What You Need to Know About
Government Audits and
Prosecutions of
Long-Term Care Facilities
Presented By:
Jonell B. Beeler, Shareholder
Thomas Parker, Shareholder
Baker Donelson
How to Prepare for Audits
www.bakerdonelson.com
© 2013 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
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Who Denied Claim
Contractors are:
• Medicare Administrative Contractors (MAC)
• Zone Program Integrity Contractors (ZPIC)
• Program Safety Contractors (PSC)
• Medicare Drug Integrity Contractors (MEDIC)
• Medicare/Medicaid Recovery Audit Contractors (RAC)
• Qualified Independent Contractors (QIC)
• Medicaid Integrity Contractors (MIC)
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Who is Investigating Claim
Enforcement agencies are:
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Federal Medicaid Integrity Group (MIG)
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Office of Inspector General (OIG) – Audit/Enforcement
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Department of Justice (DOJ)
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State Medicaid Agencies and Medicaid Fraud Control Units
(MFCUs)
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Comprehensive Error Rate Testing (CERT) Program
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Recovery Audit Contractors (RACs)
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Four RACs - Same jurisdiction as MACs
Region A: Diversified Collection Services
Region B: CGI
Region C: Connolly, Inc.
− AL, AR, FL, GA, LA, MS, TN, TX
Region D: HealthDataInsights, Inc.
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RAC Audit Authority
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RACs are paid on a contingency fee based on the amount of over
and underpayments corrected
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Contingency fee returned if denials are overturned on appeal
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RACs are not authorized to investigate fraud but are required to
refer possible fraud to CMS
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Suspension of payments
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Zone Program Integrity Contractors
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Seven ZPICs
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Zone 7 is devoted almost solely to Florida, considered a "hot zone"
because of a high incidence of Medicare fraud
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Advance Med (Zones 2 and 5)
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Zone 5 – AL, AR, GA, LA, MS, NC, SC, TN, VA, WV
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Other "hot zones" include California (Zone 1) and Texas (Zone 4)
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ZPIC Audit Responsibility
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Investigate suspected fraud, waste and abuse
Perform audit activities as other Medicare contractors, but with focus
on identification of possible Medicare fraud
Employ “innovative” strategies designed for early deduction of fraud,
including data analysis
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ZPIC Audit Authority
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Conduct prepayment and postpayment medical review
Perform announced and/or unannounced onsite audits
Interview staff and beneficiaries
Suspend provider payments pursuant to CMS approval
Refer providers and beneficiaries to law enforcement
Refer providers for exclusion from the Medicare Program
Utilize statistical sampling and extrapolation to determine
overpayment amounts
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ZPIC Actions
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Probe/Pre-Payment Audit
Post-Payment Audit
Suspension
Revocation
Referrals for civil and criminal enforcement
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Audit Scrutiny Aimed at SNFs
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Errors in consolidated billing
High % of ultra-high therapy RUGs
High % of RUGs with high ADL scores
Billing for therapy provided concurrently
Average length of stay
Errors in administration and billing of atypical antipsychotic drug
claims
Physician certifications
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Medicare Administrative Contractor Appeal Process:
Part A and Part B
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Levels of Appeal
Medicare 101: The Part B Appeals Process (Cahaba Government Benefit Administrators)
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Staying Recoupment Pending Appeal
TIP:
Notify the MAC
or DMAC that
you have
appealed to the
QIC and renew
your requested
stay of
recoupment
•
Medicare will not recoup an overpayment if
you appeal ‘super’ timely. MMA § 935.
• Redetermination: Appeal within 30 days of
the notice of overpayment to stay
recoupment.
