Latest Government Fraud Reports and How They Affect Anesthesiologists and Pain Physicians


June 4, 2012



Audit and recovery activity is up at the Office of the Inspector General and at CMS and its contractors. Prepayment reviews by the Recovery Audit Contractors are on the horizon. The need for anesthesiologists and pain physicians to be vigilant in their compliance efforts is as great as ever.


Inspector General Daniel Levinson of the Department of Health and Human Services has stated in his Spring 2012 Semiannual Report to Congress that his office expects to recover $1.2 billion from audits ($483 million) and investigations ($748 million) concluded during the first half of 2012.  Between October 2011 and March of this year, the OIG also brought 346 new criminal cases and 138 civil actions.

Information technology is playing as important a role in the OIG as it is in every other health care arena.  In his Executive Summary, Mr. Levinson said:

Over the past 6 months, OIG has stepped up our focus on data analytics as a critical tool for enhancing our fraud, waste, and abuse activities. We are using advanced data analytics to help us conduct risk assessments; more effectively pinpoint our oversight efforts; and significantly reduce the time and resources required for audits, investigations, evaluations, and other program integrity activities. …  As program integrity efforts become more technology driven, so will health care fraud, and we must adapt to this evolving environment. …

OIG’s data warehouse is a key component of our strategic use of information technologies. Among other things, the warehouse integrates data from Medicare Parts A, B, and D so we can develop a more comprehensive picture of beneficiaries’ histories of medical care and providers’ billing patterns. In addition to adding powerful analytic tools, the data warehouse has the potential for dramatically improving the timeliness and impact of our work.

The phrase “fraud and abuse” is often used as a single, indivisible concept, but the two activities are distinct.  “Fraud” involves the intent to obtain or transfer something of value, e.g., Medicare money, on the part of a miscreant who knows that the money is not his.  For example, a physician went on trial last week in Houston charged with submitting more than $5.2 million in false claims for home health services.  The defending physician never even saw 200 of the 352 patients before approving home health services for them. Home health is a perennial subject of Medicare Fraud.  In February, a physician and his office manager, along with five owners of home health agencies, were arrested on charges related to their alleged participation in a nearly $375 million scheme involving fraudulent claims for home health services. The conduct charged in this indictment represents the single largest fraud amount orchestrated by one doctor in the history of HHS enforcement programs.

“Abuse,” on the other hand, is more often used to mean error or waste, in the context of Medicare and Medicaid.  The HHS OIG, which is responsible for reducing improper Medicare and Medicaid payments, is also seeking to limit unintentional overbilling and waste.  As Mr. Levinson further said,

We also continue our focus on identifying waste in the operation of HHS programs. Reduction of waste is critical and necessary to achieve savings in Federal health care programs. Waste occurs in many forms, and work included in this report identifies outdated pricing methodologies for pharmaceuticals and durable medical equipment as well as payments for unnecessary and undocumented services.

The third area in which the OIG is currently concentrating its direct efforts is quality and specifically on reducing the incidence of adverse events in hospitals.  Together, five types of in-hospital adverse events represented half or more of the complaints in the OIG’s sample: sexual assault, medication error, physical abuse by hospital staff, restraint problems, and suicide. 

The OIG is responsible for auditing the Centers for Medicare and Medicaid Services (CMS).  In a special report dated May 18, 2012 and entitled “Obstacles to Collection of Millions in Medicare Overpayments,”  the OIG claimed that CMS had failed to collect about $3.32 million in overpayments during  the 30-month period ending on March 31, 2009.  The principal reason for the failure to recoup was that the allowed recovery period had already passed.  The OIG recommended that CMS pursue legislation that would extend the recovery period.  According to the report, “In addition, [CMS] did not provide its contractors with adequate guidance for collecting overpayments and did not have an effective system for monitoring its contractors’ collection efforts.”

Ben Penn, blogging for Decision Health’s Part B News, wrote an entry headed “According to OIG report: only 20% of overpayments recouped by CMS” on May 25th in which he concluded:

Bottom line: If you’ve received an overpayment in the late 2000s, there is no imminent threat that CMS, through its contractors, will retrieve that money. But don’t expect this lax policy to continue much longer. CMS has agreed to take action in response to OIG’s recommendations that CMS gets its house in order to ensure improved collection of overpayments in the future.

