When Medicare says, "Let's see your records"

Experts tell how to prepare for an audit, when to pay and be done with it, when to pay and appeal, and when to fight.

By Susan Harrington Preston, Senior Associate Editor

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If you're getting more requests for records from your Medicare carrier these days, blame it on ever-increasing computing power. "Five to seven years ago, the Medicare program was happy when it could screen out a hysterectomy performed on a male," says compliance consultant Ed Longazel of KPMG in Philadelphia. "That was the sophistication level of the computer edits available then."

Medicare's technology is so much better today that it's causing a sea change in the way carriers investigate fraud: They're shifting toward performing audits before, rather than after, paying claims.

"Prepayment audits have entered the scene in force only in the past 18 months," says Alice G. Gosfield, a health care attorney in Philadelphia. "The government no longer wants to 'pay and chase' billing mistakes."

HCFA acknowledges as much, crediting computer edits, which identify billing mistakes as claims are processed. "Increasingly, we have turned to computer edits to automatically review claims before they are paid," reads a February 1999 report from the agency.

The edits, developed under the Medicare Integrity Program's Correct Coding Initiative, differ from the analyses of billing patterns by region and specialty that allow carriers to identify statistical outliers. Instead, edits target the codes themselves. "It's effectively two lists of codes," says Brenda Morrow, a coding expert with ProStat Resource Group in Overland Park, KS. "The computer matches one list to the other. Then, if you bill two codes that aren't supposed to be billed separately, it red-flags the error" .

In addition, by standardizing the way carriers use CPT codes, HCFA is expanding their ability to detect outliers. "Local guidelines for Medicare carriers differ in what they allow," says Joette Derricks, a consultant with Healthcare Management Solutions of Camp Hill, PA. (Derricks, like Morrow and Longazel, spent several years working for a Medicare carrier.) "There are still a lot of very gray areas in the regulations."

With standardized CPT guidelines, statistical profiling can be done on a national level. "The government is building databases of a variety of codes so the carriers can see what's typical nationally," says Morrow. "Carriers can then find outliers that they couldn't see before because of their own regional variations."

Random audits are continuing, too, says Derricks, though she feels that the targeted doctors are being chosen within narrower bounds. "It seems obvious that the carriers are picking doctors by procedure code or by some other criterion," she says. "There are some totally random audits, but it's hard to believe they're all totally random."

Empire Medicare Services, which serves several Northeastern states, does, in fact, choose audit targets by service. "We do a focused review that looks at specific services or procedures and is based on computer edits," explains Mary Adams, an Empire executive.

Then there are "educational" audits--educational for carriers, if not for doctors, Morrow observes. "You've got all these documentation guidelines that nobody understands very well," she says. "So some of the reason for prepayment audits is to educate the carriers on what visit documentation really looks like."

Unfortunately, prepayment audits may not yield such feedback for doctors, Derricks notes. "A lot of times, clients call us and say, 'The carrier asked us for records, and we sent them in and never heard anything. Then we were doing our posting and realized three claims were denied and two weren't. Why?'"

Despite the spread of prepayment audits, however, Medicare hasn't stopped doing postpayment reviews. "They're still a significant problem for physicians," says Gosfield.

They're expensive, for one thing. "We spent several hours with the auditors, our lawyer, and our coding expert," says internist Gregory W. Otte. The four internists in his group, Elmwood Medical Associates of York (PA), handle many patients who require frequent hospital stays. As billing outliers, they've been audited twice in the past few years.

Such intensified scrutiny shows a new Medicare mindset. "Ten years ago, we weren't seeing the $5,000 fines we see now," says Derricks. "Carriers would negotiate settlements--in some cases, as low as 10 cents on the dollar. The emphasis was on educating the provider. Now, the educational concept is still there, but there's also a desire to really hurt doctors financially. It's much more 'We gotcha.'"

The fact is, consultants say, doctors are almost certain to find some errors--in coding, documentation, or both--in their files. "I have never yet had a doctor meet HCFA guidelines during an audit," says Patricia White, a coding consultant with The PM Group of Toledo, OH. She does practice audits for doctors regularly as part of putting together compliance plans for them.

