Medicare and Opinion and Government Health Care and Health Care Costs and Health Care Reform and Health Care & Insurance

Indiana among first states targeted by expanded program to root out coding, billing problems

April 6, 2009

Modern-day bounty hunters are preparing to fan out across Indiana as the U.S. Department of Health and Human Services expands a program to ferret out fraud and overpayment in the health care system.

Private contractors have been empowered to conduct audits of hospitals, doctors' offices and other providers, and the contractors have plenty of incentive to find problems: They're paid a percent age of inappropriate Medicare payments uncovered during the audits.

Depending on the geographical region, the incentive ranges from 9 percent to 12.5 percent of improper payments identified by the private contractors. The incentives add up. The group of contractors in the initial three-year phase of the audits reaped $187 million in fees.

The bounty hunting initiative—called the Recovery Audit Contractor Program—is the government's newest weapon to help identify questionable billing, coding or documentation practices that may have resulted in fraud.

The government has made clear that it intends to continue focusing on health care fraud and overpayment in the near future. So far this year we have seen million-dollar—and even billion-dollar—settlements of health care related issues.

Just a few days ago, the Department of Health and Human Services announced a $2 million civil settlement related to a radiology practice, not to mention the $1.4 billion settlement the Justice Department squeezed out of Eli Lilly and Co. related to marketing of Lilly's antipsychotic drug Zyprexa.

These astronomical settlements are only bound to increase with the onset of the audits. Already, the Office of Inspector General of Health and Human Services has reported $2.35 billion in investigative receivables related to the first wave of audits.

The bounty program started as a federal demonstration project that found $1.3 billion in incorrect payments, including $933 million in overpayments and $38 million in underpayments.

The broader launch was set for October, but then was delayed until February, which gave health care providers a reprieve to prepare.

Indiana providers won't need to wait much longer. Indiana, along with Michigan and Minnesota, were to be in the first wave of audits, which began March 1.

Two types of audits will be performed.

One will focus on coding—procedures, drugs, devices or services billed.

The coding audit will be an automated review covering data only (no medical records) and is designed to uncover clear instances of inappropriate payments, such as duplicate payments.

The other audit will focus on medical necessity—whether a procedure, drug, device or service was medically necessary.

This second type of audit will be a more detailed review focusing on likely or potential errors. It's likely the contractors will request medical records from providers in the hope of finding billing errors and/or inconsistencies. Providers will be able to fight back through as many as five levels of appeals, although each level is complex and has very stringent deadlines.

It's speculated that the initial focus of the audits in our state will be on the billing of Medicare services by Indiana hospitals and health systems rather than individual providers.

The Centers for Medicare and Medicaid Services has said outreach meetings will be held with its representatives and the contractors through state hospital associations, which lends further support to speculation that the initial focus will be hospitals and health systems.

Shortly after these meetings, look for the audits to begin. Those affected should expect to start receiving requests for records and letters demanding payments from the bounty hunters.
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Lewis is a member of Baker & Daniels' health and life sciences practice, and a former assistant U.S. attorney. Views expressed here are the writer's. 

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