− Appeal deadline for Redeterminations is
120 days
− If you lose, you can pay, request an ERP
or appeal to the second level
• Reconsideration: Appeal within 60 days of
Redetermination to stay the recoupment
− Appeal deadline for Reconsideration is 180
days
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Administrative Law Judge Hearings
Requesting an ALJ Hearing
Part A/B Appeals
42 C.F.R. §405,
sub I
Part C Appeals
42 C.F.R. §422,
sub M
Part D Appeals
42 C.F.R. §423,
sub U
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Jurisdictional elements
− QIC reconsideration/dismissal/Escalation
− Amount in controversy ($140)
− Timely request (60 days)
− Party standing
• Requests for Hearing
− Include all 42 CFR §405.1014(a) elements
− Send to centralized Docketing
− Copying parties
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Administrative Law Judge Hearings
Request Issues
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Aggregating Claims
− Used to meet the amount in controversy requirement
− Confirm 42 CFR §405.1006(f) request requirements
• Consolidated Hearings
− Cases must be before the same ALJ
• Evidence
− Document your submissions at lower levels
− Good cause must be established for submitting evidence
for the first time at the ALJ level (42 CFR §405.1028)
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Administrative Law Judge Hearings
Conduct of Hearings
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Pre-hearing conferences
ALJ assignment
− Random rotation
 National jurisdiction
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42 CFR §405.1020
− Video-teleconference (VTC)
− Teleconference
− In-person
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Administrative Law Judge Hearings
Events That Toll Time for Hearing
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All parties not copied on the request for hearing (§405.1014)
Untimely request for hearing (§405.1014)
Request for hearing sent to the incorrect entity (§405.1014)
Discovery requested (§405.1016, §405.1037)
Written evidence is submitted late (§405.1018)
Hearing is rescheduled at the Appellant’s request (§405.1020)
Appellant has material missing evidence (§405.1030)
Appellant waives timeframe (§405.1036)
Party request for opportunity to comment on the record (§405.1042)
Consolidated hearing granted at request of appellant (§405.1044)
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Medicare Appeals Council
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ALJ Decision
− Binding on the parties, unless reopened or Appeals Council acts
• Post-Hearing Appeals
− Appeals Council review (90 days for determination)
 60 days to request
 CMS can refer cases for “Own Motion Review”
 No monetary threshold
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Federal Court Review
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60 days to request
$1,400 amount in controversy
Standard of review: substantial evidence based on the record
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How to Successfully Respond
to Audit or Appeal Unfavorable
Findings
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Checklist for Responding to Audit
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Prepare a cover sheet for each claim explaining the service
furnished and how the Medicare coverage requirements for this
service were met.
Furnish all relevant requested documents, at a minimum to include:
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Copy of claim
Physician order
Progress notes
Treatment records
Signature card which shows the printed names and signatures of all
personnel documenting in the beneficiary’s chart
− Beneficiary consent for treatment
− Include name and version of software used for medical record
documentation.
− Provide listing of definitions for abbreviations used in the medical record.
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Checklist for Responding to Audit
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Number all pages of documents submitted and keep duplicate copy
for later reference
• Conduct self audit of claims at issue:
− Hire legal counsel
− Review Medicare's documentation and coverage requirements:
 Local coverage determinations, National coverage
determinations
 Medicare policy benefit manual
 Medicare program integrity manual
 Medicare contractor bulletins and newsletters
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Checklist for Responding to Audit
− Obtain assistance from treatment team in responding to medical
necessity questions
− In defending medical necessity, consider whole patient record,
not just record of dates of service requested
− Consider engaging coding and reimbursement expert
− If you determine a claim was improperly billed; either:
 Report and repay overpayment
 File correction of billing error
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Checklist for Responding to Audit
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Review ZPIC denial decision letter in detail
− If denial reasons are vague and not specific, seek clarification
− On appeal, address each reason for denial
• Timely appeal denial
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Preparation for Site Visit
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Have appropriate administrative and treatment personnel present for
visit
Assign one person as communication point with auditors
Secure all patient health records
Set aside room for auditors to use
Request photographic identification and identifying information from
each audit team member and make copies if possible
Keep copies of every document or paper provided to the auditors
during site visit
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Preparation for Site Visit
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If records requested by auditors are off site, agree to obtain them if
possible during visit; but if not possible, agree to send them to
auditors after visit
Answer truthfully all questions, but don't guess at answers to
auditor's questions. If you don't know, say you will try to get the
answer.
Keep copies of and document your transmittal of documents to the
auditors
If additional time is needed, request it by telephone and confirm your
request in writing.
