Healthcare Audit Law: Recent Developments and Tools

July 6th, 2014 by haber Leave a reply »


Medicare & Its Developments Now and In The Future-The OIG And Its Tools; CMS and Its Tools
By Kenneth Joel Haber

Mr. Haber is a former Assistant United States Attorney [1971-1979 E.D. MI] and former Senior Attorney Office of Inspector General United States Department of Health and Human Services [1979-1983]. He found this firm in 1984.

As always, please feel free to contact this office for a no obligation initial consultation as to this article or any other healthcare issue, such as Peer Review, RAC attacks, ZPIC investigation, OIG investigation, FBI investigation, Credentialing, Licensing Board Actions, Data Bank issues, etc. You may initiate such a no obligation consultation through our Contact Form by leaving your telephone number or by a direct call to the office [301-670-0016]. Thank you and don’t forget to refer us to a colleague if you find our website informative.

National health expenditures are projected to reach $4.6 trillion in 2020, up from $2.5 trillion in 2009. After increasing 4.0 percent in 2009, NH E is estimated to have grown by just 3.9 percent in 2010, largely as a result of two major factors. First, slower growth in Medicare Advantage payments to private health plans contributed to slower growth in overall Medicare spending. Second, NHE growth is estimated to have been dampened due to the recent recession’s continued effect on people’s incomes, private health insurance coverage, and utilization of health care services.

Medicare spending is projected to increase at an average annual rate of 6.3 percent for 2013 through 2020. This rate reflects faster enrollment growth associated with the baby boom generation, offset partially by certain Affordable Care Act provisions, such as reduced annual payment updates for most Medicare services and significant reductions to managed care plan payments, that are intended to slow spending growth.
The Medicare program covers 95 percent of our nation’s aged population, as well as many people who receive Social Security disability benefits. In 2010, Part A covered over 47 million enrollees with benefit payments of $244.5 billion, Part B covered almost 44 million enrollees with benefit payments of $209.7 billion, and Part D covered over 34 million enrollees with benefit payments of $61.7 billion. Administrative costs in 2010 were about 1.4 percent, 1.5 percent, and 0.6 percent of expenditures for Part A, Part B, and Part D, respectively. Total expenditures for Medicare in 2010 were $522.8 billion.

The Administration claims that it will save $500 billion from waste, fraud and abuse over the next 10 years to offset the cost of the Healthcare Reform Act. Is there such an amount of waste, fraud and abuse? Where is the savings going to come from and how does that relate to you. It is coming from legitimate physicians as much as the less conscientious and criminal physicians. Beneficiaries are also going to suffer. All are going to share in the pain.

Congress is relying upon the OIG and CMS to identify and reclaim the $500 billion dollars in waste, fraud and abuse and to squeeze additional savings for program requirements. What does that mean to any physician and institution? What tools are the OIG and CMS utilizing? CMS is relying upon Recovery audit contractors and ZPIC contractors. That is RAC and ZPIC. RAC s are bounty hunters and are paid on a contingency basis. ZPIC s think that they are mini OIGs. RAC s can recoup your past reimbursements from you and ZPIC s can coordinate with CMS to cut off your future reimbursements. Both are dangerous to all health care providers.


  • Health Care Fraud Prevention and Enforcement Efforts Result in Record-Breaking Recoveries Totaling Nearly $4.1 Billion
  • WASHINGTON –Attorney General Eric Holder and Department of Health and Human Services (HHS) Secretary Kathleen Sebelius today released a new report showing that the government’s health care fraud prevention and enforcement efforts recovered nearly $4.1 billion in taxpayer dollars in Fiscal Year (FY) 2011. This is the highest annual amount ever recovered from individuals and companies who attempted to defraud seniors and taxpayers or who sought payments to which they were not entitled.Assistant Administrator of Houston Hospital Pleads Guilty to Participating in $116 Million Medicare Fraud Scheme (February 22, 2012)
  • An assistant administrator of a Houston hospital pleaded guilty today for his role in a $116 million Medicare fraud scheme involving false claims for mental health treatment. For years he allegedly operated a scheme to bill Medicare for partial hospitalization services that were medically unnecessary or never provided.Cincinnati Hospitals Agree to $108 Million False Claims Settlement (May 21, 2010)
  • The health Alliance of Greater Cincinnati and one of its former member hospitals agreed to a $108 million civil settlement with the Justice Department Friday to resolve claims that they violated the Anti-Kickback Statute and the False Claims Act. The whistleblower, Dr. Harry Fry received $23.5 million under the settlement.

