Maximum Comfort battles CMS to the max

Tuesday, August 31, 2004

Tom Lambert stops short of calling his recent favorable court ruling a victory. After all, he’s an HME David battling the Medicare Goliath. But while the little guy comes out on top in the biblical tale, it’s the giant that usually prevails in the HME world.

Still, this Redding, Calif., provider should serve as an inspiration to all those providers who have taken on the Medicare system only to get crushed by the CMS-DMERC juggernaut. After exhausting nearly all of his resources fighting an audit that disallowed nearly $800,000 in payments due to “insufficient documentation” for K00011 power chairs, the president of Maximum Comfort got a measure of vindication from an Eastern U.S. District Court judge who ruled in his favor. Certificates of Medical Necessity, the judge stated, should be the only documentation necessary for providing medical equipment that requires it.

Lambert’s odyssey began in 1999, when Region D DMERC Cigna launched an audit of the company based on what the insurer deemed to be a pattern of overutilization regarding K00011 power chairs.

“They sent me a pie chart of Region D dealers showing K11 usage and we were third highest in the number of units that they were billed for,” Lambert recalled. “But they were basing it on our store in Redding, which has a population of 60,000. By then I had opened stores in Sacramento and Chico and was getting ready to open another in Fresno. We were selling across the entire Northern California region.”

Auditors reviewed CMNs for 30 claims, which Lambert contends were signed by 30 different physicians. Because backup documentation from the doctors was not available, the DMERC disallowed $1.2 million in claims, requiring that it be repaid within 30 days.

“Of course we couldn’t pay, so they began to offset our monthly reimbursement,” Lambert said. “Our income ceased immediately.”

At that point, attorney Bartley Fleharty came to Lambert’s aid. The time had come for someone to stand up to the Medicare establishment, he said.

“The more involved I got, the more I could see that the government and insurance carrier were doing what they wanted to do – there was a total lack of due process in the whole situation,” said Fleharty, partner with the Redding law firm of Wells, Small & Selke. “The bottom line is that we were going up against a bully who doesn’t care whether you go out of business or not.”

Things looked promising in 2001, as two administrative law judges ruled at hearings in January and September that Maximum followed proper procedures and was entitled to replacement of garnished payments with interest. Cigna and CMS successfully protracted the proceedings however, by taking the matter to the Medicare Appeals Council, which reversed the ALJs’ decisions.

The District Court judge trumped the appeals council determination, which Fleharty says has far-reaching ramifications for the HME industry.

“This is a published decision at the District level – it’s very persuasive,” he said. “The government must take notice of that.”

Because the litigation process stretched out over five years, Lambert went to the financial brink, selling his house and curtailing his operations to conserve cash.

“It’s a real nightmare – their strategy is to wear you down,” Lambert said. “A lot of people challenging them go out of business before it’s over. Even if they get a favorable decision, it’s usually too late.”

Determined to persevere, Lambert sacrificed nearly everything for his fight. He scaled back his business from 65 people to 14, sold his oxygen segment to Apria and closed his pediatric and high-end rehab operations. The company filed for Chapter 11 bankruptcy in 2002 and a reorganization plan was approved the following year. Now Maximum is focused solely on Medicaid DME and has prepay arrangements with most vendors.

“I’m back to where I started in 1989,” Lambert said. “The reason I got into Medicaid in the first place was because no one else wanted it. It’s not much, but it’s enough to keep us going.”

Indeed, Lambert has paid a steep price that few would pursue. Why did he?

“I didn’t do anything wrong and I wanted to clear my name,” he said. “Quitting was not an option. Yes, the price was terrible, but they were accusing me of fraud and I didn’t want them to get away with that.”

At press time, Cigna and CMS were contemplating whether to press the issue further and can reportedly keep Lambert in suspense about what they’ll do until the end of year.

“It’s definitely not over yet,” he said. “I suspect it will continue to be a slow process. They could conceivably take it to the U.S. Supreme Court, but that would be a pretty petty thing for them to do.”