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Preparation for Appeal
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Level 1 - Redetermination
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Submit a redetermination request via the following:
− CMS-20027 Form
− The Medicare Contractor’s Redetermination Form
or
− A written redetermination request with the required information
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Submission of Redetermination Requests
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Complete all sections legibly
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Correct address usage will expedite an appeal request
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Identify the service(s) in question and the need for the
redetermination
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Make sure the form(s) are signed and dated
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Review the request completely before mailing
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Requests that lack information needed to process will not be
returned to the provider
− Provider will receive dismissal letter
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Redetermination Request Via Letter
If neither form is used for a written redetermination request, the request
must be submitted with all the following:
• Beneficiary name
• Beneficiary’s Health Insurance Claim Number (HICN)
• Dates of service at issue
• The specific services or items for which the redetermination is being
requested
• Name and signature of the party or representative of the party
• Provider information such as Provider Transaction Access Number
(PTAN), National Provider Identifier (NPI) and Tax Identification Number
(TIN)
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Reconsideration Form
• CMS-20033: Medicare Reconsideration Request Form or form on the
back of Medicare Redetermination Notice (MRN)
• Mailing Address:
Q2 Administrators, LLC
Part B South Operations
5150 East Dublin Granville Road, Suite 200
Westerville, OH 43081
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Documentation
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Do not assume that the adjudicator will be familiar with the relevant
benefit or its coverage criteria
Set out the relevant coverage policy as outlined in the statute,
regulations, manuals, LCDs, or NCDs
Highlight any specialized documentation or facts you must prove to
establish coverage
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Developing the Record
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Tell the story of your services
− Draft a cover page to be appended to each set of documents
telling the patient's story, referring to specific notations in the
record
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Summarize critical elements in the patient's case and cite to the
record
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Applying and Attacking Extrapolation
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Utilize expert statistician
Population size – 100; sample size – 10; error in 5 cases; 50% error
rate for population
Plan of attack on appeal – appeal question of whether the sample is
representative and appeal individual claims in the sample
The reversal of even one claim in the sample would result in major
difference in the outcome
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Avoid These Pitfalls
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Delay
− Don't procrastinate in starting the appeal process
− Do not put off collecting medical records for the 'next level of
appeal'
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Underestimating work involved
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Submitting evidence as if it speaks for itself
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Assuming agreement on the relevant legal standards
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Government Investigations
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What we will cover:
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Fraud and Abuse Statutes
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HHS-OIG Work Plan 2013
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Examples of cases and investigations
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Preparing for and responding to investigation/prosecution
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Fraud and Abuse Laws
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False Claims Act (FCA)
− Civil - 31 U.S.C. §3729 – treble damages +$5,500 to $11,000 per act; permissible
exclusion
− Criminal - 18 U.S.C. §287 – felony; 5 years prison and/or $250,000 fine; 5 year
exclusion
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Health Care Fraud
− 18 U.S.C. §1035 – felony – 5 years prison or $250,000 fine or both; 5 year
exclusion
− 18 U.S.C. §1347 – felony; 10 years prison or $250,000 fine or both; 5 year
exclusion
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Anti-Kickback Statute - 42 U.S.C. §1320a-7b(b)
− Civil Penalties – 3x remuneration offered + up to $50,000 per act; permissible
exclusion
− Criminal Penalties – felony; 5 years prison and/or $25,000 fine; 5 year exclusion
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Fraud and Abuse Laws (cont.)