Hospice Provider Odyssey Healthcare Agrees to Pay $25 Million to Resolve False Claims Act Allegations (March 1, 2012)

  • Odyssey HealthCare, a subsidiary of Gentiva, has agreed to pay $25 million to resolve civil liability under the federal False Claims Act arising from allegations that Odyssey billed for home care services that were unnecessary or that were not performed in accordance with Medicare Requirements. Whistleblowers, all former employees will receive payments totaling more than $4.6 million.Manhattan U.S. Attorney Recovers More Than $13 Million in Medicare False Claims Act Lawsuit against Beth Israel Medical Center (March 1, 2012)
  • Beth Israel Medical Center (“Beth Israel”) settled a civil health care False Claims Act for fraudulently inflating its fees for services provided to Medicare patients in order to obtain larger supplemental reimbursement, known as “outlier payments,” that Medicare pays to hospitals and other health care providers in cases where the cost of care is unusually high. Beth Israel agreed to pay $13,031, 355 to the United States to settle the Government’s claims for damages and penalties under the False Claims Act.

Fourteen Hospitals to Pay U.S. More than $12 Million to Resolve False Claims Act Allegations Related to Kyphoplasty (February 7, 2012)

  • Fourteen hospitals located in New York, Mississippi, North Carolina, Washington, Indiana Missouri and Florida have agreed to pay the United States a total of more than $12 million to settle allegations that the health care facilities submitted false claims to Medicare.

Cayuga Medical Center Settles FCA/Stark Violation Claims for $3.5
Million (February 2, 2012)

  • The Cayuga Medical Center (Medical Center) of Ithaca, New York agreed to pay a total sum of 3,576,056.00 to resolve allegations that it submitted false claims to Medicare and Medicaid in connection with improper physician recruitment agreements it entered into with various medical practices in violation of the physician’s self-referral prohibition referred to as Stark and the False Claims Act. The settlement resolves a whistleblower lawsuit filed on behalf of the United States of America and the State of New York by Daniel S. Jorgenson, M.D., a plastic surgeon who formerly practiced in Ithaca.

Florida Radiology Clinic and Former Owners to Pay $3Million to Resolve Medicare False Claims Act Allegations (June 8, 2011)

  • The West Palm Beach clinic is alleged to have submitted false claims to Medicare during the period of 2000 through 2008 by entering into certain leasing and professional services agreements with referring physicians and physician groups that violated the Anti-Kickback Statute and Stark Law. Under the civil settlement, whistleblowers will receive $600,000.

NC Hospital will pay $1.9 million over false claims (April 5, 2011)

  • Rex Healthcare, a 655-bed hospital in Raleigh, N.C. has agreed to pay $1.9 million plus interest back to the U.S. to settle allegations that it overbilled Medicare by ordering higher-cost services for patients who often only just needed basic outpatient treatments.

Lakeland Regional pays $1.7M to settle false claims charges (January 5, 2011)

  • Lakeland Regional Medical Center is one of seven hospitals nationwide that agreed to pay the United States a total of more than 6.3 million to settle allegations that the health care facilities submitted false claims.

