be? Have the RAC workers become more than 900 percent more efficient? Well, in a way, they have. They have learned to harness the power of big data.

Since 1986, the ability to store digital data has grown from 0.02 exabytes to 500 exabytes. An exabyte is one quintillion bytes. Every day, the equivalent 30,000 Library of Congresses is put into storage. That’s lots of data.

Auditing by RACs has morphed into using computerized techniques to pick targets for audits. An entire industry has emerged that specializes in processing Medicare claims data and finding “sweet spots” on which the RACs can focus their attention. In a recent audit, the provider was told that a “focused provider analysis report” had been obtained from a subcontractor. Based on that report, the auditor was able to target the provider.

A number of hospitals have been hit with a slew of diagnosis-related group (DRG) downgrades from internal hospital RAC teams camping out in their offices, continually combing through their claims data. The DRG system constitutes a framework that classifies any inpatient stay into groups for purposes of payment.

The question then becomes: how is this work done? How is so much data analyzed? Obviously, these audits are not being performed manually. They are cyber audits. But again, how?

An examination of patent data sheds light on the answer. For example, Optum, Inc. of Minnesota (associated with UnitedHealthcare) has applied for a patent on “computer-implemented systems and methods of healthcare claim analysis.” These are complex processes, but what they do is analyze claims based on DRGs.

The information system envisaged in this patent appears to be specifically designed to downgrade codes. It works by running a simulation that switches out billed codes with cheaper codes, then measures if the resulting code configuration is within the statistical range averaged from other claims.

If it is, then the DRG can be downcoded so that the revenue for the hospital is reduced correspondingly. This same algorithm can be applied to hundreds of thousands of claims in only minutes. And the same algorithm can be adjusted to work with different DRGs. This is only one of many patents in this area.

When this happens, the hospital may face many thousands of downgraded claims. If it doesn’t like it, then it must appeal.

Here there is a severe danger for any hospital. The problem is that the cost the RAC incurs running the audit is thousands of time less expensive that what the hospital must spend to refute the DRG coding downgrade.

This is the nature of asymmetric warfare. In military terms, the cost of your enemy’s offense is always much smaller than the cost of your defense. That is why guerrilla warfare is successful against nation states. That is why the Soviet Union and United States decided to stop building anti-ballistic missile (ABM) systems — the cost of defense was disproportionately greater than the cost of offense.

Hospitals face the same problem. Their claims data files are a giant forest in which these big data algorithms can wander around downcoding and picking up substantial revenue streams.

By using artificial intelligence (advanced statistical) methods of reviewing Medicare claims, the RACs can bombard hospitals with so many DRG downgrades (or other claim rejections) that it quickly will overwhelm their defenses.

We should note that the use of these algorithms is not really an “audit.” It is a statistical analysis, but not done by any doctor or healthcare professional. The algorithm could just as well be counting how many bags of potato chips are sold with cans of beer.

If the patient is not an average patient, and the disease is not an average disease, and the treatment is not an average treatment, and if everything else is not “average,” then the algorithm will try to throw out the claim for the hospital to defend. This has everything to do with statistics and correlation of variables and very little to do with understanding whether the patient was treated properly.

And that is the essence of the problem with big data audits. They are not what they say they are, because they substitute mathematical algorithms for medical judgment.

EDITOR’ NOTE: In Part II of this series, Edward Roche will examine the changing appeals landscape and what big data will mean for defense against these audits. In Part III, he will look at future scenarios for the auditing industry and the corresponding public policy agenda that will involve lawmakers.

 

Another Win for the Good Guys! RAC Auditors Cannot Look Back Over 3 Years!!! (BTW: We Already Knew This -Shhhhh!)

I love being right – just ask my husband.

I have argued for years that government auditors cannot go back over three years when conducting a Medicaid/Care audit of a health care provider’s records, unless there are credible allegations of fraud. See blog.

42 CFR 455.508 states that “[a]n entity that wishes to perform the functions of a Medicaid RAC must enter into a contract with a State to carry out any of the activities described in § 455.506 under the following conditions:…(f) The entity must not review clams that are older than 3 years from the date of the claim, unless it receives approval from the State.”

Medicaid RAC is defined as “Medicaid RAC program means a recovery audit contractor program administered by a State to identify overpayments and underpayments and recoup overpayments.” 42 CFR 455. 504.