CMS is now under significant pressure to avoid and/or recover improper payments made to providers of health care services.  Last year CMS announced that it would launch a series of demonstration programs on January 1, 2012, but then postponed the start dates.  These demonstrations included:

  • A prepayment review program allowing recovery audit contractors (RACs) to review claims that historically have resulted in high rates of improper payments. These reviews will focus on seven states with high populations of fraud- and error-prone providers (FL, CA, MI, TX, NY, LA, IL) and four states with high claims volumes of short inpatient hospital stays (PA, OH, NC, MO) for a total of 11 states. The program will also help lower the error rate by preventing improper payments rather than the traditional "pay and chase" methods of looking for improper payments after they occur.
  • Prepayment review and prior authorization for power mobility devices in seven states with high Medicare fraud rates.
  • A demonstration that will allow hospitals that improperly submit claims for Part A services that should have been Part B claims to resubmit those claims and receive 90 percent of the Part B claims amount.

Of the greatest immediate concern to us, the RAC prepayment review program, which CMS postponed twice, is now set to launch some time this summer.  In an April 3rd  letter to CMS commenting on the agency’s “Improper Payment Initiatives” and the proposal to test prepayment review, the American Medical Association and a number of specialty societies, including the American Society of Anesthesiologists, strongly criticized the proposal, stating that the RACs had been consistently late in their post-payment reviews and that 46.2% of appeals had been decided in the provider’s favor.  The AMA letter contended that:

This number is far too high. In the context of prepayment review, this means that physicians may have to fight for months or years to rectify an erroneous improper payment determination by a Recovery Auditor. The cost of retaining legal counsel and internal staff to navigate Recovery Auditor appeals is also high, taking away dollars that physicians could be putting toward innovative care coordination initiatives, quality improvement, and other efforts to better medical care for patients.

More recently, in its May 24th Health System Reform Insight, the AMA noted that CMS seemed to have responded to some of the association’s concerns about excessively burdensome audit activities and reported that:

Physicians who undergo audits face tremendous expense and administrative requirements. Recent improvements to the Medicare Recovery Audit Contractor (RAC) program include a limit of 10 medical record requests within 45 days to small physician practices, a lost fee if the review is not completed within 60 days and a "discussion period" during which physicians may speak with a RAC medical director about an audit.

Recent improvements to the Medicaid RAC program include a three-year limit on the look-back period, restrictions on the number and frequency of medical record requests, and a requirement that RACs hire medical directors and certified coders.

Nevertheless, when the prepayment demonstration program — and other “Improper Payment Initiatives” — do launch, anesthesiologists, pain specialists, other physicians and allied health providers will be well advised to expect more RAC interest than we have experienced to date.

Among the seven common billing errors identified in the latest Medicare Quarterly Provider Compliance Newsletter was one related to physician Evaluation and Management (E/M) codes provided to hospital inpatients since the elimination of consultation codes.  In our experience, assigning the right level E/M code to a visit frequently challenges anesthesiologists and pain physicians, as does the appropriate use of the emergency modifier (99140). In a May 7th blog entry, “Benchmark of the week: Denial rates by modifier used, 2010 vs. 2009,” Part B News’ Ben Penn reported that a code modifier frequently used by our specialists, modifier -59 (distinct procedural service) was one of only four out of eleven frequently billed modifiers that was reported more frequently in 2010 (14.2%) than in 2009 (13.2%).  We would suggest that greater scrutiny than ever of modifier -59 might be in the works.  Other compliance issues to which we draw our readers’ attention are upcoding, rounding of anesthesia time, and medical necessity.

Because of future enhanced RAC activity, Medical Group Management Association (MGMA) members should be aware of a webinar on “Preparing for Recovery Audit Contractors - What to do when the letter comes” that was recorded on May 3rd and is still available for purchase on line.  We hope that this Alert will help you to prepare for RAC and other potential governmental investigations.

With best wishes,

Tony Mira
President and CEO