Medicaid Auditors Gone Rogue

The case continues even after two suicides.

When does an audit go beyond the reasonable and become persecution? An act of tyranny by claim denial and extrapolation?

Vernon Partners LLC (name changed for reasons of confidentiality), a medical provider in Florida, provides durable medical equipment (DME) services and counseling to the elderly.

Their attorney recently introduced me to the case. “The provider has been under incredible stress,” the attorney said. It is a family-operated business. The pressure of the audit first drove her business partner to suicide, then her daughter. The case got my attention.

“What happened?” I asked.

The provider had the unfortunate luck of hiring a pair of bad employees. One was caught stealing equipment, then re-selling it. Another was a drug addict, always late to work, and constantly lying about their performance. The two were found together destroying property. They were fired.

The spurned ex-employees learned through the grapevine that they could make a pile of money from the state if they became qui tam whistle-blowers. So they did. The truth had nothing to do with it. Greed did.

Armed with the righteousness of zealots, the auditors swept in for the kill.

The first step was to demand repayment of several years of all claims, allegedly because the provider had been operating without a license. The auditors relied upon the whistleblowers. They failed to check the records.

After a giant pile of correspondence back and forth, including emails, unanswered phone messages, payments to attorneys, and a great deal of stress, the state was eventually convinced to honor the license that it had itself issued.

The provider was out a pile of money from the administrative hassle and legal fees. The entire matter should have been resolved with a single phone call. But that was too easy.

Next, the auditor came back and denied all submitted claims, arguing that there was no indication of where the services had been provided. The repayment demand was increased to around $800,000, plus interest. Now the business was at risk of bankruptcy. When the highly paid legal team examined the records, it was found that each and every document had the address of service delivery. It was found at the top of each page, in clear sight.

By this time the entire matter had fallen into the cesspool of hardcore litigation. There were discovery demands, responses to discovery objections, and hiring of experts. All of those billable hours were piling up.

The legal team set up a meeting with the auditor. They pointed out the service location information on each document. That should have been the end of the matter. But was it?

Next, the auditor claimed that because there was a one-week period in which a few of the principals had taken a vacation, all of the claims submitted during that period were denied. The reason? No qualified persons had delivered the services. Another legal confrontation ensued.

The auditor was shown that the vacation-period substitutes were duly qualified, and so all services delivered were valid. And that should have been the end of the matter. But it wasn’t.

The auditor shifted to another form of denial logic. It criticized the software entries listing the time of each counseling session. The provider’s software had a pull-down menu in which one option for time expended was “106-120 minutes.” If the time was 106 minutes, then there was one payment code, and if it was 120 minutes, it was another. All of the sessions provided had been a standard 120 minutes. And the notes showed this. So each practitioner chose “106-120” on the computer. That should have closed the matter for the auditor, but it didn’t.

The auditor denied all of the claims. It argued that the provider could not prove the sessions were 120 minutes instead of 106.

The legal team came back and offered a compromise. The provider would be paid for 106 minutes (even though 120 had been provided). The auditor dug in its heels. It insisted that each entire session was invalid. In other words, the auditor assessed that at least 106 minutes had been provided, but since the provider could not prove it was 120, then no minutes would be recognized. Where is the logic in that?

At this point, as mentioned, two family members took their own lives. The surviving owner fell into deep clinical depression.

Then it was time to challenge the statistical sampling and extrapolation. When I attempted to describe the methodology used to our experts, they thought I was joking. When they learned it was serious, they were astounded at how bad the statistics were. There was no documented methodology, no evidence provided about how the sample size was selected, no accounting for non-sampling error, no reporting on the accuracy of the extrapolation, a sample of only 49 claims for a universe of more than 7,000 entries, and no tests for representativeness. The statistician had learned statistics analysis only during undergraduate work. There was no accounting for non-paid claims and possible under-payments. The list went on and on.

When this was reported back, what was the response?

Merely three days before the hearing, the auditor pulled a bait-and-switch by giving an entirely new reason for denying the claims.

By this time, the provider was almost catatonic, not answering telephone calls. There was a discussion of suicide watch, and cash flow problems. The business had collapsed.

At each stage, when faced with a refutation of their audit, the state had simply come back with a different set of reasons.

The case goes on today. Eventually, there will be an end, but we can forecast only the worst.

How many times should an auditor be able to come back with different reasons to justify denial of claims? Is there a constitutional issue of double, triple, quadruple, or quintuple jeopardy? Do they keep denying claims over and over until something sticks?

Two suicides and a provider driven to bankruptcy, and all because two ex-employee criminals looking for some fast cash lied to the state under the pretext of being whistleblowers?

Is this our healthcare system?

Is this America?

Programming Note:

Listen to Edward Roche report this story live during Monitor Monday, Aug. 19, 10-10:30 a.m. EST.

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Edward M. Roche, PhD, JD

Edward Roche is the director of scientific intelligence for Barraclough NY, LLC. Mr. Roche is also a member of the California Bar. Prior to his career in health law, he served as the chief research officer of the Gartner Group, a leading ICT advisory firm. He was chief scientist of the Concours Group, both leading IT consulting and research organizations. Mr. Roche is a member of the RACmonitor editorial board as an investigative reporter and is a popular panelist on Monitor Mondays.

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