Respond to a Payer Audit: Not so fast!
Part 3: Learn how to appeal appropriately.
By Dennis Mihale, MD, MBA; Jeremy P. Burnette, JD, MA; and Sidney Summers Welch, JD, MPH
Being audited is serious business. If you think there is an error with the payer’s findings, you have a right to appeal the decision and should do so, as appropriate. But you’ll need to have a firm grasp on the issues involved and act accordingly. In some cases, a settlement may be the better option. Let’s look at the appeal process and your options for appropriate recourse.
Editor’s Note: This is the last in a series of articles providing you with advice on how to handle payer audits, minimize exposure, and limit future audits. Part 1 (January, pages 54-56), and Part 2 (February, pages 48-53) of this series explored how to respond to private and government payer audits. In this final installment, we discuss the appeals process.
To Appeal or Not: That’s the Question
Following an audit, the payer will send the provider a notification of its findings. The notification will include a request for repayment if the audit shows overpayment on behalf of the payer. When deciding whether to appeal a demand for repayment, be aware of appeal deadlines and what you must do to preserve your rights. Decisions regarding whether to appeal a repayment demand are often made on a cost-benefit analysis, and are evaluated against this framework throughout the process.
An appropriate first step may be to call the payer’s medical director. This strategy is a good option if:
- You are certain the payer has made an error that requires a level of understanding beyond that of a payer representative;
- Payer representatives are being uncooperative; or
- The subject of the audit is clinical in nature and requires clinical input.
If you pursue this option, you must have a firm understanding of the issues involved. Conversations with the medical director are not privileged and could be subject to discovery or testimony in a proceeding. Confirm any information from the director with a follow-up email to create a record of the conversation, and save this email in the case file.
Consider filing an appeal if:
The issue is not resolved by conversation with the payer’s medical director;
Repayment would set a dangerous precedent for future payment disputes; or
The demanded repayment amount is significantly inaccurate.
Gather the Facts
If the alleged overpayment is the result of a coding issue, first review the claims in question with a Certified Professional Coder (CPC®). A physician with extensive experience in coding matters also may be particularly persuasive. Such an expert should be retained through the provider’s attorney, who should manage the review to preserve the confidentiality of the findings under applicable privilege. The provider should give the coding expert all of the information and correspondence that has been gathered regarding the payment issue. This will enable the expert to evaluate the merits of the repayment demand. Based on the expert’s review, an appeal may be warranted.
If clinical issues are the basis of an overpayment claim, clinical literature (particularly authoritative, justifying the implementation and reimbursement of a particular medical treatment) authored by a reputable third party may further support your position. Collect and evaluate this literature, in addition to the expert’s support and your provider’s documentation, before appealing a payment decision based on a clinical determination.
Throughout the appeal process, focus on clinical authority and the payer’s own guidelines rather than unsupported arguments of “fairness.”
Appealing Private Payer Decisions
For private payers, your contracts (or ancillary policies and procedures) will specify your appeal rights and processes. Review your provider agreement and related policies and procedures carefully—both before signing contracts and when faced with a repayment demand. If you do not have a copy of the payer’s appeals process, request one in writing. All plans are different, and the appeal process will vary among payers.
Generally, the appeal process will have three levels: informal complaint, formal appeal, and filing a grievance.
Many provider agreements allow the provider to file a complaint about how the payer has processed a claim. Typically, the initial complaint process is relatively informal and requires a written complaint to the carrier’s customer service department. Some carriers permit complaints to be conducted telephonically. This process can end a payment dispute quickly and easily when it’s based on something simple (e.g., a clerical error or when the payer lacks sufficient records to make an informed payment decision).
Take contemporaneous notes of all your conversations with the payer, keep copies of all correspondence, and confirm the resolution in writing. Document that, although the matter is resolved, you do not waive your rights to challenge the payer if, despite the assurances you have received, the payer attempts to reopen the matter. Also make sure the person responding to your appeal has authority to resolve the matter from the payer’s perspective.
Again, be mindful of time deadlines for informal resolution. You always want to preserve as much time as possible for a formal appeals process, if necessary.
Provider agreements (or the ancillary documents) outline the formal processes to appeal payers’ payment decisions. You must review your agreement (or ancillary documents) with the specific payer to comply with the rules of the appeal process. Failure to do so may result in a failed appeal simply because you didn’t meet deadlines, follow outlined procedures, or provide necessary information.
