Learn from others’ mistakes, respond aggressively to HCFA/OIG audits
Passive reaction can be much more expensive
Since the federal government’s audits of Medicare billing records are intended to set an example, to scare other health care providers into shaping up, it only makes sense that you should know what got the fined institutions in hot water. The three most common problems cited by federal auditors can cost your facility millions of dollars. And there is one special word of advice from the facility that got through a federal audit with no fine at all: Be aggressive in response to a government audit.
When Dartmouth-Hitchcock Medical Center in Lebanon, NH, was investigated in early 1997, officials there decided to take an aggressive, albeit cooperative, approach. It was hard work and it cost about $900,000 the hospital wasn’t required to spend, but Richard Showalter, CPA, senior vice president for finance, says it was cheaper than the alternatives.
The aggressive approach is necessary because of the stigma attached to federal accusations of fraud, he says, not to mention the potential financial cost to the institution. "It’s like when someone asks if you’ve stopped beating your wife," he explains. "There’s no good answer. People assume that where there’s smoke, there’s fire. I can tell you it’s not a nifty thing in your community. Your wife and kids ask you what’s going on."
Of course, the most basic advice about federal audits is to do your very best to avoid one in the first place. But evidence from the completed audits suggests that many hospitals across the country could find instances of the same sort of billing and documentation errors that have led to millions of dollars in fines. The most common violations concern faculty physicians billing for care provided by medical residents, billing for physician care at a level higher than necessary, and inadequate documentation. (See story, p. 4, for a detailed explanation of those errors and how to avoid them.)
Five hospital audits have been completed by the U.S. Department of Health and Human Services’ Office of the Inspector General (OIG) in Washington, DC. Of those five, three hospitals settled for millions of dollars after the government concluded there were substantial billing errors, and two survived the audit with no money due. These were the five hospitals:
1. The University of Pennsylvania in Philadelphia: The Clinical Practices of the University of Pennsylvania, a component of the University of Pennsylvania Health System, agreed to pay $30 million to the U.S. government after a federal audit disclosed that false Medicare bills were submitted for physician services. The claims were submitted between 1989 and 1994. As part of a mandatory corporate compliance program, the health system also is required to centralize all billing under the direction of its chief financial officer, provide ongoing billing education, and install two phone lines specifically for billing education and reporting of improper billing.
2. Thomas Jefferson University in Philadel-phia: The Jefferson Faculty Foundation, a component of Thomas Jefferson University, agreed to pay $12 million for filing improper Medicare bills. The provider also must implement a corporate compliance program.
3. The University of Virginia: The university reached a settlement of $8.6 million for improper Medicare billing and agreed to implement a corporate compliance program.
4./5. Dartmouth University and Yale Univer-sity in New Haven, CT: Both institutions were audited, but the federal inspectors found no evidence of improper billing that went beyond simple mistakes.
The OIG is moving rapidly to investigate more health care providers, says Judy Holtz, public affairs officer in Washington. As recently as July 1997, there were 49 investigations under way at once, she says. The OIG has backed out of a total of 16 reviews because inspectors decided that billing guidance from the Medicare carriers was not clear. With new hospitals added to the list since then, the current number of hospitals under investigation stands at 45.
"We’ve always stated that we will back out of an investigation if it appears that guidance from the carrier was not clear enough to ensure the provider could bill properly," Holtz says. "We’ve found that in a number of cases, but we’re finding that there also are many cases in which the guidance was quite clear and the hospitals still did not bill properly. Those are the ones we pursue."
Hire own auditors to look at records
The cited violations, along with the OIG’s explanations about how to interpret the complicated billing rules, speak best to what went wrong at the institutions required to pay millions of dollars after an audit. (Officials at those hospitals declined Healthcare Risk Management’s request for information about the settlements, other than confirming the public record.) But the experience at Dartmouth reveals some tips on how to improve your chances of coming through an audit with flying colors.
The overall message from Showalter is that you should not take the audit lying down. He notes that health care providers can be intimidated by a federal audit, even though they’re used to having their billing records reviewed by intermediaries and carriers. The federal investigations are much more accusatory and threat-ening. That was the tone when Dartmouth- Hitchcock Medical Center received a letter from the U.S. Attorney General’s office stating that it suspected the provider of billing errors. Dartmouth officials tried to explain that many of the alleged errors already had been found in the course of normal reviews and the disputed money paid back.
