A Stitch in Time: An Indictment of the CMS Appeals Process

Lack of auditor response leads to an ALJ hearing.

“A stitch in time saves nine” is a pretty famous heuristic expression, but most people I know do not have any idea what it means. Simply stated, it means that taking the time to do something correctly now will save time that otherwise would be spent fixing up the mess later.

And that is exactly the issue I am addressing here. If the Centers for Medicare & Medicaid Services (CMS) would take the time to address the failures and flaws of the appeals process in the front end, they could same themselves (and providers) the expense of cleaning up the mess in the back end.

Bear Grylls, former Special Air Service (SAS) member and lifetime adventurer, once said that “the rules of survival never change, whether you’re in a desert or in an arena.” I would opine that this is also true for healthcare providers. I know I have said this before, but it can tend to feel like we are at war with CMS. From the proposed evaluation and management (E&M) changes, which appear punitive in nature, to the updates in Chapter 8 of the Program Integrity Manual, which disregards basic standards of statistical practice, to the total lack of due process when it comes to CMS audits, the only conclusion I can reach is that the government dislikes healthcare providers. The “why” for this conclusion may seem illusory, but in my opinion, it has to do with money. Healthcare costs a lot in this country, and the government feels under significant pressure to reduce those costs any way they can. So rather than engage in intelligent and intellectual discussions regarding policy, it’s simply easier to demonize those to whom the payments go. And that is our healthcare providers.

Over the past many years, I have worked on, been the statistical expert for, or testified in hundreds of post-audit extrapolation cases. This is not because I’m so popular, but because there are so many of these extrapolation audits going on. And while I am not opposed to the use of extrapolation, like most other statisticians, I know that extrapolation must be based upon a statistically valid and representative sample. If it’s not, not only does it expand upon the findings of an overpayment, but it significantly exaggerates errors that often are the result of flaws in the extrapolation and sampling methodologies. In those cases, extrapolation is simply unacceptable.

One might think that we are fortunate that the government allows us five levels of appeal. My initial thought is that if the appeal process were fair and reasonable, we wouldn’t need five levels. The first two, which consist of reconsideration and redetermination, are completely worthless. In fact, barely any favorable findings occur at those first two levels. They are, in essence, nothing more than a rubber stamp for the auditor’s findings.

Most recently, I have been getting form-letter responses back from the Medicare Administrative Contractors (MACs) and the Qualified Independent Contractors (QICs) with respect to Unified Program Integrity Contractor (UPIC) audits. In general, this is a seven-page document that does nothing more than echo Section 8.4.2 of the Program Integrity Manual. It ends with a few pages that contain a mathematical formula and a repeat of the initial findings. Yet I have rarely seen any specific response to the challenges I have submitted on behalf of the client. For example, I might object to the way that the sample was created, or maybe the sample size. Or there may be objections regarding the way the stratification was developed or even that there wasn’t stratification when there should have been. In many cases, I might object to the methodologies used to determine the extrapolation. My reports are often long, very detailed, and contain supporting citations, graphs, charts, and tables. Yet the response is a form letter. And again, there is nothing specific regarding the objections that were raised. What does this mean? Well, that’s pretty simple. This means they don’t read the report. And I’ve always suspected that this was the case. But at the first two levels, they could care less about any objections to statistical processes or extrapolation. In fact, often, filing an objection to the statistical process of extrapolation and sampling at the first two levels of appeal is nothing more than an expensive formality for the provider.

But how would I know that this is really the case? Maybe they do read my reports and they just simply have the same exact answer every single time. Maybe my reports are exactly the same every time, in which case the form letter would be appropriate. But that’s just not the case. Proof of this, however, came to light quite recently. I was engaged with a physician provider that was subject to an extrapolation audit. The reconsideration appeal was handled by SafeguardServices LLC, the Northeast UPIC contractor. In this case, in stark violation of several sections of Chapter 8 of the Program Integrity Manual, the original auditor failed to provide the requisite data. They did not provide any documentation supporting the sample selection methodology. They did not provide data files that contained the universe or sample frame. In fact, contrary to Chapter 8, they failed to provide information necessary to both replicate and validate their audit findings, specifically the sampling and extrapolation methodology.

So in this case, rather than filing an objection to the sampling and extrapolation statistical methods, which I could not do because I did not have the information necessary to conduct an appropriate analysis, we simply filed a report that identified the fact that the auditor failed to provide the requisite information. Does anybody want to guess what SafeguardServices LLC sent back to the provider? It was the same form letter that they send when an objection to the statistical processes is filed. Nowhere within any of the documents submitted as part of the appeal response did they address the fact that the auditor failed to provide the requisite information. They just sent back that same form letter, in which they opined that the auditor conducted the audit appropriately. You would think that they would at least have a different form letter for that.

I hope you can see that the only conclusion I could draw from this is that they do not read the reports that are submitted to them as part of the appeal process. If they did, why wouldn’t they address the fact that we did not receive what we were supposed to receive from the auditor? Don’t you think that somewhere in their response they would have either agreed with us or they would’ve contested it? But they did neither. They simply sent a form letter saying that they believed that the audit was conducted appropriately. So, how would they know that? Well, either they had access to the data, which means that the information was available and wasn’t provided to us, or they didn’t have access to the data, which means that they responded that it was done appropriately without having any evidence to back it up. Either way, it is wrong on all levels.

We are currently in a crisis of due process when it comes to appealing government audits. As it stands, it takes close to three years to get an Administrative Law Judge (ALJ) hearing when the guidelines say that a provider should be able to get a hearing within 90 days. In fact, I just testified as a statistical expert at an ALJ hearing for an analysis I performed in 2015. While the government is running around like a chicken with its head cut off trying to find ways to catch up on the backlog of hearing requests, they’re doing nothing to address the problem on the front end.

While throwing more money at the problem and adding more judges will certainly help to clear up that backlog, it does nothing to stem the flow from the source. If we don’t address the lack of integrity and honesty involved in the first two levels of appeal, providers are going to continue to request ALJ hearings at a growing rate because they feel it is the only place where they may get a fair shake. Why should we even waste our time at the first two levels of appeal if there is not going to be an honest review of the provider’s objections? Maybe the reason is to discourage the provider from entering the appeal process at all. Knowing that it could take up to three years and tens of thousands of dollars in expenses to get your case heard, the provider often just gives up.

Back to Bear Grylls: while we are not in the desert or an arena, the rules of survival remain the same. We are in the fight of our lives, and the complete lack of due process or fairness not only challenges a provider’s ability to do its job, it challenges the future quality of healthcare. Maybe one of the problems is that CMS confuses motion for progress. I bought my wife a little plaque one day as a funny gift. It read, “if you want to be proud of me every day, lower your expectations.” And I guess that is what it has come to for me. In order for me to continue to work in this industry, particularly as a physician advocate, I have learned to lower my expectations. How sad.

My opinion can be summed up in this simple quote from American author Charles Bukowski: “the difference between a democracy and a dictatorship is that in a democracy, you vote first and take orders later; in a dictatorship, you don’t have to waste your time voting.”

And that’s the world according to Frank.


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Frank Cohen

Frank Cohen is the director of analytics and business Intelligence for DoctorsManagement, a Knoxville, Tenn. consulting firm. He specializes in data mining, applied statistics, practice analytics, decision support, and process improvement. He is a member of the RACmonitor editorial board and a popular contributor on Monitor Monday.

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