AMARILLO, TX – The DME industry came into existence in the 1970s. Up until the last 10 years, the industry has almost exclusively billed traditional Medicare fee-for-service (“FFS”). Within the last 10 years, the DME industry has witnessed the encroachment of Medicare Advantage (“MA”) into their lives. This caught most of the industry by surprise; the industry was so focused on competitive bidding and audits that it was only tangentially aware of MA.

Now…in 2023…the DME industry is acutely aware of MA. Approximately 50% of all Medicare beneficiaries are covered by MA plans (“MAPs”). This percentage is expected to increase to 62% over the next several years. What this means is that, today, in order for a DME supplier to have access to 50% of the Medicare patient base, the supplier must secure MA contracts that cover the Medicare patients.

In dealing with MAPs, DME suppliers face a number of challenges, including (i) provider/supplier panels that are closed and/or restricted, (ii) the MAPs not following applicable Medicare guidelines, and (iii) reimbursement that is unrealistically low.

A frustration for DME suppliers is the lack of CMS oversight of MAPs. While the federal laws pertaining to MAPs are voluminous, the focus of the laws is on beneficiary protection. The laws give very little protection to providers/suppliers. And the laws do not give much guidance to CMS regarding how it is to oversee MAPs. It is as if CMS signed contracts with MAPs and said “Go do your thing and don’t bother us.”

From 1997 until the present, federal regulatory agencies (particularly CMS) have been silent regarding activities of MAPs, particularly when MAPs take actions that (i) arguably violate existing legal guidelines and (ii) are harmful to providers and suppliers.

Finally, this is beginning to change. As discussed in prior Medtrade Monday articles, (i) the Office of Inspector General (“OIG”) is reviewing actions by MAPs and (ii) CMS is gathering information about MAPs. This scrutiny is primarily being driven by (i) abuses that are obvious in the MA marketplace and (ii) actions being taken by AAHomecare’s Payer Relations Council and other DME industry stakeholders.

The DME industry is growing accustomed to OIG inquires into product lines (e.g., CPAPs and supplies in 2018 and PMDs in 2022) in which (i) the OIG examines a small number of claims from a small number of DME suppliers, (ii) the OIG determines an error rate, (iii) the OIG calculates a recoupment based on the error rate, and then (iv) the OIG extrapolates the small dollar amount into an astronomically large amount. In its report, the OIG suggests that the DME suppliers (involved in the inquiry) repay the small actual dollar amount. And then the report references the 60 Day Rule and suggests that (i) the supplier investigate its claims submissions over the past six years, and (ii) the supplier report and refund the dollar amount calculated over the six-year period. What the OIG report leaves unsaid is that if the DME supplier does not comply with the 60 Day Rule, prior questionable claims may become “false claims.”

What is interesting is that the OIG is now taking a similar approach to MAPs. A recent OIG audit of a MAP (i) points out that the information submitted by the MAP to CMS, regarding the health status of the MAP’s enrolled patients, is inaccurate (i.e., many of the enrollees were not as sick as the MAP represented). A summary of the OIG’s report is as follows:

Why the OIG Performed the Audit
Under the Medicare Advantage (MA) program, the Centers for Medicare & Medicaid Services (CMS) makes monthly payments to MA organizations according to a system of risk adjustment that depends on the health status of each enrollee. Accordingly, MA organizations are paid more for providing benefits to enrollees with diagnoses associated with more intensive use of health care resources than to healthier enrollees, who would be expected to require fewer health care resources.

To determine the health status of enrollees, CMS relies on MA organizations to collect diagnosis codes from their providers and submit these codes to CMS. Some diagnoses are at higher risk for being miscoded, which may result in overpayments from CMS.

For this audit, we reviewed one MA organization, Cigna-HealthSpring Life & Health Insurance Company, Inc. (Cigna), and focused on nine groups of high-risk diagnosis codes. Our objective was to determine whether selected diagnosis codes that Cigna submitted to CMS for use in CMS’s risk adjustment program complied with Federal requirements.

How the OIG Performed the Audit
We sampled 300 unique enrollee-years with the high-risk diagnosis codes for which Cigna received higher payments for 2016 through 2017. We limited our review to the portions of the payments that were associated with these high-risk diagnosis codes, which totaled $720,395.

What the OIG Found
With respect to the nine high-risk groups covered by our audit, most of the selected diagnosis codes that Cigna submitted to CMS for use in CMS’s risk adjustment program did not comply with Federal requirements. Specifically, for 200 of the 300 sampled enrollee-years, the medical records that Cigna provided did not support the diagnosis codes and resulted in $468,372 in overpayments. As demonstrated by the errors found in our sample, Cigna’s policies and procedures to prevent, detect, and correct noncompliance with CMS’s program requirements could be improved. On the basis of our sample results, we estimated that Cigna received at least $6.24 million in overpayments for 2016 and 2017.