From the definition of a Medicaid RAC (Medicare RAC is similarly defined), albeit vague, entities hired by the state to identify over and underpayments are RACs. And RACs are prohibited from auditing claims that are older than 3 years from the date of the claim.

In one of our recent cases, our client, Edmond Dantes, received a Tentative Notice of Overpayment from Public Consulting Group (PCG) on May 13, 2015. In a Motion for Summary Judgment, we argued that PCG was disallowed to review claims prior to May 13, 2012. Of the 8 claims reviewed, 7 claims were older than May 13, 2012 – one even went back to 2009!

The Administrative Law Judge (ALJ) at the Office of Administrative Hearings (OAH) agreed. In the Order Granting Partial Summary Judgment, the ALJ opined that “[s]tatutes of limitation serve an important purpose: to afford security against stale demands.”

Accordingly, the ALJ threw out 7 of the 8 claims for violating the statute of limitation. With one claim left, the amount in controversy was nominal.

A note as to the precedential value of this ruling:

Generally, an ALJ decision is not binding on other ALJs. The decisions are persuasive. Had DHHS appealed the decision and the decision was upheld by Superior Court, then the case would have been precedent; it would have been law.

Regardless, this is a fantastic ruling , which only bolsters my argument that Medicaid/care auditors cannot review claims over 3 years old from the date of the claim.

So when you receive a Tentative Notice of Overpayment, after contacting an attorney, look at the reviewed claims. Are those reviewed claims over 3 years old? If so, you too may win on summary judgment.

All Medicare/Caid Health Care Professionals: Start Contracting with Qualified Translators to Comply with Section 1557 of the ACA!!

Being a health care professional who accepts Medicare and/ or Medicaid can sometimes feel like you are Sisyphus pushing the massive boulder up a hill, only to watch it roll down, over and over, with the same sequence continuing for eternity. Similarly, sometimes it can feel as though the government is the princess sleeping on 20 mattresses and you are the pea that is so small and insignificant, yet so annoying and disruptive to her sleep.

Well, effective immediately – that boulder has enlarged. And the princess has become even more sensitive.

boulder

On May 18, 2016, the Department of Health and Human Services (HHS) published a Final Rule to implement Section 1557 of the Affordable Care Act (ACA). Section 1557 of the ACA has been on the books since the ACA’s inception in 2010. However, not until 6 years later, did HSD finally implement regulations regarding Section 1557. 81 Fed. Reg. 31376.

The Final Rule became effective July 18, 2016. You are expected to be compliant with the rule’s notice requirements, specifically the posting of a nondiscrimination notice and statement and taglines within 90 days of the Final Rule – October 16, 2016. So you better giddy-up!!

First, what is Section 1557?

Section 1557 of the ACA provides that an individual shall not, on the basis of race, color, national origin, sex, age, or disability, be

  • excluded from participation in,
  • denied the benefits of, or
  • subjected to discrimination under

all health programs and activities that receive federal financial assistance through HHS, including Medicaid, most Medicare, student health plans, Basic Health Program, and CHIP funds; meaningful use payments (which sunset in 2018); the advance premium tax credits; and many other programs.

Section 1557 is extremely broad in scope. Because it is a federal regulation, it applies to all states and health care providers in all specialties, regardless the size of the practice and regardless the percentage of Medicare/caid the agency accepts.

HHS estimates that Section 1557 applies to approximately 900,000 physicians. HHS also estimates that the rule will cover 133,343 facilities, such as hospitals, home health agencies and nursing homes; 445,657 clinical laboratories; 1300 community health centers; 40 health professional training programs; Medicaid agencies in each state; and, at least, 180 insurers that offer qualified health plans.

So now that we understand Section 1557 is already effective and that it applies to almost all health care providers who accept Medicare/caid, what exactly is the burden placed on the providers? Not discriminating does not seem so hard a burden.

Section 1557 requires much more than simply not discriminating against your clients.

Section 1557 mandates that you will provide appropriate aids and services without charge and in a timely manner, including qualified interpreters, for people with disabilities and that you will provide language assistance including translated documents and oral interpretation free of charge and in a timely manner.

In other words, you have to provide written materials to your clients in their spoken language. To ease the burden of translating materials, you can find a sample notice and taglines for 64 languages on HHS’ website. See here. The other requirement is that you provide, for no cost to the client, a translator in a timely manner for your client’s spoken language.

