Audit woes

Thursday, September 30, 2004

REDDING, Calif. - Tom Lambert and his attorney, Bart Fleharty, have become guiding lights for providers struggling to survive a CMS audit.
All HME eyes turned to the duo in July when a judge in the U.S. District Court for the Eastern District of California ruled that the DMERCs can’t request documentation beyond the CMN to prove medical necessity. The ruling is binding only in the eastern district of California and CMS could still appeal it. Nevertheless, it gave providers hope that they too may be able to beat the DMERCs post payment audit tactics, which many say discount the CMN and lean too heavily on a doctor’s progress notes to prove medical necessity.

“I’ve gotten quite a few dealers calling me with horror stories,” said Lambert, from whom CMS tried to recoup an alleged overpayment of $780,000 related to K0011 claims. “It’s pretty frustrating, and you can feel all alone out there. They want to know how we argued the case.”

In all, Lambert estimated, 15-20 providers have called him since word got out of his legal victory against CMS.

David and Donna Nicolay were among those who called.

The owners of Allstate Medical Equipment in Las Vegas, Nev., have watched their cash flow drop precipitously since Medicare disallowed 13 K0011 claims last February due to insufficient documentation and then placed the company on desk review May 1. In December, the company generated $125,000 in revenue, 95% of that from K0011s. In June, Allstate’s monthly revenue had dropped to $17,000. The company has laid off 16 of 17 employees, reduced it hours from 40 to 20 a week and downsized its office space from 7,000 to 4,500 square feet. Prior to its trouble with CMS, Allstate was the largest provider of K0011’s in Las Vegas, said David Nicolay, who founded the company in 1997.

When he read about Lambert’s victory, he phoned Fleherty the next day.

“I thought that was the way it should be,” Nicolay said. “It thought it was just. If [Medicare] wants to get tough, change the CMN. If the doctors are handing out too many chairs, punish the doctors. Don’t punish the supplier.”

Doug Hartman also called Lambert. “Our situation is a little bit different, but I wanted to give him support and thank him,” said Hartman, who owns Multi-Medical in Ft. Worth, Texas. “I know what he is going through, and it is terrible. The employees I’ve had to let go are not just good employees, they are good people. It’s bad.”

Hartman’s troubles began in March 2002 when CMS put 20 of his K0011 claims through a paperwork audit. CMS found nothing wrong with those claims but eventually requested three more claims. Hartman says he didn’t provide information regarding those claims because he never received the request. CMS didn’t buy his explanation and began to audit all his power chair claims prior to paying them.

The result: Hartman’s denial rate for K0011 is 40%, and because of CMS’s intense scrutiny he’s refuse wheelchairs to people who can “barely walk” rather than risk a denial. He’s also closed three of four locations and laid off 18 of 26 employees.

“I’m living a nightmare,” Hartman said.