Audits put providers out of business

Van Miller
CEO and founder, The VGM Group

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.”

It’s absolutely amazing how some people look at statistics and make an overall generalization. Bob Black’s June 25 letter to the editor expressed an opinion without apparently knowing much about the underlying subject matter. I would like to correct the misunderstanding and set the record straight.

Providers of home medical equipment for Medicare/Medicaid patients are under siege through the use of “audits.” Black refers to an FBI estimate on Medicare/Medicaid “fraud,” which is a term they frequently use 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 home medical equipment companies, which, percent-wise, are less than 3% of total Medicare expenditures, here is the real story about the misuse of post-payment 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 as evidenced in this 2011 report by the Office of Inspector General. 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, especially smaller 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 (for example, they might stamp a thousand claims “reviewed” in one morning). Again, most will be overturned when actually reviewed by an administrative law judge, thus the auditing companies are being paid a percentage of those denials.

If space permitted, I could also explain how home medical equipment 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 is CEO and founder of The VGM Group.


From the perspective of a small provider Mr. Miller is right on the money. A small company get a recoupment of $20,000 from 3 years ago then 4 days later gets another recoupment letter for $13,000 and then a notice that they are having 100% of there payments recouped until a previous recoupment for $11,000 has been satisfied. So for 7 months every claim approved by Medicare has been recouped and now they ask for $33,000 or it will be charged to your surety bond company. Try asking for information regarding these recoupments and you get a scripted answer... "We will mail it to you" we are not allowed to tell you over the phone. It's our money and out livelyhood we deserve the right to know.


Mr. Miller please fight for the smaller guy. We are more likely to take the worst of all there is to come because we just can't afford to fight financialy. Nor can we match the margins of the Big Box Stores. What happened to this countries dedication to small business people.