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Escalating Medicare and Medicaid Auditing on the Horizon

Andrea Kraynak, for HealthLeaders Media, October 22, 2009

There's no question that audit activity is escalating and the healthcare provider community needs to find a way to deal with the higher volume of audits and increasing number of auditors conducting them.

It's no longer just RAC, MAC, CERT, and ZPIC audits looking to ensure the accuracy of Medicare payments. Providers are also subject to increased scrutiny on the Medicaid side, as states are working with the federal government to help reduce payment error rates and recoup overpayments.

Providers in some states may be ill prepared for the increase in audit activity. "Some states have been more aggressive recently and some states have not had the resources to do it. But I think it is going to be a wakeup call in those states where enforcement has not taken place to receive and respond to the audits," says James G. Sheehan, the Medicaid inspector general for New York.

"It is very challenging. The audits are stacking up," according Sarah Kay Wheeler, partner at King & Spaulding LLP in Atlanta. "And add to the list is the Medicare Advantage plans contracting with different groups to conduct independent audits for Medicare Advantage purposes."

Sheehan agrees that Medicare Advantage auditing is probably on the horizon, and believes providers may also need to watch out for Medicare Prescription Drug Benefit program audits. "I think it is reasonable to expect that the lessons that CMS learns in calculating estimates of improper payments and in auditing will be extended to the Medicare Prescription Drug Program and the Medicare Advantage Program going forward."

For now, providers should definitely spend time preparing for Medicaid Integrity Contractor audits, as these should begin in all states by the end of 2009.

What will MICs be auditing? It will vary from state to state, of course. But Sheehan believes some of the following may be issues on which MICs will focus, at least at first:

  • Dead or alive. In other words, was the patient alive at the time that the treatment was allegedly rendered to him or her? "This may seem obvious, but in a number of states their system controls process usually takes three to four months to identify a patient as deceased," says Sheehan. "That's a pretty straightforward issue for the MIC to focus on." In addition, MICs may look at whether a physician was deceased at the time he or she allegedly wrote an order, he says.

  • Inpatient at time of ambulatory service. MICs will look for patients who were inpatients at the hospital at the time they were given home healthcare or ambulance trips.

  • Hysterectomy on males. This is just one example of inconsistent coding, Sheehan says. "There are computerized techniques for identifying things that are impossible or highly unlikely. Hysterectomy on a male is one of them."

  • Debridement requiring actual cutting. MICs will look at regulations and statutes and coding guidance, such as Coding Clinics.

  • Heart failure and shock. For this issue, MICs will look for failure to meet InterQual criteria for inpatient care.

  • Ambulatory surgery with no complications to justify inpatient stay. "Commonwealth Fund just came out with a ranking of the states on this issue, and some states are better than others. It may not be a bad idea to find out where your state stands and whether this will be an issue," Sheehan says.

  • DRG assignment. Take a code pair with pretty clear criteria (e.g., temporary paralysis vs. more permanent paralysis) and examine which code pair you report more often. If you are heavily weighted toward the more expensive and many other hospitals are weighted the opposite way, you might want to take a good hard look, says Sheehan.

  • Observation beds. This is always a popular issue because Medicaid rules differ by state and also differ from Medicare in most states, explains Sheehan.

  • Exclusion. "This is my personal prediction … Over the last three years, the OIG has issued guidance on exclusion that says you can't even have a janitor who is an excluded person working for your organization if you're getting paid Medicare or Medicaid money that finds its way in whole or in part into his salary," says Sheehan, who is finding that many providers don't have the necessary screening in place to prevent employment of persons excluded under state or federal law. "You may want to take a look before the auditors come in at 42 CFR 402.209, which talks about the scope and effect of exclusions. Because I find in my own work there's not as much awareness of these issues as there should be. And it's an easy data run to do if you are a MIC."

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