The OIG’s Tools

We as a society also places enormous trust in physicians. Medicare, Medicaid, and other Federal health care programs rely on physicians’ medical judgment to treat beneficiaries with appropriate services. When reimbursing physicians and hospitals for services provided to program beneficiaries, society relies on physicians to submit accurate and truthful claims information. The presence of some dishonest health care providers who exploit the health care system for illegal personal gain has created the need for laws that combat fraud and abuse and ensure appropriate quality medical care. The following write-up assists physicians in understanding how to comply with these Federal laws by identifying “red flags” that could lead to potential liability in law enforcement and administrative actions. The information is organized around three types of relationships that physicians frequently encounter in their careers:

I. Relationships with payers,
II. Relationships with fellow physicians, facilities and other providers, and
III. Relationships with vendors.

The key issues addressed in this informational repoart are relevant to all physicians, regardless of specialty or practice setting.

The five most important Federal fraud and abuse laws that apply to physicians are the False Claims Act (FCA), the Anti-Kickback Statute (AKS), the Physician Self-Referral Law (Stark law), the Exclusion Authorities, and the Civil Monetary Penalties Law (CMPL). Government agencies, including the Department of Justice, the Department of Health & Human Services Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS), are charged with enforcing these laws. It is crucial to understand these laws not only because following them is the right thing to do, but also because violating them could result in criminal penalties, civil fines, exclusion from the Federal health care programs, or loss of your medical license from your State medical board. The Department of Justice and the OIG are operating what are called HEAT programs. The HEAT program establishes Healthcare Fraud Prevention and Enforcement Action Teams across the country. They use various statutory authorities to enforce the law.

FALSE CLAIMS ACT [31 U.S.C. §§ 3729-3733/18 U.S.C. §287

The civil FCA protects the Government from being overcharged or sold shoddy goods or services. It is illegal to submit claims for payment to Medicare or Medicaid that you know or should know are false or fraudulent. Filing false claims may result in fines of up to three times the programs’ loss plus $11,000 per claim filed. Under the civil FCA, each instance of an item or a service billed to Medicare or Medicaid counts as a claim, so fines can add up quickly. The fact that a claim results from a kickback or is made in violation of the Stark law also may render it false or fraudulent, creating liability under the civil FCA as well as the AKS or Stark law. Hospitals rendering Designated Health Services [see below] pursuant to physician orders under a relationship in violation of Stark or any services rendered pursuant to a pattern of medically unreasonable or unnecessary orders can be held to be responsible for claims the hospital files for such services and items, under appropriate circumstances. Hospital officials, employees, directors, agent and physicians, who have the authority and knowledge to prevent such improper claims and do not, in addition to any possible criminal prosecution based upon their particular circumstances, may be excluded from Medicare participation [see below & 42 CFR 1001.701; .901; .951].

Under the civil FCA, no specific intent to defraud is required. The civil FCA defines “knowing” to include not only actual knowledge but also instances in which the person acted in deliberate ignorance or reckless disregard of the truth or falsity of the information. Further, the civil FCA contains a whistleblower provision that allows a private individual to file a lawsuit on behalf of the United States and entitles that whistleblower to a percentage of any recoveries. Whistleblowers could be current or ex-business partners, hospital or office staff, employees, patients, or competitors. Such an individual could name to the government everyone to whom the individual complained and who took on action when they had authority to do so. Such named individuals with such insider information could be subject to sanctions ranging from administrative to criminal based upon their specific circumstances.

There also is a criminal FCA (18 U.S.C. § 287). Criminal penalties for submitting false claims include imprisonment and criminal fines. Physicians have gone to prison for submitting false health care claims. OIG also may impose administrative civil monetary penalties for false or fraudulent claims, as discussed below.

As noted above, the False Claims Act permits private parties to file suits against third parties and take a piece of the action if the DOJ intervenes and obtains a judgment. These private parties are called Relators. Often former and disgruntled employees file such a claim. Former and disgruntled employees are prime for such a role because they know where the dirt is in an organization or practice. There are steps that can be taken to minimize such a threat but you have to be proactive to do so. Otherwise, the house of cards can fall on you.
Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]

The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks—those who offer or pay remuneration— as well as the recipients of kickbacks—those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS. Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs. Under the CMPL, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.

