Health Care Matters

A Complimentary Newsletter From:

Law Offices Of David S. Barmak, LLC

Managing Risk for Long Term Care and Health Care Providers

Volume 11, Issue 11                               ADVERTISEMENT                              NOVEMBER 2010

In This Issue
Federal Audit Contractors
False Claim: The Amount Falsely Billed Or The Amount Reimbursed?
Elements Of A Compliance Program
David S. Barmak, Esq. 
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Licensed to practice law in the States of New Jersey, New York, Connecticut and Pennsylvania 

Federal Audit Contractors

Medicare's Recovery Audit Contractor (RAC) program has been a huge success - at least as far as the government is concerned. Unfortunately, this success has been so great that the government has decided to expand the RAC program from Medicare to Medicaid, with this author's fear that it will be to the detriment of honest healthcare providers and suppliers.


RACs are charged with identifying under and overpayments to health care providers and suppliers. In return, they receive a portion of the money they recover - namely a contingency fee of between 9 and 12.5 percent. Under the Patient Protection and Affordable Care Act, RACs have expanded from Medicare to Medicaid healthcare providers.


Based upon results reported during the three year demonstration period which ended in March 2008, the majority of the improper payments identified by RAC auditors were based upon overpayments. Roughly half of the recoveries were Part A claims and half Part B claims. Overpayments were identified on approximately 33 percent of all records reviewed. The average value of an overpayment was between $4,000 and $12,000 per claim.


RACs perform two types of reviews: automated and complex.  Automated reviews are conducted through data mining and the use of proprietary techniques to detect clear errors.   A complex review is conducted if an error is likely and the medical record is reviewed.


The RAC demonstration project has produced valuable data for defending against RAC auditors:  approximately 1/3 all appeals by healthcare providers of RAC initiated claims of overpayment were successful during the demonstration project.  It is important that healthcare providers carefully review and question RAC initiated overpayments and pursue appeals whenever reasonable to do so.


It is essential that a thorough effort be made in preparing for RAC record requests. An effective compliance program is critical in pulling together the compliance team to review the issues identified by RAC auditors not only those that arose during the RAC demonstration stage but also issues currently identified on the RAC's Web-site.  The Compliance Officer, Compliance Attorney, Compliance Nurse, Director of Finance, Director of Nursing and the Administrator must all work together to review and assess the risks that lie within the medical records prior to submission to the RAC. Documentation should be prepared with the expectation that all conclusions by the RAC auditors will need to be appealed. As always, the compliance program must reflect all efforts made to comply with laws and regulations, efforts made to comply with RAC auditor efforts as well as whatever remedies are implemented in order to minimize the risk of legitimate future problems identified by RAC or the next generation of government auditors.

False Claim: The Amount Falsely Billed Or The Amount Reimbursed?

WHAT IF a healthcare provider / supplier intentionally submits a fictitious claim to Medicare for $1,500 but the real reimbursement to be expected is $300? Is the false claim considered to be $1,500 or $300?


WHAT IF the government conducts a sting operation in which the value of the services intentionally submitted for reimbursement is $300 but the real value of the services rendered is $0? Is the false claim considered to be $300 or $0?


What if the value of the product intentionally submitted to a liability insurance carrier is inflated to $20,000 but the real value is $2,000? Is the false claim considered to be $20,000 or $2,000?

Under United States Sentencing Guidelines, 2B1.1, the offense level for defendants convicted of fraud is increased commensurate with the amount of loss involved in the fraud. The commentary to 2B1.1 indicates that "loss" for purposes of the guideline is "the greater of the actual loss or intended loss." "Actual loss" is the reasonably foreseeable pecuniary harm resulting from the offense, and "intended loss" is the pecuniary harm that was intended to result from the offense. "Intended loss" includes "intended pecuniary harm that would have been impossible or unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in which the claim exceeded the insured value)."


In other words, if a healthcare provider / supplier submits a claim that is known or should have been known to be fictitious or inflated, the amount billed to Medicare, Medicaid or any other government third party is considered prima facie evidence of the amount of the loss that the healthcare provider / supplier intended to cause. Courts will consider additional evidence to suggest that the amount billed either exaggerates or understates the billing party's intent; however, as the defendant in United States of America v. Hearne (U.S. v. Hearne, 09-60750, 5th Cir. 110-20-2010) found, claiming a lack of understanding the amounts that Medicare likely will pay - shifting responsibility for Medicare claims to his staff and claiming that he was generally uninformed about how Medicare reimbursement work - comes across as self-serving and lacks credibility.  The trial court found: 


It appears that he indiscriminately submitted false and fictitious bills in an effort to maximize reimbursements. It does not appear that he was focused on the mechanics of the program and, instead, was focused on [the] number of claims. Thus, even if he has some notion about caps and understood that full reimbursement was unlikely or impossible, the defendant [provider] still submitted claims with the intent that they would be paid.  