"They said they didn’t want to talk about details," Showalter recalls. "They said they would sue us for $1 million or we could settle for $100,000: Which do you want?’"
Dartmouth’s response was to "aggressively manage the examination." That meant, for starters, choosing PATH 2 instead of PATH 1. When a hospital is investigated as part of the Physicians at Teaching Hospitals (PATH) audits, the provider can choose either PATH 1 or PATH 2. Under PATH 1, the government brings in its own auditors, the hospital pays nothing for the audit, and you just wait to see the results. But under PATH 2, the hospital hires outside auditors to review the billing records, and the auditors’ findings are accepted by both the hospital and government.
"We spent about $900,000 to have Coopers & Lybrand come in and do the audit, working for both the OIG and the institution," Showalter says. "That expense covered the audit itself and also the other expenses such as having people dedicated internally to gather documents and answer questions."
A PATH investigation usually involves an audit of 100 randomly pulled medical records, along with all the associated physician bills. Because of all the physician billing for services such as X-rays and lab work, there may be 1,600 physician bills associated with those 100 medical records, Showalter says. To get the ball rolling, Coopers & Lybrand first pulled five medical records. The independent auditors then met with hospital and OIG officials to discuss the way those records were billed.
"Even though we had all these knowledgeable people in the room, there were some pretty heated discussions about what was right and wrong," he says. "These are not black and white issues. We would have had the same arguments with OIG auditors, so it really helps to have an independent third party at the table."
Hiring an outside firm to conduct the audit ensured that Dartmouth would get a fair shot at explaining any billing disputes, Showalter says.
"It was our suspicion that we would have come out worse without independent auditors, but [we also were at] risk because if they found anything, it would be hard to argue their objectivity," he says. "As long as we were paying for the auditors, we felt like we could tell them to go back and look for more documentation. Other auditors could just tell us no, that they had reached their conclusion, and that was it. We didn’t influence their independence, but we felt we could push to look at the records a little more."
As a result of independent auditors’ initial examination of the billing records, the OIG decided to drop the investigation of Dartmouth. The auditors were supposed to analyze 100 records, but the OIG said they could stop after the first 50 found no significant billing problems. There has been some speculation that the OIG wanted to let one or two hospitals off the hook after a public show just to prove that some hospitals bill properly, thus emphasizing how improperly other hospitals bill Medicare. But Showalter dismisses that idea as sour grapes by facilities that are afraid of what auditors might find. "We don’t feel like anyone let us off easy," he says. "It certainly didn’t feel like that when the auditors were here."
In retrospect, Showalter says he believes Dartmouth survived the audit so well because it already had in place many of the systems that the OIG now requires as part of corporate compliance plans. In particular, he points to these components:
o The hospital addressed vague billing rules about nine years ago when it became apparent that there was no clear answer on questions such as how to bill for the work of residents. Dartmouth created a physician billing manual and instituted new policies in an effort that showed the auditors an intent to bill properly, even if mistakes were made along the way.
o Documentation was improved in recent years. The hospital found that some patient records were not as complete as they could be, so new policies were created to ensure the medical record contained as much documentation of clinical care as possible. The patient’s medical record is now "a huge document," Showalter says.
o Dartmouth uses a single billing unit for all physician billing. Many academic centers have billing scattered through different departments, increasing the chances that they will develop different billing policies and procedures. The creation of a single billing unit often is a component of corporate compliance programs imposed on a provider after an audit.
o A separate coding department assesses the bill. Showalter says a separate coding department helps assure accuracy by taking coding decisions out of the hands of anyone who has an incentive to overbill or code creatively. At Dartmouth, the coders review the medical record and apply the appropriate codes instead of having clinicians make coding decisions.
In the end, Showalter says Dartmouth’s experience shows that you can stand up for yourself when you feel bullied by a federal audit. It helps a great deal, of course, if you’ve been doing the right thing all along. But even if you have, you should expect the experience to be pretty unpleasant.
"It all ended with a letter from the OIG saying that they were discontinuing the exam based on the evaluation date," he says. "There was no finding of innocence, no apology for wasting your time and $900,000 of your money."
You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content