For example, the payer may set a time limit for when a provider may appeal a payment decision. These time limits may range from 60-180 days, or more. State law may set certain time limits for such appeals, as well. You’ll need to reconcile the two sets of deadlines.
Most plans provide for multiple levels of administrative appeal. The initial appeal is likely to be reviewed by an individual who did not work on the original payment decision. If the underlying dispute is a utilization review question, request for a physician in the same medical specialty to review the payment decision. If the payer does not have such a physician on staff, you may request an independent external review to gain that expertise.
If you are not satisfied with the results of the initial appeal level, you can typically file a higher-level appeal. Again, follow the procedures outlined in the provider agreement (or ancillary documents) closely. An elevated appeal usually provides a hearing for you to present evidence or explain your position more fully. A panel (rather than an individual) typically reviews the payment decision.
If you’re still not satisfied with the payment decision, you may be able to file a formal grievance with the insurance carrier. The payer will investigate the grievance confidentially and issue an opinion within the time specified in the provider agreement or ancillary documents.
The formal grievance is often the final step in the internal, administrative review process. If you remain unsatisfied after exhausting the appeals and grievance procedures, you may be able to turn to your state insurance commissioner or court system for resolution. Often, however, payer contracts require such disputes to be resolved by binding arbitration. Know what your contract requires and be prepared to negotiate these provisions, depending on the payer’s history and reputation in your state.
Appealing Medicare Audit Decisions
If a Medicare contractor determines the Centers for Medicare & Medicaid Services (CMS) has overpaid your provider for a beneficiary’s health services, the provider will receive notification of the overpayment amount. CMS will send the provider a demand letter requesting repayment and explaining that interest will begin to accrue if the overpayment is not received within 30 days. CMS may send the provider a second demand letter if it does not receive a response in a timely matter.
If you do not repay the overpayment amount or make payment arrangements within 40 days of the original demand letter, CMS will begin recoupment procedures to recover the overpayment amount by withholding funds from currently due payments or from future claims.
You can respond to a demand letter by refunding the overpayment, requesting an extended repayment plan, or filing an appeal. If you disagree with the audit determination, there are five levels of appeals you can use to contest CMS’ repayment demand.
Note: Each state’s Medicaid program is free to establish its own appeal procedures, but they will likely resemble the processes established for Medicare claims.
A physician or supplier has 15 days from the date of the demand letter to file a rebuttal statement to the contractor explaining why CMS should not recoup the amount in question. A rebuttal statement is not a formal appeal, and will not forestall the recoupment process.
First Level: Redetermination
A provider who mounts an appeal, also known as an “appellant,” must ask the Medicare contractor that made the original claim determination for a redetermination of its adverse audit decision. Members of the contractor’s staff who did not participate in making the initial overpayment determination will conduct the redetermination.
The appellant must file the request for redetermination within 120 days from the receipt date of the initial audit determination; however, the appellant must file an appeal within 30 days of the demand letter to stop recoupment. No minimum dollar amount is required for a redetermination.
The Remittance Advice will include instructions for requesting a redetermination. Providers are encouraged to use form CMS-20027. If not using that form, a provider’s written request for redetermination must include the beneficiary’s name, the Medicare health insurance claim (HIC) number, the specific services for which the provider is requesting a redetermination, the dates of service, and the appellant’s name and signature. The appellant should also include all supporting documentation with the request for redetermination. The Medicare contractor will usually respond with its decision within 60 days of receipt of the request.
Second Level: Reconsideration
If you are dissatisfied with the redetermination decision issued by the Medicare contractor, CMS hires qualified independent contractors (QICs) to conduct reconsiderations. You must file a request for reconsideration by a QIC within 180 calendar days of receipt of the redetermination decision. To stop the recoupment process, you must file the request for reconsideration within 60 days of the redetermination decision date.
A reconsideration allows a panel of physicians or other healthcare professionals to independently review the medical necessity determinations underlying the initial decision and redetermination. CMS encourages providers to submit a request for reconsideration using form CMS-20033, but a written request that contains the following will suffice:
- Beneficiary name;
- HIC number;
- Specific services for which reconsideration is sought;
- Exact date(s) of service;
- Name and signature of the party submitting appeal (or personal representative); and
- Name of the contractor that made the redetermination in question.