When you can show you're in the right, though, you can fight an auditor's findings, and it may be worth the effort. "The bill for our initial audit was something like $22,000," says Gregory Otte. "After we appealed, it was reduced to about $700."

But whether you fight back or not, it pays to be ready in case you're targeted for a Medicare claims audit.

How to handle a prepayment audit

In a prepayment audit, the Medicare carrier will hold on to your claims and ask for records to verify that you're billing correctly. Usually, you'll be asked for records of 10 to 15 patients for several specific dates of service. Occasionally, though, the carrier may request records for only a few patients, or even just one. "Sometimes investigators think there's just an anomaly," says Alice Gosfield, "or they may be reacting to a specific patient's complaint, and they're not sure a full audit is justified."

How long are claims likely to be held up? That depends on the carrier. Gosfield has seen physicians' bills for lab services delayed for as long as 10 months. In Joette Derricks' experience, however, delays have been more reasonable: "Generally, you'll know within 60 days what has happened with your claims," she says.

• You can minimize problems with claim audits by taking certain steps:
• Prepare your staff. Make sure your employees know to alert you to requests for re-cords. "Staffers shouldn't copy the records and send them off without notifying the doctor," cautions Bob Burleigh, a consultant with Brandywine Health Care of Malvern, PA.
• Don't make changes in the charts. "You have an absolute obligation not to change records after you get a request for them," says Burleigh. "If you're tempted to fill in some of the blanks or to improve your documentation--well, don't do it."
• Ed Longazel suggests going so far as to put the charts under lock and key. "You don't want anybody--doctor or staff--changing the notes," he says. "It's also a good idea to document who has access to the locked-up charts. And make sure the originals are copied as soon as possible."
• Do your own "audit." Before sending the charts to the carrier, suggests Burleigh, try to figure out what the auditor is looking for. For example, if the requested charts are all for patients seen by a new physician, that doctor may need training in how to code. Or your staffers may be botching the bills for a service that was only recently approved for coverage.
• If your own chart review uncovers problems, you have a couple of options beyond simply waiting for the carrier to bounce the claims. "If you determine that the requested charts were, in fact, light on documentation," says Burleigh, "you can tell auditors that you'd like to withdraw the claims. You can then resubmit them using codes supported by the levels of documentation you do have in the charts."
• Another option is to give more detail about any claims that your review indicates may be vulnerable. Attorney Alice Gosfield provides an example: "Suppose your documentation wasn't what it should have been. Auditors may be asking about three dates of service for a patient with whom you have a 20-year history. If so, the background information that would establish medical necessity for those three services may be missing from the claim." You can supplement your explanation by providing further documentation from the patient's history to substantiate the service.
• Document your correspondence. Whatever you send to the carrier--patient records, service documentation, or background information--send it by certified mail, return receipt requested, with a cover letter on your letterhead. If you don't, warns attorney Claire C. Obade of Philadelphia, "Medicare might tell you later that they never got it."

How to handle a postpayment audit

Many postpayment Medicare audits begin just as prepayment audits do--with a request for records. However, postpayment audits may also include a site visit, in which the carrier's auditors--and sometimes agents from Medicare headquarters or the Health and Human Services inspector general's office--come to your office to copy patient records.

Typically, you'd get a letter several weeks before the site visit. But you might not be told until the auditors arrive which files they'll want to copy, according to Gosfield. "The carrier will only say, 'These are the kinds of things we'll be looking for. We'll give you a list of the specific records when we get there.'"

The auditors may be trying to find out, for instance, why you're billing for an unusual number of level 4 visits. They'll investigate whether your documentation supports that level, whether you've mistakenly coded new-patient visits as more-expensive consults, or whether you're billing separately for procedures that should be bundled.