Safe harbors protect certain payment and business practices that could otherwise implicate the AKS from criminal and civil prosecution. To be protected by a safe harbor, an arrangement must fit squarely in the safe harbor and satisfy all of its requirements. Some safe harbors address personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.

As a physician, you are an attractive target for kickback schemes because you can be a source of referrals for fellow physicians or other health care providers and suppliers. You decide what drugs your patients use, which specialists they see, and what health care services and supplies they receive. It can even be construed that physicians are paying Kickbacks to each other when a physician and other physicians make mutual referrals of patients for excessive and/or medically unnecessary services. The excessive and/or unnecessary referrals are considered the Kickbacks.

Many people and companies want your patients’ business and would pay you to send that business their way. Just as it is illegal for you to take money from providers and suppliers in return for the referral of your Medicare and Medicaid patients, it is illegal for you to pay others to refer their Medicare and Medicaid patients to you.

Kickbacks in health care can lead to:

Increased program costs
Corruption of medical decision making Patient steering
Unfair competition

The kickback prohibition applies to all sources of referrals, even patients. For example, where the Medicare and Medicaid programs require patients to pay co-pays for services, you are generally required to collect that money from your patients. Routinely waiving these co-pays could implicate the AKS and you may not advertise that you will forgive copayments. However, you are free to waive a copayment if you make an individual determination that the patient cannot afford to pay or if your reasonable collection efforts fail. It is also legal to provide free or discounted services to uninsured people.

Besides the AKS, the beneficiary inducement statute (42 U.S.C. § 1320a-7a(a)(5)) also imposes civil monetary penalties on physicians who offer remuneration to Medicare and Medicaid beneficiaries to influence them to use their services.

The Government does not need to prove patient harm or financial loss to the programs to show that a physician violated the AKS. A physician can be guilty of violating the AKS even if the physician actually rendered the service and the service was medically necessary. Taking money or gifts from a drug or device company or a durable medical equipment (DME) supplier is not justified by the argument that you would have prescribed that drug or ordered that wheelchair even without a kickback.

Physician Self-Referral Law [42 U.S.C. § 1395nn]

The Physician Self-Referral Law, commonly referred to as the Stark law, prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Financial relationships include both ownership/investment interests and compensation arrangements. For example, if you invest in an imaging center, the Stark law requires the resulting financial relationship to fit within an exception or you may not refer patients to the facility and the entity may not bill for the referred imaging services.

“Designated health services” are:

• clinical laboratory services;
• physical therapy, occupational therapy, and outpatient speech-language    pathology services;
• radiology and certain other imaging services;
• radiation therapy services and supplies;
• DME and supplies;
• parenteral and enteral nutrients, equipment, and supplies;
• prosthetics, orthotics, and prosthetic devices and supplies;
• home health services;
• outpatient prescription drugs; and
• inpatient and outpatient hospital services.

The Stark law is a strict liability statute, which means proof of specific intent to violate the law is not required. The Stark law prohibits the submission, or causing the submission, of claims in violation of the law’s restrictions on referrals. Penalties for physicians who violate the Stark law include fines as well as exclusion from participation in the Federal health care programs.

Exclusion Statute [42 U.S.C. § 1320a-7]

OIG is legally required to exclude from participation in all Federal health care programs individuals and entities convicted of the following types of criminal offenses: (1) Medicare or Medicaid fraud, as well as any other offenses related to the delivery of items or services under Medicare or Medicaid; (2) patient abuse or neglect; (3) felony convictions for other health-care-related fraud, theft, or other financial misconduct; and (4) felony convictions for unlawful manufacture, distribution, prescription, or dispensing of controlled substances. OIG has discretion to exclude individuals and entities on several other grounds, including misdemeanor convictions related to health care fraud other than Medicare or Medicaid fraud or misdemeanor convictions in connection with the unlawful manufacture, distribution, prescription, or dispensing of controlled substances; suspension, revocation, or surrender of a license to provide health care for reasons bearing on professional competence, professional performance, or financial integrity; provision of unnecessary or substandard services; submission of false or fraudulent claims to a Federal health care program; engaging in unlawful kickback arrangements; and defaulting on health education loan or scholarship obligations.

