Fighting Spurious Forensic Audits

The total denial per claim can run in the tens of thousands of dollars.

Chuck Buck has asked me to share with you our experiences here at the University of Wisconsin regarding so-called “forensic” audits done on our outlier claims, which we are receiving from a review firm called Equian. We see these mainly on Medicaid HMO and commercial claims. I will note that we have received similar types of denials from Optum, Med Review, and Zelis. I will say, they are all quite zealous in their attack on our charges!

I have become increasingly frustrated that medically necessary and appropriately billed services are being denied for spurious reasons, and I am not alone. It seems many hospitals are receiving these denials (and the ensuing reimbursement reductions) in increasing numbers. Many of you have reported that you are appealing to the review companies and the insurers, often without success.

Here is the scenario: an itemized bill is requested, but not medical records. They run the charges through their software, and voila! They identify many charges they find to be not reimbursable. They state that the charges are routine, not billable on an input claim, and unbundled, i.e. they should be included in the R&B charge or in an OR or procedure charge.

The total denial per claim can run in the tens of thousands of dollars, and include almost all supplies billed, IV solutions, venipuncture charges, medications, respiratory therapy services, POC labs (or what they claim are POC labs), and services provided by hospital-paid professionals, such as heath psychologists.

The amount of time that an appeal can take is significant, especially since Equian demands to see documentation that the services in question were provided, although that is not the basis of their original denial.

They try to justify these denials by quoting the Medicare Provider Reimbursement Manual, Sec. 2202.6, which very loosely defines inpatient routine services as “those services included by the provider in a daily service charge, sometimes referred to as the room and board charge…included in routine services are the regular room, dietary and nursing services, minor medical and surgical supplies, medical social services ,(etc.) for which a separate charge is not customarily made.”  

In appealing these denials, I have quite recently provided them with 2004 correspondence from Herb Kuhn, who was Director of the Center for Medicare Management, and a 2018 email from Rhonda Jones in the Dallas CMS office, both of which make it clear that Equian is misinterpreting the intent of 2202.6. I have not fully resolved any cases as yet. Also, I understand that the “clinical experts” Equian refers escalated issues to are not clinical at all.

I have had some partial success with Equian. So far, they have agreed to put “quirks” (as they call exceptions) in their system, specific for our hospital, to allow some formerly denied charges such as venipunctures, going forward. Also, if we are not contracted with a Medicaid HMO, we can file a dispute with the state Medicare Advantage (MA) program. It can take months to get an answer, but I have won every one I have submitted, and the payer has been told to pay in full.

In summation, I feel that it is a travesty that these audit companies are getting away with profiting from their erroneous denials. We must put a stop to this siphoning of healthcare dollars away from hospitals, who can ill-afford to have their reimbursement cut. I hope many of you will share your experiences, and hopefully successes, you have had in fighting these denials.

*excerpts from the CMS correspondence referenced above:

Herb Kuhn: “PRM section 2202.4 provides that a provider’s charges should be related consistently to the cost of the services and uniformly applied to all patients, inpatients or outpatients, and that these uniform charges are used in determining Medicare’s payment on the Medicare cost report. PRM Section 2203 emphasizes that while Medicare does not dictate a provider’s charge structure, it determines if the charges are appropriate for the cost report…Medicare does not dictate a provider’s charge structure or how it itemizes charges but does determine whether charges are acceptable for Medicare purposes….we do not see an issue of a hospital’s having a basic ancillary department charge for the room with additional charges for other items and services furnished to patients depending on the procedure, as long as the various charges are reasonably and consistently related to the coat of the services to which they apply and are uniformly applied (Sections 2202.4 and 2203). This applies to any ancillary department.”

Rhonda Jones: “Providers are responsible for establishing their own charge structures and should bill third-party payers accordingly. CMS does not dictate what is included on a hospital’s itemized statement. However, hospitals are required to follow appropriate uniform billing guidelines…hospitals can list services such as surgical instruments, surgery packs, and supplies separately on the itemized statement, but these items should be rolled up and reported under the appropriate revenue codes, according to billing guidelines.”