The Centers for Medicare and Medicaid Services (CMS), a division of the Department of Health and Human Services (HHS), is responsible for administering the Medicare program. CMS has many roles, which include protecting the Medicare Trust Fund, reporting and correcting improper payments, and targeting healthcare fraud. To complete its numerous statutory requirements, CMS has established the Medicare Review and Education Program. Under this program, it uses a variety of contractors to complete medical and improper payment reviews. Targeted probe and educate (TPE) reviews, a major part of the CMS Medicare and Review and Education Program, combine claim reviews and provider education. As part of those reviews, CMS permits Medicare Administrative Contractors (MACs) to exercise wide discretion in determining the design and scope of TPE audits; the percentage decrease in billing errors required to be excused from subsequent rounds of reviews; and the benchmarks for measuring the program’s success. Each MAC independently determines those areas most vulnerable to improper payments.
Although the TPEs are intended to improve claim accuracy, their definition of claim types most vulnerable to improper payments has significant consequences for providers that are difficult to overturn. Rather than focusing appeals of MAC decisions on individual claim denials, a broader attack on the lack of oversight of MACs by CMS and HHS as a whole would be more effective. This article asserts a basis for challenging targeted probe and educate reviews by arguing that the MACs’ wide discretion to design, implement, and define the metrics of the program’s success is inconsistent with CMS’s statutory duty to oversee its provider education program.
The duties and scope of review conducted by Medicare contractors have expanded. Originally, when the process was implemented, TPE reviews were limited to home health providers and short stay hospital claims. Over time, the scope of reviews has expanded to the point where reviews now cover all Medicare services and items. The TPE review process is intended to improve the accuracy of providers’ billing and coding, through a combined claims review and education process. However, a provider’s failure to achieve a reduction in the percentage of billing errors defined by the MAC can result in administrative penalties that include pre-payment review and revocation of participation in the Medicare program.
TPE audits involve up to three rounds of review conducted by a MAC. The process may be conducted as either a pre-payment or post-payment review of a sample of twenty to forty claims. At the end of each round of reviews, providers’ billing performance is re-evaluated to determine whether their error rate has been reduced to meet the benchmark set by the MAC. A subsequent increase in their error rate above the MAC-determined acceptable rate will result in further reviews. Providers who are not compliant after three reviews are referred to CMS for further action.
The strategy currently taken to overturn adverse outcomes of the reviews takes two forms: an appeal of individual claims, or, where extrapolation of the error rate has occurred, an appeal of the individual sampling amounts to either require recalculation of the error rate or to require readjustment of the overpayment. However, the timeline for appeals of denied claims, even if pursued on an expedited basis, may not be concluded prior to administrative penalties being imposed. Additionally, there are certain areas where no appeal is permitted: the Final Results letter issued by the MAC at the end of each round of reviews, and the decision by CMS to impose pre-payment review of provider claims or revoke provider participation in Medicare. The structure of the TPE review program presents an opportunity for another strategy for appealing adverse outcomes. Challenging CMS’s lack of oversight of its MACs is an alternate strategy with potential to be more effective than appealing individual claims denials.
Although CMS has stated in a frequently asked questions (FAQ) fact sheet that favorable outcomes will be considered after referral of the provider for further action, where pre-payment review has been put in place or revocation of participation in Medicare has already occurred, there is no recognized right of appeal, and no CMS regulation or policy that provides otherwise. A provider placed on pre-payment review will be reassessed by the MAC on a quarterly basis to determine if the provider’s behavior has improved sufficiently. There is no defined standard for measuring the provider’s improvement. Revocation of a provider’s participation from the Medicare program can only be reviewed after one year from its imposition, and it can extend as long as ten years, depending on the severity of the offense. After the revocation period has ended, the provider is required to reapply to the program.
By law, the Secretary of HHS is required to provide effective oversight of its contractors’ TPE programs. The Secretary’s lack of oversight of MACs’ provider education efforts, and the manner in which MACs identify risks vulnerable to improper billing, falls short of its duties.
The article outlines a statutory challenge to the current TPE review process. The Secretary of HHS’s failure to tie the TPE activity of the MACs to measurable agency standards has resulted in an inability to assess the effectiveness of the MACs’ performance, as well as an inability to ensure agency resources are appropriately allocated to those areas most vulnerable to improper payments consistent with the agency’s education and outreach program goals. The oversight requirement applicable to the Secretary of HHS, set out in 42 USC Section 1395kk-1(b)(3)(A), requires the Secretary to “develop standards for measuring the extent to which a contractor has met the requirements” of the HHS education and outreach program. Though it is true the MACs perform an administrative function of the agency, that activity is required to meet clearly defined performance metrics, and those standards are required to be established by the Secretary of HHS, not the MACs.