If you are excluded by OIG from participation in the Federal health care programs, then Medicare, Medicaid, and other Federal health care programs, such as TRICARE and the Veterans Health Administration, will not pay for items or services that you have furnished, ordered, or prescribed.

Excluded physicians may not bill directly for treating Medicare and Medicaid patients, nor may their services be billed indirectly through an employer or a group practice. In addition, if you furnish services to a patient on a private-pay basis, no order or prescription that you give to that patient will be reimbursable by any Federal health care program. Finally, the OIG takes the position that no employer may employ you if it receives federal healthcare funding. Even if you do not render services directly billed for under the programs; i.e., management functions, etc.

You are responsible for ensuring that you do not employ or contract with excluded individuals or entities, whether in a physician practice, a clinic, or in any capacity or setting in which Federal health care programs may reimburse for the items or services furnished by those employees or contractors. This responsibility requires screening all current and prospective employees and contractors against OIG’s List of Excluded Individuals and Entities. This online database can be accessed from OIG’s Exclusion Web site. If you employ or contract with an excluded individual or entity and Federal health care program payment is made for items or services that person or entity furnishes, whether directly or indirectly, you may be subject to a civil monetary penalty and/or an obligation to repay any amounts attributable to the services of the excluded individual or entity.

Civil Monetary Penalties Law [42 U.S.C. § 1320a-7a]

OIG may seek civil monetary penalties and sometimes exclusion for a wide variety of conduct and is authorized to seek different amounts of penalties and assessments based on the type of violation at issue. Penalties range from $10,000 to $50,000 per violation. Some examples of CMPL violations include:

•  presenting a claim that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent;
• presenting a claim that the person knows or should know is for an item or service for which payment may not be made;
• presenting a claim for payment that the person knows or should know that the item or service was not medically necessary;
• violating the AKS;
• violating Medicare assignment provisions;
• violating the Medicare physician agreement;
• providing false or misleading information expected to influence a decision to discharge;
• failing to provide an adequate medical screening examination for patients
• who present to a hospital emergency department with an emergency medical condition or in labor; and
• making false statements or misrepresentations on applications or contracts to participate in the Federal health care programs.

Many of the OIG tools listed above are applied in a civil and/or administrative nature. Much of the billing irregularities cited above are treated as billing mistakes due to the necessity of proving scienter in order to make a criminal case out of a matter. The one thing that a provider does not want to do is to act in such a way so as to create out of the grip of a civil/administrative matter the fangs of a criminal serpent. There is a rule entitled “Don’t kick sleeping serpents”. How do you kick sleeping serpents? You kick sleeping serpents by taking action which establishes your intent and knowledge. That happens when administrations attempt to cover up what could have been mere billing irregularities. The act of covering up creates and establishes evidence of criminal the intent and knowledge needed for a prosecution or a more severe administrative sanction. However, there are ways of lawfully diminishing the creation of the actual amount of evidence of such intent and knowledge and to reduce the impact and implications of the evidence that exists. To cover-up billing irregularities can be construed as a criminal act of Obstruction of Justice. Obstruction of Justice is not only independently prosecutable. It establishes evidence that could tie individuals into the initial billing scheme and establish it as criminal instead of civil and/or administrative.