What the OIG Recommends and Cigna Comments
We recommend that Cigna: (1) refund to the Federal Government the $468,372 of overpayments; (2) identify, for the high-risk diagnoses included in this report, similar instances of noncompliance that occurred before or after our audit period and refund any resulting overpayments to the Federal Government; and (3) continue its examination of its existing compliance procedures to identify areas where improvements can be made to ensure that diagnosis codes that are at high risk for being miscoded comply with Federal requirements and take the necessary steps to enhance those procedures.

Cigna did not concur with our recommendations and did not concur with our findings for 6 sampled enrollee-years which, according to Cigna, were supported by the medical records. Cigna did not directly agree or disagree with our findings for the remaining enrollee-years. Cigna did not agree with our audit methodology, use of extrapolation, and standards for data accuracy, coding, and documentation requirements.

After reviewing Cigna’s comments and the additional information that Cigna provided, we revised the number of enrollee-years in error from 201 to 200 for this final report. After we had issued our draft report, CMS updated regulations for audits in its risk adjustment program to specify that extrapolated overpayments could only be recouped beginning with payment year 2018. Because our audit period covered payment years 2016 and 2017, we revised our first recommendation to specify a refund of only the overpayments for the sampled enrollee-years. We made no changes to our other recommendations. We followed a reasonable audit methodology and correctly applied applicable Federal requirements underlying the MA program.

The above OIG audit is illustrative of other actions being taken by federal governmental agencies over the last 12 months. For example, (i) the OIG published a report expressing concern about activities of MCOs, and (ii) CMS issued a Request for Information about MCOs. In response to the CMS request, the AAHomecare Payer Relations Council submitted detailed comments.

Journalists are also taking notice of the problems arising out of actions by MCOs. In a recent article entitled “The Cash Monster Was Insatiable: How Insurers Exploited Medicare for Billions,” the New York Times took MCOs to task. The first two sentences of the article state: “By next year, half of Medicare beneficiaries will have a private Medicare Advantage Plan. Most large insurers in the program have been accused in court of fraud.”

The article then recounts the following:

• Kaiser Permanente called physicians in during lunch and after work and urged them to add additional illnesses to the medical records of patients they had not seen in weeks. Physicians who found enough new diagnoses could earn Champaign or bonuses.
• Anthem (now Elevance Health) paid more to physicians who said their patients were sicker.
• Executives at United Healthcare (“UHC”) told their employees to mine old medical records for illnesses.

According to the article, each of these strategies (described by the Department of Justice in lawsuits against the companies) led to diagnoses of illnesses that may never have existed…but led to the insurers collecting additional money from the government. According to the article, a New York Times review of dozens of lawsuits, inspector general audits, and watchdog investigations shows how major health insurers exploit the Medicare Advantage program to inflate their profits by billions of dollars.

The article points out that the government pays Medicare Advantage insurers a set amount per enrollee…with higher rates for sicker patients. According to the article, the insurers have developed practices designed to make their patients appear as sick as possible, often without providing additional treatment. The article states that as a result, a program designed to lower health care spending has instead become substantially more costly than the traditional government programs it was meant to improve.

The New York Times article states that eight of the 10 largest Medicare Advantage insurers, representing more than 2/3rds of the Medicare Advantage market, have submitted inflated bills. The article points out that four of the five largest players have faced lawsuits alleging that efforts to over diagnose their enrollees have crossed the line into fraud.

According to the article, most of the insurers dispute the allegations in the federal lawsuits and contend that the federal audits were flawed. In their statements, insurers said that their aim in documenting more conditions was to improve care by accurately describing their enrollees’ health. The article states that the government spends nearly as much on Medicare Advantage’s beneficiaries as on the Army and Navy combined.

According to the article, a study from the Kaiser Family Foundation, a research organization unaffiliated with the insurer Kaiser, found that the insurers typically earn twice as much gross profit from their MAPs as from other types of insurance.

Most of the fraud lawsuits brought against insurers are from former employees (whistleblowers). According to the New York Times article, the DOJ has intervened in most of the whistleblower suits. In 2021, the DOJ listed Medicare Advantage as one its top areas of fraud recovery. The article points out that CMS has not been aggressive in pursuing overpayments.

The New York Times article confirms the frustrations that DME suppliers have voiced over the past several years. Insurers have a powerful lobby and they have many friends in Congress. However, as the drumbeat of criticism increases, hopefully we will see Congress and CMS take steps to force insurers to play fair.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].