A report issued by the Government Accountability Office (GAO) in March 2017 first raised the argument that CMS failed to provide effective oversight of MACs’ efforts involving TPE audits. It determined that CMS’s decision to avoid being “overly prescriptive regarding MACs’ provider education efforts” was inconsistent with its duty to oversee its provider education program and address areas vulnerable to improper payments.
CMS’s oversight of targeted probe and educate reviews is limited, with MACs exercising a wide range of discretion and control over the design and implementation of the audits. The MACs determine which provider/suppliers to target for TPE review; the appropriate percentage decrease in claims denials that is required before a provider is excused from further review; and the metrics for assessing the success of its audits.
Physicians are targeted for TPE audits based on MACs’ error rate calculation. TPEs target those providers who have a high rate of claim denials, unusual billing practices, or bill with greater frequency those codes that CMS has determined are more likely to be improperly billed.
Each MAC independently identifies the risks that render their jurisdiction vulnerable to a higher rate of improper payments. Rates are calculated by MAC, by service, and by provider type. There is no requirement that the twelve Part A/B MACs be consistent in their method of calculating improper payment rates. The sources of data the twelve MACs use to calculate the error rate, and the weight they give each particular data source, is not subject to any standard.
MACs exclusively determine the percentage decrease in billing errors providers must meet to be excused from further rounds of one-on-one educational sessions. CMS does not disclose how that percentage is determined. It states in Chapter 3 of the Medicare Program Integrity Manual, “A provider/supplier may be removed from TPE after any round if they demonstrate low error rates or sufficient improvement in error rates, as determined by the MAC.” The MAC sets the percentage rate decrease required, and in Chapter 7 of the Medicare Program Integrity Manual, CMS admits that it does not establish or set improvement rate goals.
CMS’s failure to oversee the benchmarks independently set by MACs for the reduction of denied claims has a significant impact on providers whose denial rates fail to meet the MAC-determined rate. If providers continue to have high error rates after the three rounds of review, they may be referred to CMS for 100% pre-payment review, extrapolation of their error rates, and/or referral for revocation of enrollment in the Medicare program. Lack of alignment of MAC-implemented rate reductions creates inconsistency in remedies imposed on providers.
The measure of the success of MAC activity is reflected in the annual Improper Payment Reduction Standards (IPRS) reports MACs must submit to CMS. They report the savings achieved through claims denial rates, charge denial rates, and provider denial rates. While the IPRS reports identify program savings, they provide insufficient detail to CMS and the Secretary of HHS to determine whether the education efforts of each MAC are focused on those areas most vulnerable to improper payment. CMS’s assessment is made more difficult because of the discretion exercised by each MAC in designing and implementing audits, and evaluating the success of their own programs. The validity of this framework is subject to challenge as part of a broader challenge based on CMS’s failure to exercise oversight of its contractors conducting TPE reviews.
Given the increased scope and impact of these reviews, providers should move beyond a defensive strategy of appealing specific claim denials, and consider a broader argument focused on CMS’s inadequate oversight of the TPE review.
Following 42 U.S.C. Section 1395hh(a)(2), the Medicare Act requires the Secretary to follow a notice-and-comment procedure for any “rule, requirement, or other statement of policy that establishes or changes a substantive legal standard governing… the payment for services.” Azar v Allina Health Services 139 S Ct 1804(2019); Agendia v. Becerra, ___F 4th__ , 2021 WL 3011482 (9th Cir. 2021), cert. den’d ___US __(2022). The MACs, as part of the TPE process, are not carrying out an administrative function based on an agency defined controlling legal standard. The MACs define their own performance metrics and the design and implementation of the reviews. By statute, CMS is required to develop the performance requirements of its contractors. 42 USC 1395kk-1(a)(4), (b)(1)(C), and (b)(3)(A). ↑
Chapter 3, Section 3.1, 3.2.1, and 3.2.5, Medicare Program Integrity Manual. ↑
Chapter 8, Medicare Program Integrity Manual, Section 220.127.116.11–18.104.22.168. ↑
MACs are permitted to commence a new round of targeted probe and educate reviews forty-five days after each post-probe session, at the earliest. The Medicare appeals process permits a provider appealing denied claims or extrapolation of overpayments to reach federal district court, assuming expedited appeals, six months after the initiation by a provider of their filing of appeal. Medicare Parts A and B Appeals Process, MLN 006562 (August 2022). ↑
