The boogeyman is alive and well

An audit horror story just in time for Halloween
Tuesday, September 25, 2012

Children are sometimes threatened with the boogeyman to ensure good behavior. Someone at CMS remembered this and has applied the same tactic to suppliers/providers. Only this time, it is not a threat, it is real: Zone Program Integrity Contractors or ZPICs. They have unlimited power and almost no oversight.

Let me begin with a little background. American Medical Technologies, a d/b/a of Gordian Medical, has been supplying surgical dressings to Medicare beneficiaries in long-term-care facilities since April 1994. As our success grew, so did our company, up to the point that is the beginning of this horror story, September 2011. Then we had 400 employees and serviced 4,000-plus facilities in 47 states and the District of Columbia. According to HME News’ State of the Industry Report 2010, we were ranked 13th in allowed charges. Over the years, we had been poked, probed, audited, had claims developed, been accredited and bonded. Nothing inappropriate in our operations was ever “discovered” or brought to our attention.

In late September 2011, one of our facilities in North Carolina told us that it had just been visited by “Medicare fraud investigators” who reviewed the records of five beneficiaries who had clinically complicated gastrostomy tube sites and for whom we had supplied dressings. Since these reports were received fairly regularly with no subsequent negative impact, we thought little more about it until Nov. 28. We received a letter from Advancemed Corp., a ZPIC, advising us that, based on those five beneficiaries they reviewed, they (the ZPIC, not CMS or the DME MAC) were “suspending Medicare payment to Gordian Medical, Inc. . . . for all jurisdictions in which it bills the Medicare Program.” This payment suspension would last for 180 days. I’m not a mathematician/statistician but to invoke such a draconian impact based on a determination made by reviewing five beneficiaries out of the 14,000 on service is a ridiculously small sample of 0.036%. That’s 36/100 of 1% and they’re suspending all payments. The first thought a rational individual would have upon hearing something like this is, “They can’t do that!” 

To compound the lunacy, the determination was made on an issue which had been addressed by the Medicare Appeals Council back in 2002 and was diametrically opposite of the MAC decision, as well as multiple ALJ decisions which were based on the MAC decision. It was the basis by which we were able to provide these dressings. That decision, and the Local Coverage Determination for surgical dressings, clearly states that dressings are covered until the tube is removed and the site healed.

We immediately went to our regulatory law firm that had handled and prevailed in the original MAC appeal. Much to our surprise, we were told that there was no appeals process for this suspension but that we could write a rebuttal to convince the ZPIC to restore payments. Naturally, we had the lawyers write a very strong rebuttal to the ZPIC’s determination. After almost a month of holding our collective breaths, the law firm received the ZPIC’s reply. It was basically, Don’t confuse us with facts, our mind is made up. The payment suspension, nationwide, stays in place.

Attempts were made to contact various individuals at CMS to work out some resolution to no avail. So, even though we were a very strong, financially stable company, we were forced to file for protection under Chapter 11 of Title 11 of the Bankruptcy Act on Feb. 24, 2012.

Rather than risk being dragged into bankruptcy court and explaining these ridiculous actions to a judge, CMS’s attorneys agreed to meet and discuss a resolution. The meeting took place and a stand-still agreement was reached and approved by the bankruptcy judge. Unfortunately, this was too late for the 40 employees we were forced to lay off—almost 10% of our work force. These were well-paying jobs with full benefits, including healthcare and educational reimbursement. 

After the meeting, CMS agreed to mediation and, after mediation, submitted a “proposal” to us as a resolution to an issue already resolved by the MAC, various ALJs and allowed by the LCD. The “proposal” was a poorly veiled threat. Stop billing for dressings for clinically compromised G-tube sites or we’ll make the determination that you had been improperly reimbursed on all claims over the past three years.

We submitted a counter proposal, which was reasonable and fair to both sides. CMS’s response was to advise that we accept their first proposal, or they will reopen all claims for the last three years and determine that a $76-million overpayment occurred.

It’s all in the hands of the bankruptcy court now. We are still in business but we lost 40 members of our family and 40 families lost their livelihood.

Be aware my children: The boogeyman is real!

Michael Watson is vice president-governmental affairs and corporate compliance officer for American Medical Technologies, a d/b/a of Gordian Medical. Reach him at