The Smart Anesthesia Group’s Guide to Defending a Payer Audit

Vicki Myckowiak, Esq.
Principal, Myckowiak Associates, PC, Detroit, MI

Anesthesia groups currently find themselves in the uncomfortable position of being a target of the Office of Inspector General (OIG) of the Department of Health and Human Services, the largest inspector general's office in the federal government, with approximately 1,600 people dedicated to combating fraud, waste and abuse in government programs, including Medicare. The OIG's duties are carried out through a nationwide network of audits, investigations and inspections.¹ The current OIG Work Plan includes two ongoing anesthesia issues:

1. Anesthesia Modifiers: "Physicians must report the appropriate anesthesia modifier code to denote whether the service was personally performed or medically directed (Centers for Medicare and Medicaid Services, Medical Claims Processing Manual, Pub. No. 10004, Ch. 12, § 50). Reporting an incorrect service code modifier on the claim as if services were personally performed by an anesthesiologist when they were not will result in Medicare paying a higher amount. The service code "AA" modifier is used for anesthesia services personally performed by an anesthesiologist, whereas the "QK" modifier limits payment to 50 percent of the Medicare allowed amount for personally performed services claimed with the AA modifier. Payments to any service provider are precluded unless the provider has furnished the information necessary to determine the amounts due (SSA § 1833(e)). We will review Medicare Part B claims for personally performed anesthesia services to determine whether they were supported in accordance with Medicare requirements. We will also determine whether Medicare payments for anesthesia services reported on a claim with the AA service code modifier met Medicare requirements."

2. Medical Necessity: "Medicare Part B covers anesthesia services provided by a hospital for an outpatient or by a freestanding ambulatory surgical center for a patient. We will review Medicare Part B claims for anesthesia services to determine whether they were supported in accordance with Medicare requirements. Specifically, we will review anesthesia services to determine whether the beneficiary had a related Medicare service."

With the government's fraud and abuse detection efforts at an all-time high, anesthesia groups must fully understand: 1) the ways in which CMS conducts audits; 2) practical steps to minimize the impact of an audit; and 3) the appeals process available to them in the event of an unfavorable audit.

Types of Medicare Audits

CMS uses different types of audits to detect perceived provider fraud and abuse. These audits may differ in scope and may be conducted by different entities on behalf of Medicare, but each type of audit can result in a demand by CMS to refund payments. The following list is not exhaustive of current CMS audit and monitoring programs.

• Comprehensive Error Rate Testing

CMS established the Comprehensive Error Rate Testing (CERT) program to monitor the accuracy of Medicare fee-for-service payments. The CERT process begins with the Medicare program identifying procedure codes that statistically appear to be the subject of potentially incorrect billings and/or payments. Once the procedure codes are identified, the CERT contractor randomly selects claims made with the procedure code for a probe audit and sends the identified provider a letter requesting copies of relevant medical records. Generally, Medicare does not pay the claims requested in a CERT audit until the review substantiates the appropriateness of payment.

Upon receipt of the medical records, the CERT contractor reviews the records to determine whether the claims and records comply with Medicare coverage, documentation and coding and billing rules. When performing these reviews, the CERT contractor must follow Medicare regulations, billing instructions, National Coverage Determinations (NCDs), coverage provisions in interpretive manuals and Local Coverage Determinations (LCDs) made by the applicable Medicare claims processing contractor. The CERT contractor does not develop or apply any coverage, payment or billing policies of its own.

If the CERT contractor determines that the records and claims do not substantiate payment, it sends the provider a letter denying the reviewed claims. Moreover, negative findings from a probe audit often lead to a more extensive postpayment audit and subsequent repayment demands for "erroneous" claims.

• The Contractor Medical Review Program

As the name suggests, Contractor Medical Review Program Audits (MR Audits) are conducted by the Medicare Contractors under Part B of the Medicare program and are designed to uncover erroneous documentation, billing and/or Medicare payments.

Providers are selected for an MR Audit for a variety of reasons, including atypical billing patterns, specific identified billing issues, anonymous complaints and/or volume of services provided. Often providers are singled out for an MR Audit if their utilization for a given service exceeds that of their peers.

Most MR Audits are conducted on a post-payment basis and begin with a probe review where the Contractor reviews a sample of claims to determine whether services were medically reasonable and necessary and correctly paid. Some MR Audits are automated, and denials can be generated based on statistical and/or coding information.