In other words, you must have qualified translators “on call” for the most common 15, non-English languages in your state. You cannot rely on friends, family, or staff. You also cannot allow the child of your client to act as the interpreter. The clients in need of the interpreters are not expected to provide their own translators – the burden is on the provider. The language assistance must be provided in a “timely  manner. “Further, these “on call” translators must be “qualified,” as defined by the ACA.

I remember an English teacher in high school telling the class that there were two languages in North Carolina: English and bad English. Even if that were true back in 19XX, it is not true now.

Here is a chart depicting the number of non-English speakers in North Carolina in 1980 versus 2009-2011:

languages

As you can see, North Carolina has become infinitely more diverse in the last three decades.

And translators aren’t free. According to Costhelper Small Business,

Typical costs:
  • Interpreting may take place in person, over the phone or via video phone.
  • In-person interpreters typically cost $50-$145 per hour. For example, American Language Services offers interpreters starting at $100 per hour (or $125 for sign language) and a two-hour minimum is required.
  • Phone interpreters typically cost $1.25-$3 per minute. Language Translation, Inc. offers a flat fee of $1.88 per minute for phone interpreting, for example.
  • Video interpreters typically range from $1.75 to $7 per minute. For instance, LifeLinks offers video interpreting from $2.25 per minute for any language and $2.95 for sign language. A 15-minute minimum is common for phone or video interpreting.

It seems likely that telehealth may be the best option for health care providers considering the cost of in-person translations. Of course, you need to calculate the cost of the telehealth equipment and the savings you project over time to determine whether the investment in telehealth equipment is financially smart.

In addition to agencies having access to qualified translators, agencies with over 15 employees must designate a single employee who will be responsible for Section 1557 compliance and to adopt a grievance procedure for clients. Sometimes this may mean hiring a new employee to comply.

The Office of Civil Rights (“OCR”) at HHS is the enforcer of Section 1557. OCR has been enforcing Section 1557 since its inception in 2010 – to an extent.

However, expect a whole new policing of Section 1557 now that we have the Final Rule from HHS.

Medicaid/care Fraud: You Are Guilty Until Proven Innocent!

Don’t we have due process in America? Isn’t due process something that our founding fathers thought important, essential even? Due process is in our Constitution.

The Fourteenth (governing state governments) and the Fifth Amendment (governing federal government) state that no person shall be “deprived of life, liberty, or property without due process of law.”

Yet, apparently, if you accept Medicaid or Medicare, due process is thrown out the window. Bye, Felicia!

How is it possible that criminals (burglars, murderers, rapists) are afforded due process but a health care provider who accepts Medicaid/care does not?

Surely, that is not true! Let’s look at some examples.

In Tulsa, a 61-year-old man was arrested for killing his Lebanese neighbor. He pled not guilty. In news articles, the word “allegedly” is rampant. He allegedly killed his neighbor. Authorities believe that he may have killed his neighbor.

And prior to getting his liberty usurped and getting thrown in jail, a trial ensues. Because before we take a person’s liberty away, we want a fair trial. Doesn’t the same go for life and property?

Example A: I recently received a phone call from a health care provider in New Jersey. She ran a pediatric medical daycare. In 2012, it closed its doors when the State of New Jersey accused it of an overpayment of over $12 million and suspended its funds. With its funds suspended, it could no longer pay staff or render services to its clients.

Now, in 2016, MORE THAN FOUR YEARS LATER, she calls to ask advice on a closing statement for an administrative hearing. This tells me (from my amazing Murdoch Mysteries (my daughter’s favorite show) sense of intuition): (1) she was not provided a trial for FOUR YEARS; (2) the state has withheld her money, kept it, and gained interest on it for over FOUR YEARS; (3) in the beginning, she did have an attorney to file an injunction and a declaratory judgment; and (4) in the end, she could not afford such representation (she was filing her closing argument pro se).

Examples B-P: 15 New Mexico behavioral health care agencies. On June 23, 2013, the State of New Mexico accuses 15 behavioral health care agencies of Medicaid fraud, which comprised 87.5% of the behavioral health care in New Mexico. The state immediately suspends all reimbursements and puts most of the companies out of business. Now, MORE THAN THREE YEARS LATER, 11 of the agencies still have not undergone a “Fair Hearing.” Could you imagine the outrage if an alleged criminal were held in jail for THREE YEARS before a trial?

