June 15, 2017

Regulatory Compliance – Keeping Your Money

Regulatory Compliance – Keeping Your Money

Anyone in the healthcare arena who has experienced a compliance audit knows that if you receive money from the Federal or State government, they are going to be sure the money is spent in the manner it was intended to be spent. With the current deficits most States and certainly the Federal government are reporting, it is no wonder the Office of Inspector General’s (OIG) 2017 work plan is so robust. The mission of the OIG is to protect the integrity of the Department of Health and Human Services (HHS) programs and the health and welfare of program beneficiaries. The HHS OIG employs more than 1,600 people dedicated to combatting fraud, waste and abuse, and improving efficiencies in the Medicare and Medicaid programs. While there are numerous areas in which facilities will be tested for compliance, below we examine some of the more common and potentially more costly compliance audits and how to survive them.

The Centers for Medicare and Medicaid Services (CMS), at the direction of the OIG, hires contractors to audit Medicare claimed on a post-payment basis. Recovery Audit Contractors (RAC) typically consist of nurses, therapists, and certified coders who are hired on a contingency basis to review past Medicare claims ensure the payments made to facilities were correct. This type of audit may consist of any of the aforementioned contractors reviewing detailed medical records in order to determine whether the correct Resource Utilization Group (RUG) was claimed. If a RAC identifies an improper payment, the facility can be liable to pay back the monies identified in the demand letter.

Since RACs are hired on a contingency basis, they are motivated to identify as many improper payments as possible. So how do facilities minimalize their exposure for a recovery audit? As you will see with both types of audits discussed in this article, it all circulates circles back to having great supporting documentation. With a recovery audit, maintaining correct and adequate documentation begins with admitting a new patient and identifying a care plan. It is extremely important the MDS Coordinator is heavily involved in the care planning and that all notes are saved in the medical records. Once the patient is admitted, all services provided must be deemed necessary and documented in the medical record. If services provided are deemed necessary and detailed medical records are maintained, then the audit should go smoothly, with limited to no liabilities.

Another type of compliance audit that can potentially result in a liability (depending on what state you live in) is a Medicaid cost report audit. Most states utilizing a case mix index (CMI) to determine Medicaid rates will audit costs reports before rates are issued; thus the Medicaid audit would not result in a liability back to the state, but possible lower rates going forward. However, if you are located in a state that utilizes cost-based reimbursement, a bad Medicaid audit could result in a significant retroactive payment in addition to a lower rate going forward. Medicaid audits tend to focus on main areas which could possibly impact the daily Medicaid rate. They include but are not limited to the following items reported on a typical cost report:

  • Accuracy of patient days.
  • Accuracy and reasonableness of expenses claimed.
  • Billing and bed hold policies.
  • Handling of resident funds.
  • Related party transactions.
  • Management company fees (when applicable).

If significant findings are made during a Medicaid audit, resulting in an issuance of a lower rate, the lower rate will be retroactive to when the original rate was issued. Overall, this results in a liability back to the state and rate reduction going forward. Similar to improper payment audits, maintaining adequate documentation is key for cost report audits. Many states have the ability to go back up to seven years from the latest filed cost report, which can sometimes make it difficult to access the information they are looking for (typically invoices, receipts, patient statistics, etc.). An effective filing system is essential in order to locate documentation when needed. An example would be to scan and save invoices in well-labeled folders on a backed up hard drive. This is an effective way to save important documentation and have it ready at the tip of your fingers.

It’s important for facilities to keep the money received for services, with the uncertainty in the current healthcare industry due to budgetary constraints, possible rate reductions, and/or reform coming in the near future. An increase in compliance audits is expected, based on the OIG’s more robust plans over the past few years and their focus on eliminating fraud, waste and abuse, and improving efficiencies. All providers should be prepared with proper documentation to reduce the chances of giving back allowable monies.

If you have any questions, Marcum LLP is here to help. Please contact your Marcum advisor.

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