CMN defeat leaves CMS speechless

Saturday, July 31, 2004

SACRAMENTO, Calif. - In what looks like a gigantic legal victory for the HME industry, the U.S. District Court for the Eastern District of California ruled in late June that CMS and the DMERCs can’t require a provider to furnish documentation beyond the CMN to prove medical necessity.

In his ruling, Judge Lawrence Karlton stated: “While Congress granted the Secretary broad discretion over medical necessity and billing criteria and procedures, it did not do the same regarding medical necessity documentation. Instead, Congress addressed the issue itself and established that any and all information required to make a medical necessity determination must be contained in a CMN.”

CMS declined to comment on the ruling, which is the first of its kind regarding CMNs. CMS lawyers, however, are reportedly studying the decision, and because requests for additional documentation form the cornerstone of Medicare’s audit process, industry insiders expect CMS to appeal the decision.

The decision favors Maximum Comfort, a Redding, Calif., DME that filed a complaint against HHS Secretary Tommy Thompson. The appeal hinged on the Region D DMERC’s attempt to recoup an overpayment of almost $780,000 related to power wheelchair claims.

“My guy followed the law to a “t”, and that is what we’ve been arguing for the last five years and it has been validated,” said attorney Bart Fleharty, who represented Maximum Comfort. “The CMN was created to reduce paperwork and provide medical necessity. How quickly we forget.”

The decision is binding only in the Eastern District of California where the judge resided. In other parts of the country, providers can use this precedent-setting ruling when appealing an audit, said Jeff Baird, a healthcare attorney with Brown & Fortunato in Amarillo, Texas.

From a practical standpoint, outside the Eastern District of California, the fair hearing officer will most likely not be persuaded by the Maximum Comfort decision. Administrative law judges will most likely be persuaded as will the Medicare Appeals Council, Baird said.

“We are excited by this, and I hope it will have a positive impact,” said healthcare attorney Steve Azia of Eastwood and Azia in Washington. “We are seeing time and again where claims are being denied by some nurse reviewer’s arbitrary interpretation of progress notes.”

One government insider said that “while suppliers may see it as a great thing, from a fraud perspective, [the ruling] is horrendous.”

“It’s like telling the IRS they can only use what someone puts on the Form 1040 as the basis of their tax liability and not check any supporting documents,” the source said.

By ruling in Maximum Comfort’s favor, the judge overturned a Medicare Appeals Council ruling that stated CMS could require documentation beyond the CMN. The appeals council had previously overruled decisions by two administrative law judges that CMS couldn’t request the additional documentation.

Fighting the case drove Maximum Comfort into bankruptcy and forced company president Tom Lambert to sell his house and move into a mobile home.

“If Congress says you have to provide PT evaluations and chart notes, so be it,” Lambert said. “But they just assume the authority and go in and ruin people like they did me.”

As part of the decision, Judge Karlton ordered Secretary Thompson, CMS and the Region D DMERC to stop “recouping, offsetting or otherwise collecting from plaintiff any alleged overpayments” related to the audit in question. He also gave Lambert 20 days to calculate and provide documents that show how much he believes CMS should repay him. In all, CMS recouped $259,000 from Maximum Comfort. The company also spent thousands in legal fees, Lambert said.

“I want back what I’m entitled to,” he said. “I’m still here, and we have our health. I’m not going anyplace.”