Example Q: Child psychiatrist in rural area is accused of Medicaid fraud. In reality, he is not guilty. The person he hired as his biller is guilty. But the state immediately suspends all reimbursements. This Example has a happy ending. Child psychiatrist hired us and we obtained an injunction, which lifted the suspension. He did not go out of business.

Example R: A man runs a company that provides non-emergency medical transportation (NEMT). One day, the government comes and seizes all his property and freezes all his bank accounts with no notice. They even seize his fiance’s wedding ring. More than TWO YEARS LATER – He has not stood trial. He has not been able to defend himself. He still has no assets. He cannot pay for a legal defense, much less groceries.

Apparently the right to speedy trial and due process only applies to alleged burglars, rapists, and murderers, not physicians and health care providers who render medically necessary services to our most fragile and vulnerable population. Due process??? Bye, Felicia!

What can you, as a health care provider, do if you are accused of fraud and your reimbursements are immediately suspended?

  1. Prepare. If you accept Medicare/caid, open an account and contribute to it generously. This is your CYA account. It is for your legal defense. And do not be stupid. If you accept Medicaid/care, it is not a matter of if; it is a matter of when.
  2. Have your attorney on speed dial. And I am not talking about your brother’s best friend from college who practices general trial law and defends DUIs. I am talking about a Medicaid/care litigation expert.
  3. File an injunction. Suspension of your reimbursements is a death sentence. The two prongs for an injunction are (a) likelihood of success on the merits; and (b) irreparable harm. Losing your company is irreparable harm. Likelihood of success on the merits is on you. If your documents are good – you are good.

Medicaid Reimbursement Rates: What Goes Down Never Goes Up!

It is a timeless joke. What goes down, but never goes up? Medicaid rates!

Having a Medicaid card is as useful as holding a lottery ticket. Sure, maybe you’ll hit the jackpot and find a quality health care provider with whom you share some common connection, but, most likely, you will receive nothing but false hope. 10% of nothing is nothing.

For health care providers that do accept Medicaid – how many of you are accepting new patients? Or maybe the better question is – how many of you are profitable from your Medicaid patients?

The fact of the matter is that Medicaid pays crap. See blog. And blog.

Because we live in a society in which we need money to live, if Medicaid pays less than the cost, health care providers will not accept Medicaid. And you cannot blame them. It’s happening all over the country. In Utah, dentists are un-enrolling in Medicaid, i.e., refusing their Medicaid patients. See article. Pennsylvania has a shortage of psychiatrists..even more so who accept Medicaid. See article. “Some 55% of doctors in major metropolitan areas refuse to take new Medicaid patients, according to a 2014 report by Merritt Hawkins. The Department of Health and Human Services reported that same year that 56% of Medicaid primary-care doctors and 43% of specialists weren’t available to new patients.” See article.

Medicaid is failing our most vulnerable and many more. Medicaid, as it exists now, fails every taxpayer, every health care provider who accepts it, and every family member of a developmentally disabled person who is dependent on Medicaid.

The cost of the Medicaid program is expected to rise from $500 billion to $890 billion by 2024, according to the Center for Medicare and Medicaid Services (CMS). Yet – throwing more money at a dysfunctional program does not equate to Medicaid recipients gaining access to quality care. The increased money is not going to the services for Medicaid recipients. The ballooned Medicaid budget is not earmarked to elevate the current, inadequate Medicaid reimbursements, which would induce more health care providers to accept Medicaid. The higher the cost of Medicaid, the more the government slashes the reimbursement rates. Yet our government is willing to throw Medicaid dollars at managed care organizations (MCOs) to release the burden of managing such shortfalls and turn a blind eye when our taxpayers’ money is not used to provide Medicaid medically necessary services to recipients, but to compensate CEOs $400,000 or allow alleged extortion.

For example, in obstetrics, if the national Medicaid reimbursement rate for ob/gyn visits is $1.00, here, in NC, Medicaid reimburses ob/gyns 88¢. Which is why only 34% of North Carolina ob/gyns accept Medicaid.

If it is imperative for the Medicaid reimbursements to increase (to, at the very least, cost, if not a slight profit), then how do we accomplish such an insurmountable task?

There are two options: (1) lobbying (which, obviously, has not been successful thus far); and (2) litigation.

Section 30(A) of the Medicaid Act requires that a state provide Medicaid reimbursement rates at a level to “assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population…”

In an article entitled “Nurse Staffing Levels and Medicaid Reimbursement Rates in Nursing Facilities,” written by Charlene Harrington, James H. Swan, and Helen Carrillo, the authors found that the Medicaid nursing home reimbursement rates were linked to quality of care, as to both RN hours and total nursing hours.

