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Navigating the CMS Audit Appeals Process: A Primer from Laboratory Economics

February 26, 2024

The content of this article has been sourced from CodeMap® from Lab Economics with their permission. Thank you to CodeMap® from Lab Economics for granting us the right to share their valuable insights on this vital topic.

Laboratories and other diagnostic providers face many challenges. Navigating a Centers for Medicare and Medicaid Services (CMS) audit appeals process is one challenge that must be mastered to ensure full compliance with regulatory requirements and to safeguard a lab’s financial stability. Laboratory Economics Compliance & Policy Report recently spoke with Guillermo Beades, a partner with Frier Levitt (New Jersey) and co-chair of the firm’s insurance defense department about how to navigate CMS’s audit appeals process.

What typically triggers an audit?
What usually happens is that a lab or other diagnostic provider is seen as an outlier, typically due to an unusually large volume of claims. Claims that are reimbursed at a high rate are also more likely to be audited. CMS compares labs and other diagnostic providers to similar organizations in their region. Niche practices are more likely to bill codes that stand out from regional peers. It can also be that a lab or other diagnostic organization becomes part of a target enforcement action where a particular code or procedure is being billed incorrectly in a region.

Does CMS automatically screen all claims?
CMS has some of the best analytics. All claims are tracked. For example, it’s easy for an investigator to pull up a clinical laboratory to get a claim snapshot to see what they are billing and at what frequency. CMS has an open-source tracking system where users can look up a provider or procedure and see who is billing it the most.

How should a laboratory prepare for an audit?
Organizations receive a letter from CMS informing them that claims are being audited. The first thing the lab team will do is gather everything that will support the test claim that was submitted. The more information the lab can provide that supports the claim the better. The audit is done remotely. The organization will receive a findings letter from CMS that explains any deficiencies found. The lab will also receive an overpayment demand letter from the Medicare Administrative Contractor (MAC). The various deadlines are calculated five days from the date of the letter from the MAC. Organizations have 15 days from then to file a rebuttal. A rebuttal is not an appeal but a mechanism for providers to present additional information or documentation that could clarify potential misunderstandings or rectify any errors identified in the initial audit. If the organization files within the first 30 days, they can stay recoupment of overpayments pending further appeal.

At what point should a lab appeal?
If the rebuttal does not lead to a satisfactory resolution, the organization has 120 days to file a redetermination appeal. This stage presents another opportunity to provide additional supporting evidence to justify the claims.

How many levels of appeal are there?
There are five levels of appeal.

When the organization asks the MAC to reverse its decision. A reversal happens about 1% of the time.
The lab has 180 days from the unfavorable decision from the MAC to seek reconsideration with a QIC hired by CMS. Although QICs frequently echo the MAC’s findings, there are times when they reverse the unfavorable findings, in part or whole.
If the QIC rubber stamps the MAC decision, the organization can go to an administrative law judge (ALJ), the third level of appeal. The lab has 60 days from receipt of an unfavorable QIC decision to do so. That’s a critical stage because it’s the first time you have someone independent looking at this. It’s like a mini-trial. The majority of the time, CMS doesn’t even show up. Having competent healthcare counsel with experience at these hearings is invaluable. You can get a fully favorable ruling, partially favorable, fully unfavorable, or partially unfavorable. You have a 60% shot of getting a partially favorable ruling, although each case is very fact-specific, so the individual likelihood of success can vary significantly.
The fourth level of appeal is before the Medicare Appeals Council (MAC), which must be filed within 60 days of the ALJ’s decision. This appeal is fully written. Once you get a decision from the MAC, your remedies are limited. This is harder to get overturned because you have to show that the ALJ made an actual error. The ALJ decisions get overturned about 30% of the time.
The final level of appeal is to file a lawsuit in district court. This is very rare. Most providers go through the ALJ phase and then call it quits.

At what point should a lab bring in legal counsel?
Organizations don’t always need legal counsel when they get an audit letter. But as soon as an organization receives an overpayment demand, they should bring in legal counsel. The CMS audit process is full of red tape. It’s important to know that there is no recourse if something is not filed on time. That’s why it’s important to have legal counsel involved.

How should a lab navigate requests for recoupment?
There’s one thing lab leaders must keep in mind: CMS charges an interest rate of 11% on overpayments. The interest starts after 60 days of receipt of a demand letter. Our firm recommends that if an organization can pay it, they should. This does not waive the right to appeal. If the organization wins the appeal, they can get the money back. CMS will start recouping money from the lab’s current claims. That’s why we recommend that labs pay first and then fight to get the money back. If a lab can’t do that, it’s important to stay recoupment as long as possible. Recoupment can be stayed through the first two levels of appeal, but interest accrues during that entire time. If the appeal is won, the lab will get all that money back plus the interest.

What percentage of providers win their appeals?
That’s hard to say because there might be some claims for which the appeal is lost and others where it’s won. Organizations have a good shot (a little better than half) to get CMS to reduce the recoupment. But Medicare doesn’t negotiate on recoupment. Private payers do, and Medicaid will.

In cases where CMS gets it wrong, such as misinterpreting a local coverage determination, a lab has a high chance of success. When I think of appealable CMS cases, I feel like we always win, at least to an extent. We might get some of the money back. But in a case where a service or test is not properly documented, the adage is, if it wasn’t documented, it wasn’t done. The only time we appeal those is to show CMS that even though it wasn’t documented it was done, so the provider doesn’t face a potential fraud charge.

The most important takeaway regarding audits is that if a lab continues making the same mistakes, it can lead to getting kicked out of the Medicare program. CMS has many different types of audits, including targeted probe and education, unified program integrity contractor, supplemental medical review contract and recovery audit contractors. All audits carry some risk. Strict compliance with auditors and guidance from competent healthcare counsel are invaluable when navigating these rough waters.

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