Audits Part IV: DME MACs vs. ZPICs

Editor's note: Part V will discuss contractor abuses.

DME MACs perform Medical Review activities. An MR of claims requires that a benefit category review, statutory exclusion review, reasonable and necessary review, and/or coding review be made after claim payment (post-payment audit) or before payment (prepayment review). MR functions include analyzing data; writing and reviewing LCDs; reviewing claims and educating providers; comprehensive error rate testing; advance determination of Medicare coverage; probe reviews; and supplier education.

When initiating an MR, the DME MAC is required to give suppliers written notice of the following: that the supplier has been selected for review and the specific reason for the selection; the list of claims that require medical records; and the OMB Paperwork Reduction Act collection number. A DME MAC may review a claim regardless of whether an NCD, coverage provision in an interpretative manual, or LCD exists for that service. A DME MAC must first consider coverage determinations based on the absence of a benefit category or based on statutory exclusion. Next, a DME MAC then considers whether the claim is reasonable and necessary.

A DME MAC may request additional documentation from a supplier by issuing an ADR. The purpose of such documentation is to support the medical necessity of the item or service provided. The documentation may take the form of clinical evaluations, physician evaluations, consultations, progress notes, physician letters, or other documents. A DME MAC that issues an ADR to the supplier must notify the supplier that it has 30 days to respond. If the supplier does not respond to the ADR within the time period specified by the DME MAC, the claim will be denied. If the supplier does respond to the ADR, but the information supplied fails to support medical necessity, the claim will be denied.

The 1996 enactment of HIPAA revised the Social Security Act and established the Medicare Integrity Program. The MIP's primary purpose is to deter fraud and abuse by giving CMS authority to enter into contracts with outside entities to ensure the “integrity” of the Medicare program. In 1999, CMS developed the Program Safeguard Contractor program to support the MIP. PSCs are transitioning to ZPICs. ZPICs have the responsibility to investigate allegations of fraud; refer investigations to the OIG/Office of Investigations; support law enforcement in requests for information; and recommend administrative actions to CMS and/or the OIG.

In conducting a post-payment audit, a ZPIC refers all identified overpayments to the DME MAC, which subsequently sends the supplier a demand letter for recoupment of the overpayment. Under most circumstances, ZPICs may use statistical sampling to calculate and project the amount of overpayments made on claims. If the supplier elects to appeal a claim reviewed by a ZPIC, then the ZPIC will forward its case file to the DME MAC so that it can handle the appeal.

While ZPIC prepayment reviews and post-payment audits are similar in many ways to DME MAC reviews/audits, they do differ in one very important aspect—potential Medicare fraud implications. The ZPIC has a great deal of discretion when conducting a review for benefit integrity. A ZPIC may use one or more of the following investigative methods: review a small sample of claims submitted within recent months: interview beneficiaries being serviced by the supplier; interview physicians who order items for the beneficiaries; look for past contacts by another Medicare contractor concerning comparable violations; perform data analysis; review original CMNs; perform an analysis of high frequency/high cost, high frequency/low cost, low frequency/low cost, and low frequency/high cost procedures and items; and perform an analysis of local trends of practice and billing vs. national and regional trends.

If the ZPIC investigation becomes a fraud case, the file will be referred to the OIG and/or DOJ. Regardless of whether or not the investigation becomes a fraud case, the ZPIC will seek recoupment whenever it determines there is an overpayment. The DME MAC performs the recoupment. hme

Jeffrey S. Baird, Esq. is chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He can be reached at (806) 345-6320 or jbaird@bf-law.com.