When you're notified of a site visit:

• Enlist the help of a health care attorney. A lawyer can alert you to potential problems specific to your practice, hire a coding expert to review your files, and remind you of your rights during an audit. If the lawyer hires your coding consultant, the latter's findings will be protected under attorney-client privilege.
• Catch up on your filing. "Pay attention to whether your records are complete," says Gosfield. "You don't want to run around the day of the audit saying, 'No, we don't keep the ECGs with the medical records.' Or 'We don't keep the drug orders with the medical records.' Or 'All of the lab reports haven't been filed back.' That kind of stuff gets you in trouble."
• Conduct a chart review. The cost of hiring a consultant to go over your records, or the prospect of doing it yourself, may seem daunting. Even if the audit begins with a request for records, you won't know exactly what codes and claims the carrier is investigating. If the audit begins with a site visit, you may not even know what files to review. And you won't know until after the site visit whether the refund demanded by Medicare, if any, is big enough to make an appeal worthwhile.
• However, reviewing your files beforehand, at least for the issues the auditors alerted you they'd be investigating, offers some advantages. For one thing, you'll be able to deal much more confidently with your visitors if you're aware of what they'll find. And you'll be prepared to discuss the charts knowledgeably if the auditors raise questions while they're in your office. You may even discover the auditors are wrong because, say, they're applying a new policy incorrectly.
• Coding consultant Brenda Morrow was involved in such a case within the past year. "An orthopedic group in Kansas City had been using the modifier -25 for evaluation and management services when the patient had also had a joint injection," Morrow explains. "The modifier means that the visit was separately identifiable from the injection, but the auditors had got it into their heads that you had to have two different diagnosis codes to warrant a separate evaluation and management code. So they sent the practice a bill for overpayment.
• "The practice paid, but then appealed. While preparing for the hearing, a staffer found an article in an old carrier newsletter about modifier -25. One of the examples was this exact situation--trigger-point injections when other things are done on the same day. The article said modifier -25 was appropriate. Most of the audit findings were reversed." If the practice's staff hadn't done a chart review, the group would have paid the entire tab.
• Cooperate during the visit--but don't overdo it. The actual site visit won't be complex; the auditors will tell you which charts they want so they can copy them. You need do only two things: Be as politely cooperative as possible, and arrange for the auditors to have a quiet, comfortable place to work.
• But don't give them free rein. Have your staff bring the auditors the files they request. Don't let the auditors roam your office looking for other billings to question.
• Weigh whether to accept the auditors' findings. Weeks (or maybe months) after their visit, the auditors will send you a letter with an estimate of how much you owe Medicare in overpayments, based on an extrapolation from the 15 or more charts they've reviewed.
• Carriers call that set of charts a "limited statistically valid random sample"--which is to say that they've reviewed too few for the extrapolation to be statistically valid. Nevertheless, that subsample is the basis of the letter, which in carrier lingo is an "offer of a consent settlement." Now you have 60 days to decide whether or not to contest the audit results. For advice on filing and pursuing an appeal.

Where you can get Medicare computer edits

Today's computer edit software, developed under HCFA's National Correct Coding Initiative, searches for pairs of codes that aren't supposed to be used in the same Medicare claim. These programs, the first weapons in a planned arsenal of claims oversight software, can identify up to 108,000 bad matches and red-flag them for the carriers' watchdogs.

Many of the edits now in use are available for public scrutiny. But HCFA's toolbox already includes edits developed by private firms, with more to come. Those aren't public, according to Brenda Morrow, a coding expert at ProStat Resource Group of Overland Park, KS. "The carriers will not release proprietary edits," says Morrow. "Nor can physicians purchase them from any other source."

The edits open to doctors are available from various sources. You can get many of the disallowed Part B code pairings in print form in the National Correct Coding Policy Manual in Comprehensive Code Sequence for Part B Medicare Carriers. It's published by The National Technical Information Service, part of the US Department of Commerce. With quarterly updates, this printed behemoth costs $260 a year.

Chapters are also published separately. Primary care doctors will be most interested in Chapter XI, "Medicine, Evaluation and Management Services," which covers CPT codes 90000 to 99999. You can get that chapter alone for $45 per quarterly issue, or $160 a year.

The NTIS manual lists CPT codes that can be used as comprehensive codes in numerical order. Codes that are considered components of each comprehensive code--and therefore ineligible for payment if used on the same claim--are listed in subgroups.