CMS Tools

The Centers for Medicare/Medicaid Services is not without means of protecting the taxpayer’s funds. Congress has given it a variety of authorities that it has implemented in a broad fashion. It has created a variety of contractors which exercise a variety of powers in order to accomplish their goals. In addition to the government’s own employees, CMS operates through an assortment of contractors with names varying from ZPIC, Safeguard, MAC, RAC, DMERC, CBIC, QIC, MAC [different MAC], etc

These contractors can act with impressive power. The constitutionality of some of the delegations could certainly be questioned but, regardless, under the system as it stands, they have this power. Appropriate Contractors such as ZPICs have been delegated power to suspend payments for up to 180 days and longer. The ZPIC has also been delegated power to place providers on prepayment review. This power has been in one known case delegated to the investigator who was investigating the provider. This is a breach of due process and an inappropriate delegation of powers. Such power does not rest with even trained investigators in traditional federal bureaucracies but, rather, delegated to trained, experienced high ranking administrative staff designees. Yet, low level investigative employees of these federal contractors are permitted to act in this decision-making function for CMS and Medicare as to suspension of payments and creation of prepayment requirements. Under the regulations, it is asserted that no judicial review of these initial determinations exists.


Consistent with Sections 1833(e), 1842(a)(2)(B), and 1862(a)(1) of the Social Security Act, the Centers for Medicare & Medicaid Services (CMS) is required to protect the Medicare Trust Fund against inappropriate payments that pose the greatest risk to the Trust Fund and take corrective actions.

To meet this requirement CMS contracts with Part A and Part B Medicare Administrative Contractors (A/B MACs), Durable Medical Equipment Medicare Administrative Contractors (DME MACs/DMERC), fiscal intermediaries (FIs), carriers and others to perform analysis of fee-for-service (FFS) claim data to identify atypical billing patterns and perform claims review. These entities are referred to as Medicare Contractors.

Medical review is the collection of information and clinical review of medical records by Medicare Contractors to ensure that payment is made only for services that meet all Medicare coverage, coding, and medical necessity requirements. Medical review activities are directed toward areas where data analysis, Comprehensive Error Rate Testing (CERT) and Office of Inspector General (OIG)/Government Accounting Office (GAO) findings as well as Recovery Audit Contractor (RAC) vulnerabilities indicate questionable billing patterns.

Goal of the Medical Review Program

The goal of the medical review program is to reduce payment error by identifying and addressing billing errors concerning coverage and coding made by providers. To achieve the goal of the medical review program, Medicare Contractors:

• Proactively identify patterns of potential billing errors concerning Medicare coverage and coding made by providers through data analysis and evaluation of other information (e.g. complaints);
• Review CERT data, RAC vulnerabilities and OIG/GAO reports;
• Take action to prevent and/or address the identified error;
• Publish local medical review policy (called Local Coverage Determination-(LCD)) to provide guidance to the public and medical community about when items and services will be eligible for payment under the Medicare statute; and
• Publish MLN (Medicare Learning Network) educational articles as they relate to the medical review process.

Progressive Corrective Action (PCA)

PCA is an operational principle upon which all medical review activities are based. PCA involves data analysis, error detection, validation of errors, provider education, determination of review type, sampling claims and payment recovery. It serves as an approach to performing medical review and assists contractors in deciding how to deploy medical review resources and tools appropriately.

The Medicare Contractor may use any relevant information they deem necessary to make a prepayment or post-payment claim review determination. This includes reviewing any documentation submitted with the claim as well as soliciting documentation from the provider or other entity when the contractor deems it necessary and in accordance with our manuals, through a process known as additional documentation request (ADR).

Contractor Oversight

One distinct role of the CMS Medical Review personnel is to provide contractor oversight such as:

Providing broad direction on medical review policy
• Review and approve Medicare Contractors’ annual medical review strategies
• Facilitate Medicare Contractors’ implementation of recently enacted Medicare legislation
• Facilitate compliance with current regulations
• Ensure Medicare Contractors’ performance of CMS operating instructions
• Conduct continuous monitoring and evaluation of Medicare Contractors’ performance in accord with CMS program instructions as well as contractors’ strategies and goals
• Provide ongoing feedback and consultation to contractors regarding Medicare program and medical review issues.

