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Medicare Audit Improvement Act of 2012 Proposes to More Heavily Regulate Audit Contractors

Representatives Sam Graves (R-MO), Todd Akin (R-MO), Billy Long (R-MO), and Adam Schiff (D-CA) introduced a bill to Congress on October 16, 2012 which proposes to reduce the Medicare contractor audit burden on hospitals. The bill, called the Medicare Audit Improvement Act of 2012 (Act), proposes changes to the ways contractors may conduct audits and imposes additional requirements on contractors.

Medicare Audit Improvement Act of 2012.pdf

Among the requirements introduced in the Act are limits to the amount of additional documentation a Medicare contractor may request for complex pre-payment audits and complex post-payment audits. The Act would limit the additional documentation requests for hospitals’ Part A claims to the lesser of 2 percent of those claims for the year, or 500 additional documentation requests during any 45 day period.

The Act also proposes penalties for contractors that fail to maintain compliance with Medicare program requirements. Specifically, the Act calls for financial penalties when a contractor fails to complete an audit determination within the applicable timeframes, and when a contractor fails to provide communication in a timely manner regarding claim denials and appeals. Further, the Act proposes to impose financial penalties for appeals which are overturned. When a party successfully appeals a claim denial, the Act would require the contractor to pay a monetary penalty to the party that prevailed in the appeal. This aspect of the Act is notable given the number of claim denials, particularly in the area of short-stay inpatient admissions, that are overturned at the ALJ level of appeal.

Medical necessity audits are also addressed by the Act. Under the Act, pre-payment and post-payment medical necessity audits would only be allowed if it addresses a widespread payment error rate. A widespread payment error rate is defined in the Act as a 40 percent payment error rate as determined by a significant sampling of claims submitted, adjusted to take into account claim denials overturned on appeal. Also, the Act calls for a restoration of due process rights under the AB Rebilling Demonstration Program. This mean that the Centers for Medicare and Medicaid Services (CMS) could not require providers in the demonstration project to waive their right to the appeals process for inpatient claim denials which, under the demonstration, could then be re-billed under Medicare Part B for 90 percent of the Part B payment.

Contractors would also be required to publish performance data under the Act. Contractors would be required to publish data each year on:

• the aggregate number of audits conducted,

• the aggregate number of denials for each audit type,

• denial rates,

• the aggregate number of appeals filed by providers,

• the aggregate rate of appeals, and

• the appeal outcomes at each stage of appeal.

Additionally, publication of performance evaluations of contractors performed by independent entities, including error rates, would be required.

If you have any questions about how the Medicare Audit Improvement Act of 2012 could affect you, or need help defending a Medicare audit, please contact an experienced Wachler & Associates healthcare attorney at 248-544-0888.