“Resident case mix was a positive predictor of RN hours and a negative predictor of total nursing hours. Higher state minimum RN staffing standards was a positive predictor of RN and total nursing hours while for-profit facilities and the percent of Medicaid residents were negative predictors.” Id.

Numerous other articles have been published in the last few years that cite the direct correlation between reimbursement rates and quality of care.

How do we stop Medicaid reimbursement rates from dropping and the executives of those companies charged with managing Medicaid funds from lining their own pockets?

According to the Supreme Court, suing under the Supremacy Clause is not the answer.

In Armstrong v. Exceptional Child Services, providers of habilitative Medicaid services sued the State of Idaho for Medicaid reimbursements rates being too low as to violate Section 30(A) of the Medicaid Act.

In the Armstrong decision from last year, the Supreme Court, Scalia found that, in enacting §1902(a)(30)(A) Congress had empowered the HHS Secretary to withhold all Federal funds from states that violate federal law. According to Armstrong, this “express provision of an administrative remedy” shows that Congress intended that the Secretary be the enforcer – not the courts. In other words, the Supreme Court held that

“The sole remedy Congress provided for a State’s failure to comply with Medicaid’s requirements—for the State’s “breach” of the Spending Clause contract—is the withholding of Medicaid funds by the Secretary of Health and Human Services.” Armstrong.

In other words, according to Armstrong, the sole remedy for health care providers who demand higher Medicaid reimbursement rates, will be for the Secretary of HHS to withhold Medicaid funds from the state. Such a drastic measure would undoubtedly cause the state such a budgetary shortfall that the state would soon be in a position in which it could not reimburse health care providers at all. Therefore, the providers go from receiving woefully low reimbursement rates to receiving none at all. That seems hardly the situation that the Supreme Court would want.

There are still litigation options for health care providers to sue in order to increase the Medicaid reimbursement rate. Just not through the Supremacy Clause.

I have a joke: What goes down, but never goes up?

NC DHHS Fails: No Bid Contracts – No Bueno!

A recent State Auditor report found that DHHS “had approximately 2,500 non-competitively bid contracts with a value of approximately $2.4 billion between state fiscal year 2012 through 2014. The value of the no-bid contracts accounts for more than 32% of all contracts during the same period.”

No bid contracts are exactly that – the company awarded the contract received the contract without competition, or a bid process. Think of a no bid contract as a try out for a professional football team, but only one person is trying out. Generally, competition breeds better results because people try harder when they compete, rather than a solo act.

In contract bidding, rivalry also breeds a lower contract price. It’s only logical. If you know that other companies are submitting bids, you are going to submit the lowest number possible.

So how is DHHS allowed to award no bid contracts?

NC Statute dictates that the AG or the AG’s attorney shall review “all proposed contracts for supplies, materials, printing, equipment, and contractual services that exceed one million dollars…” as of June 27, 2011. See NCGS 114-8.3 as amended by Session Law 2011-326 and Session Law 2013-234.

But – Per 09 NCAC 06B .0901, “…competition may be limited or waived where a factual basis demonstrates support of one or more of the conditions set forth in Paragraph (b) of this Rule. If the procurement is within a purchasing agency’s general delegation, then the purchasing agency may waive competition in conformance with this Rule. If the procurement is greater than the agency’s delegation, requests for limited or waived competition shall be submitted to the State CIO for approval.”

Here are the exceptions found in 09 NCAC 06B.0901(b):

(b) Competition may be limited or waived under the following conditions:

  1. Competition is not available;
  2. A needed product or service is available from only one source of supply;
  3. Emergency action is indicated;
  4. Competition has been solicited but no responsive offers have been received;
  5. Standardization or compatibility is the overriding consideration;
  6. A donation stipulates the source of supply;
  7. Personal or particular professional services are required;
  8. A product or service is needed for a person with disabilities and there are overriding considerations for its use;
  9. Additional products or services are needed to complete an ongoing job or task;
  10. A particular product or service is desired for educational, training, experimental, developmental or research work;
  11. Equipment is already installed, connected and in service, and it is determined advantageous to purchase it;
  12. Items are subject to rapid price fluctuation or immediate acceptance;
  13. There is evidence of resale price maintenance or other control of prices or collusion on the part of persons or entities that thwarts normal competitive procedures unless otherwise prohibited by law;
  14. A purchase is being made and a price is available from a previous contract;
  15. The requirement is for an authorized cooperative project with another governmental unit(s) or a charitable non-profit organization(s); or
  16. A used item is available on short notice and subject to prior sale.