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Prohibited Physician Referrals (Stark Law) - 42 U.S.C. §1395nn
− Civil Penalties - $15,000 per service; $100,000 per scheme;
permissible exclusion
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Civil Monetary Penalties Law - 42 U.S.C. §1320a-7a
− $10,000 per item or service; 3x amount claimed for item or
service; exclusion
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State Laws – Medicaid FCA
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False Claims Act
(FERA) Amendments
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Expanded coverage to acts of sub-contractor or agent of contractor
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Broadened use of a false record “to get” a false claim paid to use of
a false record “material to a false or fraudulent claim”
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Expanded retaliation claims to suits by contractors or agents
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Made knowing retention of overpayments an FCA claim
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Applied presentment changes retroactively to June 2008
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Patient Protection and Affordable Care Act
(PPACA) Amendments
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Narrowed original source defense to only disclosures from federal
sources or news media
Eliminated requirement that qui tam relator have “direct knowledge”
Added anti-kickback violations as FCA claims
Provided for suspension of payments if “credible allegations of
fraud”
Relaxed specific intent requirement for anti-kickback enforcement
and violations of healthcare fraud statute
Must report crimes committed to long-term care facility resident –
within 24 hours if resulted in serious bodily injury
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Practical Impact of PPACA
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Recipients of Overpayments
− Overpayment is defined as any funds received or retained under
Medicare or Medicaid to which the recipient is not entitled
− Any overpayment must be reported and refunded within 60 days
after it is identified or after the corresponding cost report
becomes due
− PPACA puts teeth into general prohibition against retention of
overpayments under 42 U.S.C. § 1320a-7b
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Practical Impact of PPACA (cont.)
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Nursing Home Transparency and Improvement
− Transparency
 Disclosure of ownership and relationships
 Nursing Home Compare website to link to state inspection
reports, complaints form, information on violations, including
criminal
− Accountability
 Mandatory compliance and ethics program requirement,
including more formalized programs for organizations
operating five or more facilities (Regulations not yet issued)
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Compliance and Ethics Program Required Components
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Establish compliance standards and procedures;
Designate “high-level personnel” to oversee compliance with sufficient
resources and authority;
Avoid giving authority people the organization knows or should know have a
“propensity to engage in criminal, civil, and administrative violations”;
Provide effective training of the standards and procedures to all;
Monitoring, auditing systems and reporting systems - including antiretaliation protections for employees who report suspected offenses;
Consistently enforce standards by disciplinary action;
If an offense is detected, report the offense and take steps to prevent further
similar offenses; and
Undertake periodic reviews of the compliance program to identify necessary
changes.
42 USC 1320a-7j(b)(4)
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Principal Enforcement Agencies
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U.S. Department of Justice (DOJ)
HHS Office of Inspector General (OIG)
Office of General Counsel (OGC)
National Health Care Fraud and Abuse Control Program (HCFAC)
which coordinates federal, state and local law enforcement activities
Health Care Fraud Prevention and Enforcement Action Team
(HEAT)
Federal Bureau of Investigations (FBI)
State Attorneys General and Medicaid Fraud Control Units
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HHS-OIG Enforcement Priorities
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OIG Work Plan - October 1, 2012 for 2013 fiscal year - priorities:
1. Nursing Facilities
a) Adverse Events in Post-Acute Care for Medicare Beneficiaries
b) Medicare Requirements for Quality of Care in SNF
c) (New) State Agency Verification of Deficiency Corrections
d) Oversight of Poorly Performing Nursing Homes
e) (New) Assessment and Monitoring of Nursing Home
Residents Receiving Atypical Antipsychotic Drugs
f) Hospitalizations of Nursing Home Residents
g) Nursing Home – Questionable Billing Practices – Part B
Services
h) (New) Oversight of the Minimum Data Set submitted by Long
Term Care Facilities
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HHS-OIG Enforcement Priorities (cont.)
2. Hospice – Marketing Practices and Financial Relationships
with Nursing Facilities
3. Hospices – General In-Patient Care
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Recent Cases and Investigations
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Criminal prosecutions:
− Fraud related to billing for Services not rendered
− Upcoding
− Abuse of medications
− Inadequate Staffing (fraud and abuse cases)
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Civil Cases - False Claims Act:
− Kickbacks
− Upcoding/Skilled Nursing
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Billing for Services Not Rendered
• Houser and Forum Healthcare Group – owner of GA nursing
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home sentenced to 20 years in prison and ordered to pay $7.5
million in restitution.
Accused of conspiracy to defraud Medicare and Medicaid based on
billing for services not rendered or “worthless and harmful” thereby
defrauding the federal programs of the money that was paid to them.
Examples of substandard conditions included food shortages,
broken air conditioners and leaky roofs.
Mr. Houser’s wife cooperated in the prosecution of her husband.