National and Local Coverage Determinations (NCD and LCD)

Medicare Contractors are required to follow CMS policy instructions. In addition to the instructions found in our manuals, CMS and their contractors issue the following types of instructions:

• National Coverage Determination (NCD): Medicare coverage is limited to items and services that are reasonable and necessary for the diagnosis or treatment of an illness or injury (and within the scope of a Medicare benefit category). The NCDs are developed by CMS to describe the circumstances for which Medicare will cover specific services, procedures, or technologies on a national basis. Medicare Contractors are required to follow NCDs. If an NCD does not specifically exclude/limit an indication or circumstance, or if the item or service is not mentioned at all in an NCD or in a Medicare manual, it is up to the Medicare contractor to make the coverage decision.

• Local Coverage Determinations (LCD): In the absence of a national coverage policy, an item or service may be covered at the discretion of the Medicare Contractors based on a local coverage determination (LCD).

Section 522 of the Benefits Improvement and Protection Act (BIPA) defines an LCD as a decision by a FI or carrier whether to cover a particular service on an intermediary-wide or carrier-wide basis in accordance with Section 1862(a)(1)(A) of the Social Security Act (e.g., a determination as to whether the service or item is reasonable and necessary).

FIs, carriers, and MACs are Medicare Contractors that develop and/or adopt LCDs. Medicare Contractors develop LCDs when there is no NCD or when there is a need to further define an NCD. The guidelines for LCD development are provided in Chapter 13 of the Medicare Program Integrity Manual.

All NCDs, LCDs, local policy articles, and proposed NCD decisions are found in the Medicare Coverage Database.

What to Do At Any Entity To Minimize Exposure

 To Catastrophic Consequences for Billing Errors

There are several steps that should be taken at any entity to minimize exposure to catastrophic consequences for billing errors, if they are not already in place. This should be adopted at a doctor’s small or solo-practice to a major Medical Center. The size of the entity dictates the sophistication and cost of the system. First, establish and maintain a quality Compliance Program. It is being required under the Healthcare Reform Act of all providers. Second, retain or designate a Compliance Officer of unquestionable integrity and a compliance office [for larger entities] supported by management. Third, require all employees and staff to report to the compliance office [or officer as applicable] any conduct that they believe to be improper or inappropriate to them. This prevents employees from sitting back and reporting the employer after termination of employment. Fourth, establish monitoring and/or reviews to identify billing errors and other program deficiencies. Fifth, do not over-assume intent as to billing irregularities but make sure you remit to the CMS and Medicaid at the lowest appropriate level all overpayments identified. Sixth, establish a Corrective Action Plan [CPA] to avoid the same and similar errors in the future. When making repayment of overpayments, it is critical to remember the following.

The HHS/OIG provided for in the Federal Register at Vol. 63, No. 210, Friday October 30, 1998:

The Provider Self-Disclosure Protocol is intended to facilitate the resolution of only matters that, in the provider’s reasonable assessment, are potentially violative of Federal criminal, civil or administrative laws. Matters exclusively involving overpayments or errors that do not suggest that violations of law have occurred should be brought directly to the attention of the entity (e.g., a contractor such as a carrier or an intermediary) that processes claims and issues payment on behalf of the Government agency responsible for the particular Federal health care program (e.g., HCFA for matters involving Medicare). The program contractors are responsible for processing the refund and will review the circumstances surrounding the initial overpayment. If *58401 the contractor concludes that the overpayment raises concerns about the integrity of the provider, the matter may be referred to the OIG. Accordingly, the provider’s initial decision of where to refer a matter involving non-compliance with program requirements should be made carefully.

While it would be inappropriate to over-assume intent of those responsible for the billings, it is imperative to never make any statement of fact to government officials and/or the government’s agents and contractors which is incorrect. It is the responsibility of the CMS and Medicaid authorities to conclude intent and request any additional information which they deem necessary. The most important rule to remember when making these reports is to be fully truthful concerning any information provided. Remember the provider’s initial decision of where to refer a matter involving non-compliance with program requirements should always be made carefully and it should always be done with experienced counsel.


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