Holland & Hart Healthcare Law Blog

TWENTY-FIVE STEPS IN DEFENSE OF RAC AUDITS.

Recovery Audit Contractors (RACs) are in the process of saddling up for the nationwide roll out of their Medicare payment recoupment mission. Here are twenty-five recommended proactive steps to circle the wagons and defend the RAC threat.

1. Develop and implement a written audit defense plan- the government bounty hunters are coming your way and they will be looking for the  low lying fruit.

2. Select an audit team or responsible persons depending upon the size of your organization. Including if appropriate internal audit, billing and coding, medical records, risk management and the CFO.

3. Assign specific team member responsibilities in dealing with anticipated audit issues.

4. Consider running an internal pre-audit to identify vulnerabilities such as “medical necessity” and “duplication of services.”

RAC AUDITS AND NEW FEDERAL FALSE CLAIMS ACT EXPOSURE.UNDER THE FRAUD ENFORCEMENT RECOVERY ACT OF 2009 (“FERA”).

The federal squeeze of health care providers is underway. Federal Medicare recovery “bounty hunters,” the Recovery Audit Contractors (“RAC”), are marshalling resources for the anticipated, algorithm primed, data mining hunt for Medicare overpayments from hospitals, physicians, DME companies, hospices and other providers, which is likely to bloom in the second half of this year. Those that attempt to mislead the government or its computer toting agents in order to limit the harvest are facing additional potential exposure under the Federal False Claims Act, 31 U.S.C. §3729-3733 (“FCA”).

STATE CANNOT REDUCE MEDICALLY NECESSARY HOME HEALTH COVERAGE UNDER MEDICAID.

In Anna C. Moore v. M.D. Rhonda Medows, No. 107-CV-631 TWT (D.C.N.D. Georgia-Atlanta Div. June 4, 2008), an action for declaratory and equitable relief brought by a 12 year old Medicaid patient under 42 U.S.C. §1983, the U.S. District Court granted Ms. Moore summary judgment against the State of Georgia which sought to reduce the number of home duty nursing hours afforded the plaintiff from 94 prescribed by her doctor to 84 hours a week as a cost cutting measure.

MEDICAL CLINICAL ALGORITHMS: BACK-UP OR FIRST LINE IN DIFFERENTIAL DIAGNOSIS.

What if your doctor was right 98% of the time in his or her differential diagnosis?  A genius?  Perhaps our expectation is that our doctor should score 100%, but that would not only be “aggressive,” it would be wildly inaccurate – after all doctors are human.  That begs the question of the likely future use of medical clinical algorithm’s to aid in the improvement of medical diagnosis.  Medical Clinical Algorithms’ incorporate a method of using medical tests such as The Oxford Text Book of Medicine and hundreds of medical journal articles into a differential diagnosis decision tree model to computer diagnose an illness through the symptom presented by a patient.

5th Circuit Reduces Quarter Billion Dollar IRS Sanction Against Home Health Agency To Zero.

In Michael T. Caracci et al. v. Commissioner, No. 02-60912 (11 July 2006), the federal Fifth Circuit Court of Appeals did the right thing and dumped an IRS intermediate sanction against a group of Sta-Home Health Agencies (the "Agency") in rural Mississippi that was obscene in its character and amount.  The Agency, owned by the Caracci family served the rural poor in Mississippi as an alternative to the alternative of nursing homes and other similar facilities in the area.  The Agency never made a profit in its existence.  It was originally a tax exempt entity as required by earlier existing law. 95 percent of its patients were Medicare patients (compared to a national average of 38%), which meant that they were paid a percentage of their costs, inherently resulting in a loss each year. 

Because Mississippi requires a certificate of need to operate an agency in the state and because it had imposed a moratorium on certificates of need there was no way for new agencies to enter the market without acquiring a company with an existing certificate, which gave the Agency some value. In 1995 the Agency converted to a for profit entity because of a change in the law.  In the transfer of assets from the exempt company to the for profit entity the IRS determined that the Agency's assets exceeded the transferred liabilities resulting in a "net excess benefit" of $18.5 Billion Dollars. The IRS issued deficiency notices against the agency and its owners in the amount of $250 Million Dollars in excise taxes under 26 U.S.C. Section 4958 which permits a 25% and a 200% surcharge.

HIPAA Fraud Conviction For Non Health Care Providers Affirmed.

In US v. Lucien the 2nd Cir. Court of Appeals affirmed for the first time the conviction and penalties assessed against defendants who were not health care providers. The Defendants engaged in a scheme to defraud the no-fault auto insurance program of New York state by staging accidents and having the passengers assign claims to health care providers and themselves filing claims for cash settlements. The defendants argued that the no-fault program was not a health care benefit program and that the statute was intended to prevent fraud by health care providers.