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Verifying an audit’s accuracy

October 24, 2013
by Shannon Brys, Associate Editor
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Whether republican, democrat or independent, everyone agrees on one thing— Medicaid fraud is bad. Bad for tax payers, Medicaid recipients, and the healthcare system. Very bad for those convicted of fraud, who face not only stuff fines or sentences, but lifetime exclusion from participation. Even the allegation of Medicaid fraud can be extremely damaging, since the Affordable Care Act grants sweeping powers to state Medicaid authorities to suspend payments to any provider who is deemed to face credible fraud allegations, as has been seen in recent high-profile cases in California and New Mexico.

Allegations of fraud can flow into Medicaid authorities via customer complaints, internal whistleblowers, managed care organizations, and relatively new Medicaid recovery audit contractor (RAC) programs. According to Knicole Emanuel, attorney and partner at the law firm Williams Mullen, RAC programs had been around for Medicare and had recovered over $1.03 billion in overpayments, so the federal government decided that RAC programs ought to be mandated for state Medicaid programs as well.  These Medicaid RAC programs are tasked with identify overpayments and underpayments to providers through the use of audits and other program-integrity tools. RACs also receive a percentage of any overpayments they are able to recoup.

Emanuel, who once served as counsel to North Carolina’s Medicaid program, now represents Medicaid providers in North Carolina who are undergoing audits, who have had suspensions of Medicaid payments, and who have had issues with their Medicaid contracts. Her experiences, and those of her clients, suggest that if a provider is confronted with the results of a RAC audit alleging waste, abuse or fraud in their Medicaid billings, it may be essential to question the audit’s methodology and results thoroughly as the basis for a legal appeal.

According to Emanuel, “We appeal every one of these [audits] and we try to decide whether we want to appeal the extrapolations or the audit itself, and whether we want it to be an informal appeal that goes to the office of administrative hearings, or state court.”

She says extrapolations that are typically used in Medicaid audits have been quite a source of interest lately for providers and rule makers. The process of extrapolation involves gathering actual numerical data from a small, but statistically valid sampling of patients (e.g. sampling from 150 charts selected at random), then multiplying it out to approximate the size of the provider’s patient base. In this way, auditors take a number such as $23,462.40 and extrapolate it to $418,024.00. She asks, “Who’s doing these extrapolations? What are the statistical methods? Are they accurate?”

Over her years as an attorney representing cases relating to this topic, she has found that auditors can and do make mistakes in their auditing and estimation methods. Below, she says, are a series of actual audit mistakes and problems that she and her colleagues have used to defend client actions, dramatically reduce the size of alleged overpayments, or resolve overpayment issues altogether.

  1. Audit results cite wrong policy. Although she can’t speak for every state, Emanuel says that in North Carolina, the Medicaid policies for each service change almost every year. She explains that it is difficult to track down Medicaid policies from prior years, but important to do. “What I have found that PCG has done is they take a 2013 policy and they look at a 2008 date-of-service and apply the new, more stringent policy to an old date-of-service,” she says, citing this example from a dental office:
  • The 2008 policy stated: Enter the attending provider’s NPI for the individual dentist rendering service (This number should correspond to the signature in field 53).
  • The 2013 policy stated: Enter the attending provider’s NPI for the individual dentist rendering service (This number must correspond to the signature in field 53.)

Emanuel says these dental providers were “getting dinged” because the NPI number did not correspond with the signature as specified in the 2013 policy. However, the policy in previous years had no such requirement. In this case, Emanuel believes this would be an incorrect non-compliance issue.

  1. Imprecise or “canned” information requests. She says, “These audits are very tailored to North Carolina, to the Medicaid services, to the policies, but the way that they’re going about them is pretty canned.”

For example, there was an auditor that told a mental health provider that she was getting non-compliance because she needed the staff log for the date-of-service for the Medicaid recipient who they had reviewed. Emanuel says when she actually reviewed the case, it wasn’t that they needed the staff log, it was the fact that they could not read the handwriting on the document and could not determine the name of the staff who provided the service. Therefore, they were denying it—not because the service was non-compliant or the documentation was non-compliant, but because they could not read the signature and did not bother to look further into it.