Here is the real story about audits

Tuesday, September 9, 2014

Editor’s note: The following is a letter to the editor from Van Miller that appeared in the Waterloo Cedar Falls Courier in July. The letter is in response to another reader’s letter decrying fraud and abuse in the Medicare program—a letter that ended with, “Here’s to audits, let there be more.”

Providers of HME for Medicare/Medicaid patients are under siege through the use of “audits.” Mr. Black refers to an FBI estimate on Medicare/Medicaid “fraud,” which is a term frequently used loosely to also include “improper payments.” This includes situations where a patient and his/her doctor order equipment for use in the home, that equipment is delivered and used by the patient, and then years later (after an “audit”) the government finds there is insufficient documentation in the file to support that ordered equipment under Medicare’s then-current interpretations of what is required. In the case of HME companies, which, percent-wise, are less than 3% of total Medicare expenditures, here is the real story about the misuse of audits.
Companies that do the audits are private independent contractors that are paid hundreds of millions of dollars or a contingency. To show the government a return on its investment, they often find minor technical errors or omissions in documentation (most often the doctor’s records) and do not take into account the medical need for the services provided.

These contractors have little oversight. Because the vast majority of these audit “recoveries” are based on physicians not crossing the Ts or dotting the Is in their records, the preliminary audit findings are eventually overturned through the appeal process. The administrative law judge that finally gets to hear the facts finds the patient did need the equipment, his/her doctor did order the equipment and the provider did deliver the equipment. However, at this time, the appeal process can take up to three years or more. In the meantime, these audit contractors are paid a percentage of claims “found” to be “improper.” It is essentially a “gotcha” game played years later with someone else’s records being found inadequate by someone who is paid to do so.

Meanwhile, many of the providers are being put out of business because they can’t sustain their business. Imagine if you were told years after the fact that your employer was taking back the pay they gave you because they found that someone above you in the company didn’t fill out your paperwork correctly that month. Imagine the hours and hours of work that must go in to defending these post-pay audits years later, while you are otherwise struggling to take care of current patients.

There are lower levels of administrative appeal, but these are almost knee-jerk denials by Medicare staff that have no incentive to spend time on old problems. On the rare occasion they do, 70% of the audit denials are easily overturned. Medicare has recently adopted a policy of not paying the auditing companies until the first two appeal steps are completed. This doesn’t help much because most of the time those first two appeals processes are not substantive. Again, most will be overturned when actually reviewed by an administrative law judge.

If space permitted, I could also explain how HME suppliers save Medicare/Medicaid hundreds of millions of dollars a year by allowing patients to be treated outside of hospitals and nursing homes.

So, Mr. Black, I would appreciate it if you’d call me so I can further explain why this audit process is not just “annoying and a pest,” but rather how it’s putting honest and efficient small businesses out of business and helping to drive healthcare costs higher and higher.

—Van Miller, CEO and founder, The VGM Group