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Upcoding
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Carolyn Wetterberg, Wetterberg Nursing Homes, Pond View
Nursing Facility –
− 10 people were indicted for Medicaid fraud schemes by the State
of Massachusetts. Charges included fraud and larceny based on
billing for services that were not provided.
− 2008 - nursing home shut down by Public Health authorities and
the residents were transferred to other facilities.
− Management Minute Questionnaire - assessment by facility staff
to determine the reimbursement rate for residents and after
transfer MMQ scores dropped. Authorities concluded that the
defendants’ facilities had intentionally inflated those scores to get
a higher payment rate.
− Defendant died before the case went to the trial.
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Abuse of medications
• Pamela Ott - Kern Valley Health District –
− administrator of a nursing home charged for actions of
subordinate employee
− criminal charges based upon the use of psychotropic
drugs by staff member to subdue residents rather than
therapy.
− Sentenced to 3 years probation - Civil cases are still
pending.
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Inadequate Staffing (fraud and abuse cases)
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American Healthcare Management; Robert Wachter –
− Nursing Home CEO sentenced to 18 months in federal prison
− Allegations of staffing inadequacies and lack of supervision such
that it was abusive.
− Prosecution focused on fact that CEO set budget for 3 nursing
homes and had a rule that the staffing could not exceed 40% of
the Medicaid per diem rate for residents.
− Despite the insufficient nursing staff, the facilities billed Medicare
and Medicaid for services that they knew were inadequate or not
performed at all.
− Criminal charges followed civil settlement with state and federal
officials in the amount of $1.25 million to resolve the False
Claims Act case.
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Inadequate Staffing (fraud and abuse cases)
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Cathedral Rock Nursing Home – St. Louis, Missouri area - pleaded guilty to
Medicare and Medicaid fraud involving understaffing and substandard care.
They admitted that they failed to sufficiently staff the nursing homes to provide
adequate nursing care, wound care, and failed to administer prescribed meds;
Evidence that they falsified medical records during “a charting party” - submitted
fraudulent claims to Medicare for services that were either not provided or were not
required.
Majority owner and the facility jointly paid $1 million in criminal fines.
Owner agreed to implement a rigorous compliance program in each facility that he
owned to ensure that residents received quality care.
The parties agreed to an additional civil settlement in the amount for approximately
$630,000.00
5 year CIA with monitor
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False Claims Act - Kickbacks
• Health Systems, Inc. (HSI); Rehab Systems of Missouri;
Rehab Care Group, Inc. (RCG) –
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False Claims Act case set for trial on this month.
HSI owned approximately 60 nursing homes at the time of the
transaction.
Alleged that RCG paid HSI more than $10 million in kickbacks in
exchange for the referral of HSI residents who are also Medicare or
Medicaid recipients to RCG for therapy services.
The payments included down payment plus 5-years of profit sharing
based on the Medicare reimbursement for the therapy patients.
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False Claims Act - Upcoding/Skilled Nursing
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Life Care Centers of America (E.D. Tennessee)
− U.S. DOJ intervened in a qui tam lawsuit alleging defendant systematically
pressured its rehab therapists to meet corporate “ultrahigh and average” length of
stay targets by exaggerating the assessments in the Minimum Data Sets such
that the RUG level was higher than necessary or reasonable for that patient’s
care in order to maximize Medicare revenue.
− Amount of damages – not specified. Government seeks treble damages plus
attorney fees plus between $5,500.00 and $11,000.00 per false claim.
− Mot. to Dismiss – Life Care argues that the settlement agreement in JIMMO v.
Sebelius is an admission by the USA that the standard for skilled nursing care
was not clear and therefore defendant could not have “knowingly” submitted a
false claim.
− Life Care asserts that the contractors for the USA utilized a “rule of thumb”
requiring “improvement” for the resident as opposed to “maintenance.”
− Life Care also asserts that it did not submit false claims because it developed a
plan of care for each resident based on physician orders.
