Home Health & Hospice Week

A 43-claim audit led to $7.9 million overpayment demand.

A federal court decision issued last month may give home care providers a fighting chance when it comes to opposing extrapolated recoupment amounts based on claims denials.

The history: The Zone Program Integrity Contractor audited 43 claims from Texas home health agency Family Rehab Inc. in October 2016, according to a U.S. Court of Appeals for the Fifth Circuit decision in Family Rehab Inc. v. Azar issued back in March. The ZPIC determined that Family Rehab overbilled Medicare on 93 percent of the audited claims, “primarily a result of documentary deficiencies related to the initial home health certification.” The ZPIC then used statistical sampling and extrapolation to determine Family Rehab received nearly $7.9 million in excess reimbursement, the court noted.

HHH Medicare Administrative Contractor Palmetto GBA accordingly sent Family Rehab an overpayment demand letter for that amount, and the HHA appealed the denials and overpayment amount.

Palmetto affirmed the denials on reconsideration (first appeal level) and the Qualified Independent Contractor (second appeal level) reduced the amount slightly to just more than $7.6 million but otherwise upheld the denials as well, the decision recounted.

Palmetto notified the provider it would begin recoupment on Nov. 1, 2017. Family Rehab requested an Administrative Law Judge hearing (third appeal level), but Medicare is allowed to initiate recoupment for appealed denials after the second (QIC) appeal level.

Family Rehab then went to court to stop the recoupment via a Temporary Restraining Order and an injunction, the decision said. The U.S. District Court for the Northern District of Texas dismissed the suit for lacking jurisdiction, saying Family Rehab had to complete the four-step Medicare appeals process and receive a decision from the Medicare Appeals Council before being able to appeal that decision in court.

Family Rehab argued to the appeals court that failing to receive a timely ALJ decision violated due process and gave it jurisdiction. (Reminder: Providers are supposed to receive an ALJ decision within 90 days of request.) The 5th Circuit Appeals Court found that argument convincing and remanded the case to the lower court based on Family Rehab’s “procedural due-process and ultra vires claims,” according to the decision.

On June 4, the District Court granted Family Rehab’s Temporary Restraining Order. The court enjoined CMS from “withholding, recouping, offsetting, or otherwise failing to pay Family Rehab any current Medicare receivables,” the decision notes. U.S. Judge Ed Kinkeade noted the court had “reluctantly” dismissed the initial TRO request based on its understanding of case law.

In the decision, the District Court “was sympathetic to the fact that Family Rehab’s remaining employees will lose their jobs and that its patients will lose their provider,” notes attorney Robert Chu with Cozen O’Connor in Philadelphia, in analysis of the decision.

What the decision means: “Whereas Medicare providers have previously been unable to get into federal court to enjoin or suspend Medicare recoupment while waiting for a hearing with an ALJ, under Azar, Medicare providers potentially have a new way to combat the heavy financial burden placed upon providers when faced with the backlog of Medicare claims appeals,” says attorney Ashley Carver Meredith with Taylor Porter in Baton Rouge, Louisiana. “Though a limited win for Family Rehab, the Azar opinion gives other providers a roadmap for how to prevent CMS from recouping funds while they await an administrative hearing on amounts in dispute,” Carver Meredith says in analysis.

The appeals court decision sends a “strong message regarding the federal government’s administration of Medicare claims appeals: failure to provide a provider with a timely appeal may be grounds for a violation of due-process,” points out attorney Danielle Borel with Breazeale, Sachse & Wilson in Baton Rouge.

Thanks to this decision, providers “faced with a recoupment but which are not timely provided with an administrative hearing may have grounds on which to request a stay or injunction of the recoupment until a hearing is provided,” notes Borel in online analysis. “Second, the decision sends the message that the backlog of Medicare appeals can no longer be ignored.”

The appeals court decision “opens procedural doors” previously closed to providers and “expands their options for fighting a Medicare recoupment,” Borel concludes.