Medicare and Medicaid Fraud, Reimbursement & Exclusion


As all providers know, there is a huge focus on the financial cost of the healthcare reforms and the financial viability of existing Medicare and Medicaid programs. The State of Texas Office of the Inspector General (Medicaid) and the federal government (CMS and Office of Inspector General or “OIG”) have promised vigorous action against fraud and abuse in these programs.

The aging US population and declining birthrate promise to adversely affect the financial viability of these programs and the time-honored solution has been to attempt to control reimbursement rates.

Though much has been said and will continue to be said about the Affordable Care Act, the impact of Medicare revenues (or the lack thereof for those opting out) will be an important economic issue to all practitioners.

Being forcibly excluded from Medicare as a provider can have a pervasive and profoundly adverse effect upon the reputation and economic dynamics of a practice. Being excluded as a provider is not equivalent to voluntary opting out.

When a practitioner is excluded from Medicare that exclusion is supposed to extend to all federal programs. In addition, managed care companies see such an exclusion as a severe reputational issue and an opportunity to also exclude the practitioner. Likewise, state licensure boards, workers compensation regulators, hospital peer review, and specialty boards may likewise exclude a practitioner based upon Medicare or Medicaid exclusion.

Exclusions fall into two categories, mandatory and permissive. OIG is required by law to exclude any healthcare providers from participation who have been convicted of criminal activity falling under those categories. Mandatory exclusions include convictions for fraud under any federal or state health care programs and patient abuse or neglect, just to name a few. Permissive exclusions include healthcare licensure suspensions, revocations or surrenders for reasons of professional competence or performance and misdemeanor  convictions for fraud in a program funded by any federal, state or local government  but can also include matters unrelated to healthcare such as defaulting on education loans. With permissive exclusions, the OIG can, at their discretion, choose to exclude individuals or entities.

If you are a health care licensee participating in any federally funded program, or employed by such an entity, you should be aware of the possible consequences of a guilty plea or verdict, or even a no contest plea to felony or misdemeanor charges. Similarly, licensing actions by the state may also have the effect of adversely affecting federal participation. Though OIG does provide for a hearing or appeal process, it is crucial to understand the possible exclusion effects prior to any guilty plea or conviction, deferred disposition or other type agreement.

In Texas, Medicare quality of care is reviewed by the Texas Medical Foundation (“TMF”), not to be confused with the Texas Medical Association. The TMF reviews charts, responds to complaints, and holds hearings that may result in exclusion proceedings on the federal level. This Firm has been involved with defending physicians in the TMF process for more than 20 years. The unique procedures for TMF review and decision can be confusing, frustrating, and painful for the unprepared provider. Providers who receive a TMF notice should seek legal counsel immediately, prior to responding to the stated concerns.

In Texas, Medicare reimbursement is reviewed by CMS through its subcontractors. The subcontractors are essentially paid on the basis of the dollars recovered/disallowed in cases where they find charting deficiencies which do not support the billing code used. It is extremely important for any provider who is facing the threat of sanction by TMF or CMS to seek experienced legal counsel as soon as possible.

What does this mean for the healthcare provider? Obviously, providers are worried about falling reimbursement levels. However, payment denial and recoupment are receiving a huge push. Audit programs are being government implemented and are well funded. After all, if funds are in short supply, recoupment for misbilled or nonexistent services could be an effective method to significantly cut the total program costs.

However, the aggressive methods used in the audit process, the arbitrary total denial of payment, instead of downcoding, and the aggressive, immediate efforts to withhold and recoup extrapolated funds are a serious threat to targeted providers.

The current audit methodologies in the federal and state programs target the discrepancies that may exist between the service codes billed and the documentation in the chart, and exploit these discrepancies to disallow, reduce, and/or recoup payments to providers.

These new “ZPIC” audit programs can have devastating economic consequences for providers.

Perhaps the most troubling aspect of the ZPIC audits is their practice of extrapolating in order to escalate repayment claims beyond actual amounts reviewed, resulting in crushing economic recoupment.

As an example of this dynamic, assume that a physician is audited and has 30 charts reviewed involving three billing codes. If 20 charts are found deficient, CMS will potentially seek to recoup 20/30 (66-2/3 %) of all payments made in those codes to that physician during the audit period. (Using inferential statistical techniques).

In this crude example, assume that the amount of the billings in the actual deficient charts was $2,700. Assume the physician collected $225,000 on these codes during the audit period. The recoupment might thus be for $150,000 (66.67% of $225,000). The physician would then be subjected to payment withholds and aggressive collection letters from the justice department for $150,000. Suddenly, a profound economic crisis has emerged.

The audit process involves several levels of appeal with varying time deadlines. It is critically important to act immediately upon receipt of an audit result to organize the effort and begin work on the appeal. In some cases, collection action can be forestalled by proper and timely filing of appeals. It is possible to waive any appeal by not preparing and filing a case by rebuttal.

The audit process itself, from initial results to administrative law judge ruling may take several years, and involve up to five levels of appeal following the audit result. Each step is very important and is built upon the step previously taken.

We encourage every Medicare and Medicaid provider to review the criteria for the billing codes in use and carefully and thoroughly document all critical criteria.

Finally, healthcare providers should consider the possibility of criminal charges under the federal Health Care Fraud Act, False Claims Act, Ant-Kickback statutes or other statutory authority.