To learn whether a particular component code can be billed along with a given comprehensive code, you can consult another NTIS publication, the National Correct Coding Policy Manual in Component Code Sequence for Part B Medicare Carriers. This reference costs $200 a year, with individual quarterly issues priced at $60.

If you want software that will look up codes, CC+Edits is available on discette or CD-ROM for $196 a year or $60 per quarterly issue. You enter the codes you want to use on a claim, and the program will tell you whether the combination is disallowed. This interactive software is published by a private firm but sold through the NTIS. It can be used in four ways: You can check to determine whether a single pair of codes is eligible for payment; enter an unlimited number of codes, then see if any disallowed pairs turn up; search for component codes that go with a given comprehensive code; or find comprehensive codes that go with a given component code.

CodeBreaker, another private-firm product sold through the NTIS, is designed specifically for physicians' practices. It enables you to search for code pairings in a wide variety of ways, and includes a full complement of code types and descriptions and other information, such as procedure and diagnosis codes, procedure descriptions, relative value units, conversion factors, and "usual, customary, and reasonable" fees at the 50th, 75th, and 90th percentiles. A single-user copy of CodeBreaker costs $749 a year or $500 a quarter. Network versions are also available.

To obtain these publications or software programs, call NTIS at 800-363-2068. More information is available at www.ntis.gov/yellowbk/1nty667.htm.

If you want to fight the audit findings

In deciding whether to dispute a Medicare carrier's audit decision, you need to weigh two factors: whether you have the documentation to prove your claims were correct, and whether the battle is worth fighting.

The decision may not be easy. Quite likely you'll spend more money contesting the findings than you'll get back in reduced charges. You'll almost certainly need to hire an attorney and a coding consultant, and you'll spend hours poring over the charts yourself. If you've been audited once, you'll be audited again within six months, under HCFA guidelines.

On the other hand, if you successfully defend the charges, subsequent audits will probably be less troublesome. And there's a significant possibility that the government's refund demand will be reduced. "It's not at all uncommon for findings to be reversed during a review," says consultant Brenda Morrow of ProStat Resource Group in Overland Park, KS.

Even if you do contest the audit decision, you should go ahead and pay the carrier's demand up front; that way you'll avoid penalties and interest if your appeal fails. The carrier can start charging interest (the recent rate was 13.25 percent) 60 days after its letter offering you a consent settlement.

If you have a short fuse, let your coding expert or lawyer carry the ball in any face-to-face meetings, because they can be intensely frustrating. "The auditors would say, 'Based on the rules now, you were in violation three years ago,'" recalls internist Gregory W. Otte, whose Pennsylvania group has been through two recent Medicare audits. "We could not get them to understand that when you change the rules, you can't apply the new rules to what happened before."

If you're going to appeal an audit, here's how to proceed:

• Request a review by the carrier. You have six months from the date of the auditors' consent-settlement letter to file such a request. You must send additional documentation to support your challenge. The carrier will not review any more of your claims, and you retain the right to appeal the review decision.
• Ask for a hearing. If that decision is unsatisfactory, you have six months to request a hearing--again by the carrier. If you do, the carrier can examine all of your files in order to develop a statistically valid estimate of the alleged overpayment. The hearing officer is supposed to be impartial, and can be disqualified if not. But the fact that the hearing officer is an employee of the carrier is not by itself a reason for disqualification.
• Seek an ALJ review. If you're still dissatisfied after the carrier hearing, and if the claims in question total $500 or more, you can ask for a review before an administrative law judge. You must file a formal request with a Social Security office, HCFA, or the carrier within 60 days of the carrier's notification of its decision on your hearing.
• Go before a review board. If you disagree with the judge's decision, and if the disputed claims total $1,000 or more, your next option is a hearing by HCFA's Provider Reimbursement Review Board. You have 60 days from notification of the ALJ's ruling to file your request for the board review.
• Take your appeal to federal court. This is your final venue, and it's one that few doctors try for. Generally, you can seek a court date only if you've exhausted all administrative appeals. Unless there are extenuating circumstances, you have 60 days to file a civil action in federal court after the Provider Reimbursement Review Board mails the notice of its decision. Be aware, though, that federal courts will focus only on major issues. They will not rule on the amount of a refund demanded by Medicare.