Did all the no bid contracts that DHHS procured between state fiscal year 2012 through 2014 to equal approximately $2.4 billion fit within 1 or more of the above referenced exceptions?

At least, according to the State Auditor – No.

Here are the key findings of the State Auditor’s Report:

  • Many no-bid contracts lacked required review and approval to protect state interests
  • Many no-bid contracts lacked documentation of negotiations to improve pricing or terms
  • Many no-bid contracts lacked adequate written justification to waive competition, which increases the risk of favoritism, unfavorable terms, and poor performance

It appears that DHHS failed this audit. Should we extrapolate?

Former mental health providers take fight over Medicaid funds to lawmakers

Loyal followers will remember the behavioral health care debacle that happened in New Mexico in June 2013. See blog and blog and blog. Basically, the State of New Mexico accused 15 behavioral health care companies of credible allegations of fraud and immediately froze all the companies’ Medicaid reimbursements. These 15 companies comprised 87.5% of New Mexico’s behavioral health providers. The companies were forced to close their doors. Hundreds of people lost their jobs. Hundreds of thousands of Medicaid recipients no longer received their medically necessary mental health and substance abuse services. It really was and is such a sad tragedy.

Now, more than 3 years later, the consequences of that payment suspension still haunts those providers. Once they were exonerated of fraud by the Attorney General, the single state entity, Human Services Department (HSD), is now accusing them – one by one – of alleged overpayments. These alleged overpayments are extrapolated. So 10 claims for $600 turns into $2 million. See blog.

I will leave Saturday the 30th of July to fly to Albuquerque, NM, to defend one of those behavioral health care providers in administrative court. The trial is scheduled to last two weeks.

Below is a great article from today’s The Santa Fe New Mexican about this:

By: Justin Horwath
ALBUQUERQUE — Executives of three former mental health agencies told state lawmakers Wednesday that they are still fighting the state’s determination that they overbilled Medicaid, and they are expected to repay millions of dollars, even after they have been cleared of criminal wrongdoing.

“Three years after the fact, and we are still plodding through this,” Shannon Freedle, who was an executive with the now-defunct Teambuilders Counseling Services in Santa Fe, told lawmakers on the Health and Human Services Committee during a hearing in Albuquerque. He was referring to allegations in June 2013 against 15 mental health providers that led to a statewide Medicaid service shake-up.

Along with Freedle, executives of the Santa Fe-based Easter Seals El Mirador and Albuquerque-based Hogares Inc. testified about the New Mexico Human Services Department’s continued claims of Medicaid overpayments long after the state Attorney General’s Office announced it found no evidence that any of the providers had committed fraud and many of the firms have shut down.

Some of the providers, meanwhile, say the state’s former Medicaid claims contractor, OptumHealth New Mexico, still owes them millions of dollars in back payments for treating patients before the shake-up. A group of behavioral health providers, including Teambuilders, Easter Seals and Hogares, filed a lawsuit against OptumHealth in state District Court in June. OptumHealth also faces at least three other lawsuits filed this year, accusing it of Medicaid fraud.

State Rep. Bill O’Neill, D-Albuquerque, called the Human Services Department’s actions “outrageous on so many levels.”

Rep. Christine Trujillo, also an Albuquerque Democrat, called for the resignation of Human Services Department Cabinet Secretary Brent Earnest and for “criminal charges to be pressed because this isn’t human error anymore — this is actually criminal behavior.” She is the second member of the committee to call for Earnest to step down.

No Republicans on the bipartisan committee were at the presentation.

Earlier Wednesday — at a news conference in Albuquerque promoting the Martinez administration’s efforts to tackle New Mexico’s drug abuse epidemic — Gov. Susana Martinez made a rare public comment about the decision in June 2013 to freeze Medicaid payments to the 15 mental health providers on allegations they had defrauded Medicaid, the state and federal program that provides health care to low-income residents. The state brought in five Arizona firms to replace the New Mexico providers, but three of them have since left the state, citing financial losses

Martinez said the decision to freeze the Medicaid payments “was recommended by the federal government.”

