Legal Update

Financial Management

By: Thomas O'Carroll

Published: 1/15/2019

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Medical Billing Audits: The Road to Ruin


CLEAN BILL OF HEALTH? Will your billing practices stand up to a federal or commercial payer audit?

It’s a letter you never want to receive, but it’s increasingly likely these days that your facility might get one. It first appears rather innocuous: A federal or private payer asks you for a sample of your billing records — say, 20 to 30 of them. They don’t say why they’re asking, but you comply anyway. That letter almost certainly means that the next letter you receive, sometimes as much as a year later, will be a demand for recoupment of potentially years of billing based on the carrier’s audit of those patients’ records.

In more than 20 years of practice, I have never seen a provider with sufficient coverage lose personal assets in a medical malpractice lawsuit. I have, however, seen medical billing audits not only destroy a surgical business and lead to bankruptcy, but also lead to criminal charges.

Under suspicion

Fraud and overbilling are serious concerns for CMS and carriers (see “Hospital Improperly Unbundled Orthopedic Surgery Claims”). If they’ve targeted you for an audit, the payer will calculate the “error rate” based on medical necessity of the sample size you provided and will extrapolate that rate over the months or years of payments. Don’t believe that past payments are endorsements of proper billing or documentation. Nor should you believe that a change in billing practice will be sufficient going forward. Once a center is audited, the payer is going to want its money back for work that your center had performed months or years ago. You could even find yourself working just to repay the debt (that you dispute) while you’re waiting for your day in court.

Both insurers and CMS will use computers for any indication that your center is a billing outlier. They know what a facility like yours should bill, which codes are typically used and have reams of data from across the industry to guide their investigation. If they see something about your billing practices that differs from the statistical norm, it is likely that your center could face an audit.

When they ask for those sample records, contact your attorney immediately. You should also contact your carrier, which might cover legal fees in defending these cases. The earlier you take action, the better.

In my experience, single providers are often hit with an overpayment demand well into the 6 figures. In the case of a surgical center, it ranges into the millions. These cases are typically very difficult to defend and usually will take years to resolve. They can be a black cloud that hangs over your facility.

Audits by private carriers tend to be easier and quicker to resolve than CMS audits, which feel like a bureaucratic nightmare. It’s extremely difficult to talk to a live person and your appeals can spend years in backlogs. In 2017, the Secretary of Health and Human Services identified more than 600,000 appeals handled by fewer than 2,000 judges leading to a backlog that could cause a delay of 3 to 6 years from the date of appeal to the date of the hearing in front of the judge. There’s now a process in place to settle CMS claims before the matter is heard by an administrative law judge. A recent case law precludes CMS from recoupment while the appeal is pending (osmag.net/MZAn9k).

Prevent defense: self-audits

How can you avoid an audit? The plain truth is that you should be preparing for a possible audit well in advance of receiving one of those letters.

Your best defense? Regularly perform your own billing audits, either internally, or by

using a trusted third-party provider, so that you can avoid getting audited in the first place.

It’s easy to get wrapped up in the day-to-day of operating a facility. Bad practices and habits tend to gather momentum and snowball over time. What might have started as a shortcut or an oversight in 1 or 2 cases can become an epidemic within your center, and the fact that the bills are being paid could easily lead to a false sense of security. A self-audit can be a chore, but it is the most reliable way to avoid an external audit.

Beyond that, keep close track of medical coding changes, particularly in evaluation and management (E/M) coding — not just to avoid an audit, but also for the more practical reason that some of your miscoded claims might be denied or ignored.

If you use a third-party provider to handle your billing, don’t assume they’re using updated codes. It’s not a defense to an audit that you outsource your billing to a third party. Consultants can help you navigate and implement coding changes if you don’t have the time or resources to do so internally.

Even technical violations of CMS coding and documentation requirements are difficult to defend. The best defense against audits is to, quite simply, get your house in order. Do it now. Make the time and make it a priority. Perform a self-audit, communicate the necessary changes in process and practice to your staff, and mandate compliance. Break free of complacency and sleep better at night. OSM

MODIFIER 59
Hospital Improperly Unbundled Orthopedic Surgery Claims

They got away with fraudulently unbundling orthopedic surgery claims to inflate their bills to federal payers by millions for 7 years, but the U.S. Justice Department finally caught up to Coordinated Health, a Lehigh Valley, Pa.-based, for-profit hospital and health system that last month paid $12.5 million to settle allegations they submitted false claims for orthopedic surgeries.

The government alleges that Coordinated Health regularly affixed modifier 59 to its request for payment for reimbursement of orthopedic surgery claims. The billing code tells the payer that it’s appropriate to pay a separately billed service that was not part of the original surgery.

One surgeon routinely diagnosed his knee replacement patients with poor patellar tracking and stated he made an incision to improve patellar tracking, says the government. This type of incision is covered under the global surgery reimbursement for knee arthroplasty, but Coordinated Health systemically misused modifier 59 to bill for the incision as if it had been performed separately from the knee replacement — even after independent coding consultants twice warned hospital executives against it, alleges the government.

“It is improper ‘unbundling’ when a provider submits a claim for a global reimbursement for a surgery and misuses modifier 59 to separately bill for parts of the same surgery,” says the government.

The health network’s billing practices will be monitored for 5 years due to a corporate integrity agreement with the U.S. Department of Health and Human Services. Coordinated Health did not admit any wrongdoing or liability under the settlement.

— Dan O’Connor

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