www.cms.gov, FAQs on TPEs. This fact sheet states that CMS has discretion to suspend its review of the provider, where the provider is successful on all appeals, before CMS takes action. It also removes all program penalties imposed, where the provider wins all appeals after the imposition of administrative penalties. CMS’s discretion, it concedes, is outside the appeals process and grants relief from decisions that are not appealable. It is only outlined in a fact sheet. It does not appear in any Medicare Program Integrity Manual, Claims Processing Manual, or any CMS regulation. The relief granted is an after-the-fact attempt to reverse the results of a TPE process that was
Medicare Program Integrity Manual, Chapter 3, section 22.214.171.124(A). ↑
42 CFR section 424.535. ↑
Government Accountability Office (GAO), Standards for Internal Control in the Federal Government, The Green Book, 2017. (GAO-14-704G), Washington, D.C. 2017. Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. See also OV2.15, p. 12; external auditors and the Office of Inspector General (OIG) are not considered part of CMS’s internal controls. “While management (CMS and the Secretary of HHS) may evaluate and incorporate recommendations from external auditors and the OIG, responsibility for an entity’s internal control system resides with management (CMS and the Secretary of HHS).” ↑
42 USC Section 1395kk-1(a)(4) and (b)(1)(C), (b)(3)(A)(i)-(iv). “The Secretary shall develop contract performance requirements to carry out the specific requirements applicable under this subchapter to a function described in subsection (a)(4) and shall develop standards for measuring the extent to which a contractor has met such requirements. Such requirements shall include specific performance duties expected of a medical director of a Medicare administrative contractor.” See also, 42 USC Section 1395kk-1(A)(iii)-(iv). ↑
GAO Report to the Chairman, Committee on Finance, US Senate, Medicare Provider Education, Oversight of Efforts to Reduce Improper Billing Needs Improvement (March 2017). ↑
Id, at pp. 13–15. ↑
Chapter 3, Medicare Program Integrity Manual, section 3.2.5. ↑
Chapter 3, Medicare Program Integrity Manual, section 3.2.1. The Secretary of HHS provides the MACs with a list of improper payments identified by the Recovery Audit Contractor (RAC) within the MAC’s region. While the scope of the education program is determined by the MAC (42 USC Section 1395kk-1(h)(4)), it must be consistent with clearly defined performance metrics, so that the outcome of the activity is consistent with the Secretary of HHS’s program goals. See 42 USC Section 1395kk-1(b)(3)(A) (requiring the Secretary to “develop standards for measuring the extent to which a contractor has met the requirements” of the HHS education and outreach program). ↑
Medicare Program Integrity Manual, Chapter 3, section 3.2.5. “The MACs shall target their efforts at error prevention to those services and items that pose the greatest financial risk to the Medicare program and that represent the best investment of resources. This requires establishing a priority setting process to assure MR (medical review) focuses on areas with the greatest potential for improper payment. The MACs shall develop a problem-focused, outcome-based medical review (MR) strategy and Strategy Analysis Report (SAR) that defines what risks to the Medicare trust fund the MAC’s MR programs will address and the interventions that will be implemented during the fiscal/option year. The MACs shall focus their edits where the services billed have significant potential to be non-covered or incorrectly coded.”
The MACs have the discretion to select target areas because of:
– high volume of services;
– high cost;
– dramatic change in frequency of use;
– high risk problem-prone areas; and/or,
– Recovery Auditor, Comprehensive Error Rate Testing, OIG, or GAO data demonstrating vulnerability. ↑
GAO Report, pp. 6-8, Chapter 3, Medicare Program Integrity Manual, 3.2.B. (pre-payment edit capabilities). ↑
Twelve MACs perform Part A/B audits, and of those twelve, four audit home health and hospice providers. An additional four audit DME suppliers. ↑
Unlike MACs, Medicare Recovery Auditors (RACs) and Unified Program Integrity Auditors (UPICs) are required to use a strict random sampling methodology as part of their post-payment claims reviews to ensure that the universe selected is appropriate. Chapter 8, Medicare Program Integrity Manual, Sections 126.96.36.199–188.8.131.52; Sections 8.4.2–184.108.40.206. In TPE audits, the claims designated to be audited are the result of a data-driven selection process, with the attributes of the audit determined by data selected on a problem-focused risk basis. Though the probe itself is subject to a medical review of the sample claims, it is intended to validate the data-driven findings.
In instances where overpayments are identified by data analysis alone, Chapter 8 specifically states that “the contractor shall consult with its Contracting Officer’s Representative COR/Business Function Lead (BFL) as defined in the PIM Chapter 4, Section 4.7-Investigations. In addition, if CMS approves the data driven overpayment, the contractor shall also consult with its COR/BFL on whether statistical sampling and extrapolation are necessary to identify the overpayment.” Chapter 8, Section 220.127.116.11, Medicare Program Integrity Manual. ↑
Medicare Program Integrity Manual, section 18.104.22.168. ↑
Chapter 3, Medicare Program Integrity Manual, Section 3.2.5. D. ↑
Each MAC is required to submit annually an IPRS report to CMS, to identify the results of its medical review activities, including provider outreach, targeted probe and educate reviews, and other payment interventions. Chapter 7, Medicare Program Integrity Manual, section 7.1.1.-7.1.2; section 7.2.4. ↑