“But the patients were continued to be serviced and their services were not interrupted,” she said, “unless they decided on their own that they wanted to not continue.”

Asked to clarify Martinez’s statement about the federal government’s role in the Medicaid payment freeze, Michael Lonergan, the governor’s spokesman, said in an email that Martinez was “referencing federal law, which calls for the state to suspend payments and investigate any credible allegations of fraud.”

Federal law gave the state the option to freeze Medicaid payments but didn’t require it.

Kyler Nerison, a spokesman for the Human Services Department, defended the agency’s efforts to pursue the return of funds allegedly overpaid to the former Medicaid providers, saying in an email that the “Attorney General’s limited review of the agencies that had their payments suspended found thousands of cases of billing errors and other regulatory violations.

“Medicaid dollars should be used to help the people who need it most, and if these politicians want to turn a blind-eye to that kind of waste and abuse, that’s solely on them,” Nerison said. “The Human Services Department will continue working to recoup the misspent and overbilled Medicaid dollars as we continue to help more New Mexicans than ever before in both Medicaid and behavioral health services.”

Freedle said he will attend a Human Services Department hearing next week to contest the agency’s claim that Teambuilders owes the state $2.2 million. At issue is the agency’s use of extrapolation to determine the figure of the alleged overbilling. The agency pointed to 12 allegedly errant claims Teambuilders had made to OptumHealth requesting Medicaid reimbursements worth a total of $728.

But Freedle said the Human Services Department used overpayments found in a small sample of claims and multiplied the amount by 3,000 to determine overbilling over a longer period of time, without proving such billing errors occurred. An investigation by the Attorney General’s Office, which found no evidence of criminal fraud, also found a smaller error rate.

Patsy Romero, CEO of Easter Seals El Mirador, and Nancy Jo Archer, who was the CEO of Hogares, broke down in tears as they described the Human Services Department’s “fair hearing process.”

“That’s really and truly an oxymoron,” Archer said.

Medicare Fraud: Do MCOs Have Accountability Too?

Dr. Isaac Kojo Anakwah Thompson, a Florida primary care physician, was sentenced in July 2016 to 4 years in prison and a subsequent two years of supervised release. Dr. Thompson pled guilty to health care fraud.  He was further ordered to pay restitution in the amount of $2,114,332.33. Ouch!! What did he do?

According to the Department of Justice, Dr. Thompson falsely reported that 387 of his clients suffered from ankylosing spondylitis when they did not.

Question: How does faking a patient’s disease make a physician money???

Answer: Hierarchal condition category (HCC) coding. Wait, what?

Basically, Medicare Advantage assigns HCC coding to each patient depending on the severity of their illnesses. Higher HCC scores equals substantially higher monthly capitation payments from Medicare to the managed care organization (MCO). In turn, the MCO will pay physicians more who have more extremely sick patients (higher HCC codes).

Ankylosing spondylitis is a form of arthritis that causes inflammation and damage at the joints; eventually, the inflamed spinal joints can become fused, or joined together so they can’t move independently. It’s a rare disease, affecting 1 in 1000 people. And, importantly, it sports a high HCC code.

In this case, the Office of Inspector General (OIG) found it odd that, between 2006-2010, Dr. Thompson diagnosed 387 Medicare Advantage beneficiaries with ankylosing spondylitis and treated them with such rare disease. To which, I say, if you’re going to defraud the Medicare system, choose common, fabricated diseases (kidding – it’s called sarcasm – I always have to add a disclaimer for people with no humor).

According to the Department of Justice, none or very few of Dr. Thompson’s 387 consumers actually had ankylosing spondylitis.

My issue is as follows: Doesn’t the managed care organization (MCO) share in some of the punishment? Shouldn’t the MCO have to repay the financial benefit it reaped from Dr. Thompson?? Shouldn’t the MCO have a duty to report such oddities?

Let me explain:

In Florida, Humana acted as the MCO. Every dollar that Dr. Thompson received was funneled through Humana. Humana would pay Dr. Thompson a monthly capitation fee from Medicare Advantage based on his patient’s hierarchal condition category (HCC) coding. Increasing even just one patient’s HCC code means more bucks for Dr. Thompson. Remember, according to the DOJ, he increased 387 patients’ HCC codes.

Dr. Thompson reported these diagnoses to Humana, which in turn reported them to Medicare. Consequently, Medicare paid approximately $2.1 million in excess capitation fees to Humana, approximately 80% of which went to Dr. Thompson.