In other cases, the provider receives a letter requesting documentation for certain patients on specific dates of service. The Contractor reviews and analyzes the documentation sent in by the provider to determine whether the services were fully and completely documented, medically necessary and correctly billed.

Upon conclusion of the probe review, the Contractor can take any of the following steps:

1. Refrain from action based on appropriateness of documentation and services.
2. Provide notification and education.
3. Make a demand for repayment.
4. Place a provider on pre-payment utilization review, which consists of medical review of claims prior to payment.
5. Conduct an expanded postpayment audit. Contractors are authorized to review a relatively small number of claims and then to use statistical sampling to extrapolate any denials to an entire universe of claims for a designated period of time.
6. Refer the case to the OIG for further investigation for potential fraud and abuse.

• Recovery Audit Contractor Recovery Audit

Contractor (RAC) audits are provided by independent companies whose payment for the audit services provided is based on a percentage of the money recovered for the Medicare program. RACs are tasked with identifying and correcting improper payment for Medicare services. RACs are supposed to identify both overpayments and underpayments, collect the overpayments and facilitate repayment of the underpayments, but, not surprisingly, the number of overpayments dwarfs the number of underpayments.

Like CERT contractors, RACs are bound by statutes, regulations, CMS national coverage, payment and billing policies, and LCDs. RACs do not develop or apply their own coverage, payment or billing policies.

RACs use proprietary software to identify claims that may have received improper payment. If the payment can be determined to be incorrect based solely on computer data available to the RAC (e.g., in contravention of the Correct Coding Initiative) the RAC will make an overpayment demand and request a refund from the provider. In most cases, however, the RAC requests the medical records from the provider, reviews the claims and medical records, and then makes a determination as to whether the claim contains an overpayment, underpayment or correct payment.

The use of RACs is not without controversy. Providers find the RAC system burdensome because it takes significant resources to respond to the voluminous record requests and to defend denied claims. Additionally, there is a concern that paying the RACs on a contingency basis incentivizes RACs to deny claims for issues such as documentation or medical necessity, areas which are highly subjective and often disputed by providers.

Strategies for Preventing Adverse Audit Findings

The primary objective when faced with a Medicare audit is to effectively input the audit process to achieve a positive audit result. If the audit result is not positive, the anesthesia group's objective should be to preserve all appeal rights and, eventually, to win the case during the appeals process. There are a number of steps groups can take to meet these objectives.

• Before the Audit

Groups can take proactive measures to minimize the potential negative effect of an audit. The implementation and maintenance of an effective compliance program can help ensure that the group's providers are fully and completely documenting the anesthesia record and that the anesthesia record is driving the correct coding and billing of the services. A discussion of the elements of an effective compliance program is beyond the scope of this article. However, a good starting point for any anesthesia group is the "OIG Compliance Program for Individual and Small Group Physician Practices."

Anesthesia groups should also educate their staff regarding Medicare audits and responses before an audit occurs. For example, all staff should understand the protocol to follow if an auditor shows up at the billing office or if the group receives an audit letter.

The protocol should include: 1) the designation of a point person to handle the audit; 2) the requirement that all audit requests be immediately given to that point person; 3) an understanding that the staff does not have to speak with the auditors and should refrain from signing any documents provided by the auditors; and 4) a method for documenting and confirming the records and other documents provided to the auditor.

• During the Audit

Most audits begin with a request for records, which is usually sent to the billing address. If the group's address is associated with a billing company or facility, the group should implement a policy ensuring that the billing company/facility notify it immediately if an audit record request is received. Groups often make the mistake of sending in the requested records without first conducting a review of the records. However, the audit submission may vary depending on the documentation and/or billing issues, if any, raised in the records.