Unless extraordinary evidence exists, the intended loss of a false claim is calculated to be the amount falsely billed to Medicare or other government third party payor rather than the amount a healthcare provider / supplier is reimbursed.  This is a critical determination because the civil penalty for a false claim is three times the amount of the intended loss plus up to $11,000 per false claim plus attorneys' fees and costs.



Elements Of A Compliance Program

An effective compliance program addresses the healthcare provider's / supplier's need to prevent fraud and abuse and carries the added benefit of improving the provision of quality health care at lower costs. A successful compliance program also openly demonstrates, to the government, employees and the public, the provider's / supplier's commitment to conducting its affairs honestly and responsibly.

Compliance programs encourage employees to report potential problems and permit the provider / supplier to conduct an internal investigation and take corrective action. An effective compliance program should increase the likelihood of preventing, identifying, and correcting unlawful, abusive or wasteful conduct at an early stage, minimizing financial loss to the government, to taxpayers, and to the provider / supplier.


Compliance programs must encompass billings, payments, medical necessity, quality of care, governance, credentialing and other risk areas that a provider / supplier, with due diligence, identifies. Specifically, an effective compliance plan should include the following elements:


1. Designation of a compliance officer responsible for the day-to-day operation of the compliance program; this employee should report directly to the provider's / supplier's chief executive and periodically report to the governing body (Board of Directors or Board of Trustees) on the activities of the compliance program;


2. Training and education of all affected employees and persons associated with the provider / supplier, including executives and governing body members, on compliance issues, expectations, and the operation of the compliance program; such training should occur periodically and should be made a part of the orientation of new employees and governing body members;


3. A communication process, such as a hotline, accessible to all employees, outside vendors, governing body members, patients or other users of the provider's / supplier's services, for the reporting of compliance issues; the lines of communication should allow for anonymous and good faith reporting of potential compliance issues as they are identified;


4. Disciplinary policies and standards that are distributed to all employees, which are fairly, evenly, and firmly applied, and encourage good faith participation in the compliance process, including policies that articulate expectations for reporting compliance issues and assist in their resolution and outline sanctions for:
a. failing to report suspected problems;
b. engaging in non-compliant behavior;
c. encouraging, directing, facilitating or permitting either actively or passively non-compliant behavior.


5. A system for routine identification of compliance risk areas specific to the particular provider / supplier, for self-evaluation of such risks areas, including but not limited to internal audits and as appropriate, external audits, and for evaluation of potential or actual non-compliance as a result of such self-evaluations and audits, credentialing of providers / suppliers and persons associated with providers / suppliers, reporting, governance, and quality of care to patients.


6. A system for responding to compliance issues as they are raised; for investigating potential compliance problems; responding to compliance problems as identified in the course of self-evaluations, external evaluations and audits, correcting such problems promptly and thoroughly and implementing procedures, policies and systems as necessary to reduce the potential for recurrence; identifying and reporting compliance issues to federal and state officials, (Office of Inspector General, Medicaid Fraud Units, etc.); and refunding overpayments.


Mission Statement - Reduce Your Risk Now
Our firm is dedicated to helping health care providers, in particular long term care facilities and their insurers, reduce costs by minimizing the risk of adverse events.
We do this by being proactive (pre-litigation strategies). This includes training and education of employees, review of policies and procedures, implementing communication channels, getting feedback through interviews and focus groups, and continuous monitoring and auditing. Vital to employee education is documentation training and effective communication training.
If an adverse event occurs, our response is promptly reactive (pre-litigation strategies). Mandatory, non-binding mediation is utilized whenever possible. Our goal is to quickly resolve disputes before they escalate and require resolution through the judicial system. To avoid a repeat occurrence, we continue staff training and education with a focus on prevention, as well as review and revise policies and procedures for greater effectiveness.
If a lawsuit is filed, the risk that existed has been realized (litigation strategies). Defense analysis, expert witnesses, focus groups, and mock trials are all part of litigation defense. Finally, implement post-litigation risk management strategies to remedy the situation.
A comprehensive Compliance Program (also known as a Risk Management Program) focuses on early intervention through training, communication, and policy review. Monitoring and auditing are key elements to reduce medical liability exposure and improve patient safety.

David S. Barmak, Esq. received his JD from Cornell University and BA from Duke University. He is licensed to practice and serves clients in the States of New Jersey, New York, Connecticut and Pennsylvania. Before making your choice of attorney, you should give this matter careful thought. The selection of an attorney is an important decision.

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