Demand Dropped from $4 Million to a Few Thousand

Imagine going through the morning mail, opening a letter from Medicare, and finding a demand for $3,966,500 in alleged overpayments.

That's what a small ophthalmology practice was facing 483 days after what had seemed to be a routine on-site audit. The practice administrator immediately called in expert legal advice from an attorney specializing in health care law.

"Such an enormous financial burden would have been a death sentence for a small practice and a devastating blow to the personal finances of the five ophthalmologists involved," said Howard Bogard of Burr Foreman.

After three and a half years of fighting a legal battle through five levels of appeal, the final outcome was that instead of almost $4 million, the practice only owed a couple of thousand dollars. However, the stress and legal expense of proving their case was considerable. Had they not responded promptly and with an all-out effort to tell their side of the story, the costs could have been much higher.

Time is critical.

"Although you have 120 days for the first level of appeal, you have to file an appeal within 30 days, or you have to repay the amount demanded while the appeal goes on and hope to receive a refund later. If you don't file an appeal, you are conceding the demand," Bogard said.

"Appealing may help you avoid a large payout. However, it can be a gamble. If appeals go against you, interest accrues from the date of the demand letter.

When the stakes are high—the survival of the practice in this case—pursuing vigorous appeals may be the only option.

What happened?

It wasn't until the third level of appeal in a hearing with an Administrative Law Judge (ALJ) that specific details came to light. An anonymous call triggered an audit of an ophthalmology practice.

As many eye disorders are age-related, a high percentage of their patients are covered by Medicare. The key problem, however, was that there are two accepted approaches to coding ophthalmology billing, but the reviewer was only familiar with one, and so rejected claims using the ophthalmology billing approach. Medical records were on paper, and not all files had complete notes and documentation at the time of review.

Multiplying the problem was the statistical methodology used by the reviewer that extrapolated the error rate based on a small sample, resulting in an enormous estimated overpayment.

"Preparation won this case," Bogard said. "We went chart by chart tracking down documentation. We brought in our own statistician to explain the flaws in the reviewer's statistical methodology. When you file for the level two reconsideration with the Qualified Independent Contractor (QIC), you need to give them everything you have, because this is usually the last chance you have to introduce new evidence.

"Going to appeal before an Administrative Law Judge, you need to make it simple. You have to take boxes of complex evidence and make it easy to understand—color code, index, use spreadsheets and group by category. Cases aren't argued face to face. When you talk by phone, you need to be able to refer to a specific page number so the judge can immediately see what you're saying."

After a finding mostly in favor of the practice, the other side appealed to a higher level. Meanwhile, the practice was still having to pay $80,000 a month in an extended repayment plan they were able to negotiate at appeal level 2, in spite of the fact that the ALJ finding said they owed only a couple of thousand dollars. The final appeal again went mostly in favor of the practice. The balance they had paid was refunded with interest.

Lessons Learned?

"Appeal, appeal, appeal," Bogard said. "Educate every member of the practice to understand what documentation is needed in the charts to support specific codes, and do regular internal audits of your files. Electronic Medical Records can help with prompts and to make sure all files are complete and readily accessible. Have a robust compliance plan in place and someone who can keep up with changes in the hundreds of Medicare regulations.

"When you're setting up a practice, it's also important to have an agreement that all shareholders are individually responsible for the financial impact if their charts are audited. As the law is written, without an agreement, the practice is financially responsible. Physicians who leave the practice are no longer liable."

Bogard expects the frequency of Medicare audits to increase. "More patients are becoming eligible for Medicare, and cost containment efforts are becoming more aggressive. It's more important than ever to be proactive."