Anesthesia groups should work with qualified legal counsel and consultants well-versed in issues related to anesthesia practices to carefully review requested records and to consider the following steps and strategies:

1. Ensure that all deadlines are met. If it appears that the group will need more time to compile the audit documents, its representative should contact the auditor for an extension and keep written confirmation that the extension was granted.
2. Review the record request to determine any connections between the records. Identifying connections will give the anesthesia group an idea of the issues surrounding the audit request. For example, do all the records involve monitored anesthesia care? Are all the records for billing with the AA modifier?
3. Compile the following documents for review by the group's legal counsel and qualified consultant:
            a. The audit letter.
            b. Copies of the entire perioperative record for each patient whose records are part of the audit. The group should also include the surgeon's report, the circulating nurse's report, and documentation for lines and postoperative pain procedures.
            c. Information on any previous audits or correspondence that may impact the current audit. For example, if the group was the subject of a previous audit for the same types of services, and the Medicare Contractor determined that the services were appropriate in the previous audit, the group may consider providing that helpful information to the current auditor.
            d. Relevant internal reports such as total Medicare payments for all codes in the requested records. For example, if Medicare paid a total of $300,000.00 for all services provided during the audit period, and the auditor makes an overpayment demand of $350,000.00 based on a statistical sample, the group may want to retain a statistician to review the statistical extrapolation.
4. If the records are illegible, the Medicare auditor is more likely to deny the services. Groups can counteract this problem by submitting not only the illegible records but also a word-for-word dictation of the records.
5. Work with legal counsel to review all Medicare authorities, such as LCDs and contractor policies, to determine if the records meet the Medicare documentation and medical necessity requirements.
6. Work with the consultant to determine whether the anesthesia records support the services billed.

Groups should be certain to keep copies of all submitted documents and to provide the documents to the auditor in a way that provides proof of submission (e.g., certified mail, return receipt requested). Once the records are submitted, the anesthesia group must wait for the results of the audit. If the audit results are unfavorable, then the group should consider an appeal.

The Appeal Process

Whether the audit determination comes from a CERT audit, an MR audit or a RAC audit, the appeal process is the same. The first step is the receipt of an adverse initial determination. The next steps are as follows:

• Level 1: Redetermination

A redetermination is a request that the Contractor take another look at the audit findings. Redetermination is an independent on-the-record review of the initial determination. The Contractor is supposed to have the claims reviewed by auditors who did not take part in the original adverse determination. The request for redetermination must be submitted within 120 calendar days from receipt of notice of the initial determination.

• Level 2: Reconsideration

If the redetermination is unfavorable, then the next step is to appeal to a Qualified Independent Contractor (QIC). Providers must submit their request for reconsideration in writing within 180 calendar days from receipt of notice of the redetermination. It is important to note that the provider must submit all evidence at this stage of the appeal process. Failure to submit evidence at this stage could preclude subsequent consideration of the evidence.

Providers should also ensure that their legal counsel is raising some common legal defenses to the audit, including: 1) waiver of liability; 2) provider without fault; and 3) the treating physician rule.

• Level 3: Administrative Law Judge Hearing

Unfavorable reconsideration decisions can be appealed to an Administrative Law Judge (ALJ). The ALJ level is independent of the RAC contractor. The provider must file the request for an ALJ hearing within 60 days of receipt of the reconsideration decision.

Unlike the lower levels of appeal, the ALJ hearing provides an opportunity to provide evidence via witnesses such as the provider, coding experts and medical experts. In most instances, the hearings are held via conference call or video-teleconference. In-person hearings may be granted if good cause is shown, but in-person hearings are not the norm. Anesthesia groups should be prepared to be present and testify at the hearing. The group's testimony will be the strongest weapon in the arsenal, but it may also be prudent to produce expert witnesses at the hearing to support the appropriateness of the documentation and coding of the services.

• Level 4: Medicare Appeals Board

Groups can file appeals to the Medicare Appeals Board within 60 days of receipt of the decision of the ALJ. Importantly, CMS or the Medicare Contractor can also request an appeal from the ALJ determination, and the Appeals Board can decide to hear an appeal of its own accord. The Appeals Board review is on the record, so in-person testimony is not allowed.

• Level 5: Federal District Court

The final step in the appeals process is to the Federal District Court. This appeal must be filed in writing within 60 days of the Appeals Board decision.

Conclusion

Although anesthesia groups should be concerned about the probability of a Medicare audit, there are proactive steps to take to minimize the risk of an adverse outcome. Compliance with Medicare rules, regulations and policies is the best defense to an audit. A thorough familiarity with the types of Medicare audits is essential to successfully navigate the ins and outs of the audit. Finally, a comprehensive approach to the audit and, if necessary, to an appeal of the audit determination, can lead to a positive outcome for the anesthesia providers.