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Enforcement Techniques
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DOJ
− Coordination with OIG and State Officials
− Contact letters
− Visits/inspections
− Civil Investigative Demands (CIDs), now issued under FERA
through delegation from Attorney General
− HIPAA subpoenas
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HEAT
− Task Forces in several cities
− Interagency coordination of investigations
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Start of Governmental Investigation
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How the government gets involved – source of information:
− Employee – Current or Former
− Resident or Family member
− Reports of wrongdoing to ZPIC Contractor, Medicare
Administrative Contractor, HHS-OIG, FBI, State authorities
− Statistical Anomalies in Claims (data mining) – MFSF (FBI/OIG)
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Responding To - Resolving An Investigation
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How company learns of Investigation
− Whistleblower/Hotline complaint
− Internal incident report
− Agents approach employee or former employee
− Execution of search warrant
− Subpoena for records
 Grand jury, civil investigative demand, OIG
− Simple request (letter or phone call)
− Lawsuits by competitors, customers, patients
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Search Warrants
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Prepare Game Plan for when agents arrive
− Call Counsel
− Monitor the search – designate key employee(s) – take notes
− Protect attorney client/sensitive information
− Review the warrant
− Get inventory and agent’s contact Information
− Ask for copies of documents
− Escort agent(s) off property
− Interview Employees who spoke with agents
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Internal Investigation
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Goal – Understand the Facts
Who should conduct
Preserving documents – Document Hold
Maintaining and reviewing records
Retention of third party agents by counsel
Witnesses - Interviews
Who Needs Counsel
Findings
Voluntary Disclosure/Preserve the Privilege
Cooperation
Responding to contract letters, subpoenas, document requests and
search warrants
Proactive Communication with agents and government attorneys
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Employee Witnesses
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Joint defense agreements
− Pros and cons
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Privilege consideration – corporate/individual – Upjohn Warning
Right/obligations of employees
− Explain attorney’s role
− Who has the privilege
− Who needs separate counsel
− Indemnification/advancement of fees
United States v. Ruehle
− Ethics considerations in dealing with employees
− Standards for attorney-client privilege – confidentiality is key
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Internal Investigation
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Organizing the internal investigation
− Role of Board and General Counsel
− Lines of reporting
 U.S. Sentencing Guidelines
▫ Reward effective compliance program even if high-level
executive involved in conduct
▫ (Re)organize
▫ Report
▫ Remediate
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Cautionary Tale – In-House Attorney
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“They got all the privilege notes from me and from senior paralegals.
… Although you think what you are writing will never see the light of
day, you should write as if you might need to defend it on the front
page of the New York times. … I wouldn’t put in writing any personal
musings or statements that could be subject to interpretation.”
Lauren Stevens, former Associate Gen.
Counsel GlaxoSmithKline PLC
WSJ Law Blog, Oct. 1, 2012
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Results of Internal Investigation
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Assessing corporate liability
− Respondeat superior
 Scope of employment
− Strict liability
 Omission of specific duty
 Responsible corporate officer
▫ Collective knowledge
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Responding To and Resolving an Investigation
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Remediation –Corrective action
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Reporting the results of the investigation
− Preserving privilege
− Form of disclosure to enforcement agency
− DOJ cooperation policy
 Waiver of attorney-client privilege is not a prerequisite to establishing
cooperation by a corporation
− DOJ disclosure of exculpatory information
 DOJ Memoranda (January 4, 2010)
− SEC cooperation policy for public companies Seaboard doctrine
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Responding To and Resolving an Investigation (cont.)
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Resolving the investigation
− Declinations
− Deferred prosecution agreements
− Pleas
− Civil parallel proceedings, including forfeiture
− Settlements
− Exclusion
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Responding To and Resolving an Investigation (cont.)
Corporate Integrity Agreement
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
IRO monitor required
5 years usually
Certification of Compliance Agreement
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No IRO
3 years usually
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Upcoming LTC Webinar
October 22, 2013
Top 10 Employment Law Mistakes
Long Term Care Employers Make
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Contact Information
Jonell B. Beeler, Shareholder
Baker Donelson
4268 I-55 North
Jackson, MS 39211-6391
601.351.2427
[email protected]
Tommy Parker, Shareholder
Baker Donelson
First Tennessee Building
165 Madison Avenue, Suite 2000
Memphis, TN 38103
901.577.2179
[email protected]
www.bakerdonelson.com
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