Medicare audits: Just how bad are they?

Among the problems is a lack of consensus among contractors regarding what documents establish medical necessity
Friday, August 24, 2012

Editor’s note: This is the last in a series of commentaries on audits. Go to for previous commentaries.

No matter how you look at it, the contractors are out of control. Examples include: instructions by a ZPIC to the four DME MACs to suspend payments to a supplier because the ZPIC is dissatisfied with the supplier’s documentation and because the ZPIC asserts (without substantiated evidence) that the supplier is violating the telephone solicitation statute; placement of a supplier on a 100% prepayment review because the contractor does not feel that the medical necessity documentation is sufficient; and a supplier having to respond to the same audit request for the same patient on multiple occasions.

Specific contractor abuses

• There is a glaring failure of CMS oversight of the ZPICs. CMS does not have the staff (with sufficient experience) to know if the ZPICs “are doing things right.” This is compounded by the fact that, too often, a ZPIC contractor has no experience in the areas of fraud and abuse that it is investigating. This lack of knowledge results in incorrect policy applications, errors in data analysis, and unnecessary audits, reviews and investigations.

• A contractor will disregard medical necessity documentation that is contemporaneous with the physician’s order. There have been a number of incidents in which a CERT contractor has disregarded medical documentation created contemporaneously with the initial order and, instead, requires suppliers to submit patient records that document medical necessity on the date of service that the CERT contractor is auditing.

• Contractors interpret CMS instructions (pertaining to LCDs and NCDs) to mean that suppliers must document, in unrealistic detail, every element of the coverage criteria in the LCD. The result is that suppliers must document ancillary LCD provisions that, in and of themselves, do not affect coverage for the DMEPOS item. In short, contractors are looking for documentation that reflects, word-for-word, the language of the LCD. It is impossible for physician records to recite words and phrases from an LCD with the cookie-cutter precision that the contractors demand.

• Contractor staff is prohibited from using “clinical judgment” (or “clinical inference”) in reviewing documentation. DME MACs and ZPICs employ clinical staff; unfortunately, the staff has no ability to exercise their clinical expertise. This lack of clinical inference can lead to ridiculous results.

• There is a lack of consensus among contractors, and even among auditors working for the same contractor, regarding what documents establish medical necessity. Some, but not all, contractors interpret CMS’s audit strategy as a mandate to audit every statement in an LCD no matter how remotely the statement affects coverage of the item. This interpretation results in requests for information that are not relevant to the determination of medical necessity. The same phenomenon occurs within a single contractor: One auditor will adopt a hyper-strict interpretation of what the LCD requires, while another auditor will not take such a strict view.

• Too often, ZPICs request hundreds of medical records on short deadlines without any explanation about why the documents are being reviewed. ZPICs are not receiving appropriate oversight and monitoring from CMS to ensure that they are complying with CMS guidelines for medical review. Further, the ZPICs are not affording suppliers even the most basic procedural protections set out it in the Program Integrity Manual. This creates hardships for suppliers that remain indefinitely on prepayment reviews.

Responsive steps by the industry

AAHomecare has taken the leadership role in confronting contractor abuses. It has gathered evidence of contractor abuse from multiple HME providers. Through its various committees and councils, AAHomecare has met with CMS on multiple occasions. At these meetings, AAHomecare has presented examples of contractor abuse. AAHomecare has also submitted a detailed white paper to CMS that outlines the problems discussed above and suggests solutions.

State DME associations have been aggressive in presenting the problems to their elected U.S. representatives and senators. VGM and The MED Group have encouraged their members to lobby their elected representatives. Stakeholders have submitted white papers to the Senate Finance Committee that detail contractor abuses.

At the end of the day, it is important for HME providers to educate their customers and physicians regarding the problems that the suppliers are encountering with audits. History has shown that CMS often turns a deaf ear to complaints by providers. To a lesser extent, Capitol Hill does the same. However, when a Medicare beneficiary and/or a physician complains, CMS and Capitol Hill listen. hme 

Jeffrey S. Baird, Esq. is chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He can be reached at 806-345-6320 or


This is as blunt as I can be. While Providers are being prompted to an exercise in futility please allow me to tell everyone exactly what you need to do. Currently, it has been brought to my attention that I am trying to proclaim my case, The Nichole Medical case, is the most important and only issue for the Industry and it's Providers. That is somewhat a distortion of the truth.

Here is the bluntness of the facts. The Nichole Medical case is NOT about just CMS's contracted Auditors. It is about CMS's Contractors. CMS has hundreds of contractors administering all the facets of the Medicare Program. Whatever The Third Circuit Decides will be applicable to everyone of those hundreds of Contractors even the ones administering "Competitive Bidding". It is imperative for every Industry Provider to understand and realize this is fact!

Next, while the industry is on bended knee with tears in their eyes does anyone really believe that letters to anyone in Washington will supersede or undermine anything The Third Circuit Decides especially with Retired Supreme Court Justice Sandra Day O'Connor's signature on the Decision. Unless and until, The Nichole Medical case successfully receives a favorable Decision binding CMS Contractors liable for it's actions in The Federal Court ALL your efforts would be in vain. I have written in previous comments Washington is very much watching this case and are well aware of the reach it will have on CMS and the Industry.

If The Third Circuit Decision finds the inferior actions of the contractors in The Nichole medical case uncontestable in Federal Court NOT one letter or one tear will be considered by anyone in Washington. The Courts will have spoken and that will be their response to Medicare Providers. These are "the facts"! It is NOT about Auditors ! It is the Contractors. I hope this enlightened everyone. As I said previously this is a "high stakes" case and I am ALL-in. As a reminder to everyone I receive NO residuals from a favorable Decision for My Company. So, whoever wants to proclaim to be the leader regarding this issue; My legal team and me are unaware of any other Federal Court actions in current proceedings. If anyone does know of any other cases proceeding any Federal Court would you kindly let me know.

Now you ALL know the facts and can decide for yourselves how important or NOT important this case is to the industry's perpetuity!

Therefore, you ALL need to decide what all of you need to do!