Beware: More Audits Coming Your Way

It has been almost four years since the world shut down due to COVID-19. Life has been divided into “before COVID” and “after COVID.” Before COVID, the Centers for Medicare & Medicaid Services (CMS) aggressively pursued audits with durable medical equipment (DME) suppliers, home health, hospice, behavioral health, long-term care facilities, and hospitals. When COVID hit, most audits were paused.

But not for long.

As you know, CMS resumed its audit activities as early as August 2020. However, in the world of COVID, there were exceptions to every rule, many of which were state-specific. Even exceptions had exceptions. It is imperative that you maintain for your type of healthcare service every policy, exceptions, bulletins, and advisory opinions from 2020 through the present. If you have not assigned this task to someone in your facility, do it today.

We have seen an uptick in audit activity with pneumonic compression devices (PCDs). PCDs were not listed in the top error rates for the 2021 Improper Payment Report, but in the 2023 report, PCDs had the second-highest error rate, behind oral cancer drugs, at 78.9 percent. With an error rate that high, PCDs will be a focal point of audits. Other items identified in the 2023 Improper Payment Report for having high error rates include urological supplies, parenteral and enteral nutrition, manual wheelchairs, and various orthoses. These items will all see increased audit activity in the upcoming year as well. Basically, as long as the error rates remain high, audit activity will continue.

Surgical dressings have also been consistently audited. Surgical dressings are a relatively complex product to bill. DME suppliers of surgical dressings and physicians who order surgical dressings are seeing an uptick in denials.

The 2021 Medicare Fee-for-Service supplemental Improper Payment Report, covering claims from July 1, 2019, through June 30, 2020, listed surgical dressings as having the highest improper payment rate, at 69.7 percent, followed closely by therapeutic shoes, with an error rate of 67.9 percent. Since then, there has not been much improvement. The 2023 Improper Payment Report, covering claims submitted between July 1, 2021, and June 30, 2022, shows the improper payment rate for surgical dressings is still at 62.1 percent.

Therapeutic shoes did show some improvement, with an improper payment rate of 51.4 percent, but this is still significant. For the 2023 reporting period, insufficient documentation accounted for 82.4 percent of improper payments for surgical dressings. Other types of errors for surgical dressings were no documentation at 1.9 percent, medical necessity at 1.7 percent, incorrect coding at 1.9 percent, and “other” at 12.2 percent.

Targeted Probe-and-Educate (TPE) audits were some of the first audits resumed by CMS. Recovery Audit Contractor (RAC) audits are also increasing. I consider RACs to be the bounty hunters of Medicare and Medicaid.

Audits of skilled nursing providers are going to see a hike this year, with a growing number of federal and state recovery audits adding to specialized compliance reviews announced last year. In 2023, regulators instituted audits of facilities using a potentially inappropriate diagnosis of schizophrenia, as well as a new five-claim audit of every U.S. nursing home that was specifically meant to root out improper payments.

CMS came under additional pressure this past summer. That’s when the Government Accountability Office (GAO) said the agency needs to do a better job of recouping overpayments. What do we think CMS will do, in light of the GAO instructing the agency to do a better job of this? The answer is: audit more.

But, as they say in football, the best defense is a good offense. Be prepared.