In this case, it is reasonable to expect that Humana had knowledge that Dr. Thompson reported abnormally high HCCs for his patients. For comparison, ankylosing spondylitis has an HCC score of 0.364, which is more than an aortic aneurysm and three times as high as diabetes. Plus, look at the amount of money that the MCO paid Dr. Thompson. Surely, it appeared irregular.

What, if anything, is the MCO’s duty to report physicians with an abnormally high number of high HCC codes? If you have knowledge of someone committing a crime and you do nothing, isn’t that called aiding and abetting?

With the publication of the Yates memo, I expect to see CMS holding MCOs and other state agencies accountable for the actions of its providers. Not to say that the MCOs should actively, independently investigate Medicare/caid fraud, but to notify the Human Services Department (HSD) if abnormalities exist, especially if as blatant as one doctor with 387 patients suffering from ankylosing spondylitis.

The New White Collar Exemptions: The Final Rule, (an exception), and the Possible Consequences

On May 18, 2016, the US Department of Labor (DOL) announced the Final Rule amending the “white collar” overtime exemptions to increase the number of employees eligible for overtime, effective December 1, 2016. Got overtime? There is no phase-in; it is immediately effective on December 1st.

We all know that the Affordable Care Act (ACA) placed heavier burdens on employers with the employer mandate for employee health insurance. But, the burdens didn’t stop with the ACA!! Oh, no!  In 2014, President Obama signed an Executive Order directing the Department of Labor to update the regulations defining which white collar workers are protected by the Fair Labor Standards Act (FLSA) minimum wage and overtime standards. How else could we financially burden employers? We could mandate employers pay overtime to salaried workers!!! Oh, we already do? Let’s raise the overtime salary threshold exemptions so more employees receive overtime!!

aca-white-collar-highres

You ask, “How is the DOL Final Rule on white collar exemptions germane to my health care agency/practice?” Answer: Do you have employees? If yes, the Final Rule is applicable to you. If no, there is no need to read this blog (unless you are a salaried employee and want to receive more overtime).

The new, increased salary threshold for executives, administration, and professionals exemptions swells from $455/week to $913/week or $23,660/year to $47,476/year. The number for the ceiling is actually less than what was proposed by $800/week. These numbers are based on 40th percentile of full-time employees (salaried) in the lowest wage region, which happens to be the South. Don’t get your knickers in a knot.

Furthermore, the exemption for the highly compensated employee will jump from $100,000 to $134,004 (odd number). This number is $12,000 more than the proposed amount. Well, that just dills my pickle!

The Final Rule also requires that the salary threshold for executives, administration, and professionals be reviewed every three years in order to maintain the salary exemption comparable to the 40th percentile of full-time employees (salaried) in the lowest wage census region – the South.

Finally, the salary basis test will be amended to allow employers to use non-discretionary bonuses and incentive payments, such as commissions, to satisfy the requirements up to 10% of the salary threshold.

The allowance of non-discretionary bonuses and incentive payments was meant to soften the blow of the increased salary thresholds. That’s about as useless as a screen door on a submarine/a trapdoor on a canoe.

VERY IMPORTANT EXCEPTION

The Secretary of DOL issued a time-limited non-enforcement policy for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. From December 1, 2016 to March 17, 2019, the Department will not enforce the updated salary thresholds.

BUT THE REST OF US BEWARE!!

Do your math!! If the 10% maximum allowance is exceeded, you could find yourself in a world of hurt! We are talking misclassification claims! Also, ensure you know the proper distinctions between discretionary and non-discretionary bonuses!

What likely consequences will arise from this Final Rule? There are a number of possibilities:

  1. Employers will raise employees’ salaries to the new levels;
  2. Employers will pay more overtime;
  3. Employers will convert the salaried employees to hourly;
  4. Employers will change benefits or other operation costs to compensate for the increased burden.

Well, that’s just lower than a snake’s belly in a wagon rut!

Turning Medicare Into a Premium Support System: Frequently Asked Questions — The Henry J. Kaiser Family Foundation

Premium support is a general term used to describe an approach to reform Medicare that aims to reduce the growth in Medicare spending. These FAQs raise and discuss basic questions about the possible effects of a premium support system for Medicare beneficiaries, the federal budget, health care providers, and private health plans.

via Turning Medicare Into a Premium Support System: Frequently Asked Questions — The Henry J. Kaiser Family Foundation