Provide a clear explanation of the rationale for disputing the redetermination, and a copy of the original remittance advice with the request for reconsideration. Provide the QIC with all pertinent documentation and other evidence supporting your challenge to the redetermination. If you do not provide evidence prior to the issuance of a reconsideration decision, you will not be able to submit relevant evidence in later stages of the appeal process without showing good cause.
The QIC will issue its decision within 60 days of the request for reconsideration. If the QIC cannot finish its review in time, it will inform you of your right to advance to the next appeal level.
Third Level: Administrative Law Judge Hearing
If you remain dissatisfied after the QIC’s reconsideration decision, you can request an administrative law judge (ALJ) hearing if at least $140 remains in controversy. You must file the request within 60 days of receipt of the reconsideration decision. Appellants must serve all other parties to the QIC reconsideration with the request for an ALJ hearing. ALJ hearings are typically conducted via video teleconference or telephone. You may obtain an in-person hearing by demonstrating good cause for such a proceeding. ALJs will determine whether to grant in-person hearings on a case-by-case basis.
The ALJ sets the hearing procedures. CMS or its contractors may be a party to the hearing with notice to the ALJ and all parties. Generally, the ALJ will issue a decision within 90 days of his or her receipt of the hearing request. This deadline may be extended for reasons such as the submission of additional evidence or a request for an in-person hearing. If the ALJ fails to issue a decision within the allotted time, the appellant may request the ALJ to escalate the case to the next level of appeal.
Fourth Level: Appeals Council Review
Any party dissatisfied with the result of the ALJ hearing may request the appeals council to review the case. There is no monetary minimum threshold for appeals council review. The appellant must request this review in writing within 60 days of receipt of the ALJ’s decision, and the request must identify the contested issues and findings. The appeals council will typically issue a decision within 90 days of receipt of the review request. If the appeals council fails to issue a decision within the allotted timeframe, the appellant may request the appeals council to escalate the case to the final appeal level.
Fifth Level: Judicial Review in U.S. District Court
Finally, a party dissatisfied with the appeals council decision can appeal that decision to the U.S. District Court if at least $1,400 remains in controversy after the council decision. The dissatisfied party has 60 days after the appeals council decision to request such review.
Consult your legal counsel throughout the appeal process. Legal representation is particularly important at this repayment appeal level.
Mea Culpa: Settlements
If you determine the provider’s documentation was deficient, or coding and/or billing was inaccurate, you may wish to approach the payer about settling the dispute. Medicare and Medicaid recovery audit contractors (RACs) are unable to settle claims with providers, but CMS or the state equivalent can. Private insurance companies regularly settle with providers to resolve payment disputes.
When deciding whether to approach a payer about a settlement, double-check your coding and billing and the payer’s audit sampling and extrapolation. Consult legal counsel regarding whether to attempt to negotiate a settlement with the payer. Calculate the payer’s error rate, which is the percentage of cases the payer has incorrectly identified as problematic: The higher the payer’s error rate, the stronger your negotiating power.
Providers can make concessions that may facilitate settlement. For example, a provider may commit to improved education and training of physicians, billers, and/or coders; follow-up audits to verify the provider has implemented the agreed-upon corrections; or community service, such as physicians providing teaching opportunities at local medical schools.
Ideally, a settlement agreement should prevent the payer from future “look backs.” The agreement should settle the parties’ dispute with finality, and the payer should agree not to challenge future payments involving the same issue that occurred prior to the settlement. Negotiate for the billing errors to be characterized as administrative errors; and make sure there are no citations, indicia, or allegations of fraud or abuse in the settlement agreement.
If you have agreed to implement changes, such as training or changes in billing procedures, negotiate for enough time to fulfill those obligations (usually 60 or 90 days). Your legal counsel should negotiate the settlement agreement language and draft or review the agreement before you sign it.
If you have any questions or require additional information, please contact the authors.
Dennis Mihale, MD, MBA, is CEO of CMG, CMO/medical director for six healthcare technology companies, an assistant professor at USF’s Medical College, and former IBM and McKesson executive. He built two HMOs and several healthcare technology firms serving as CEO or CMO. Mihale is a major in the U.S. Army Reserve – Medical Corps. You may contact him at firstname.lastname@example.org.
Sidney Summers Welch, JD, MPH, is co-chair of the Healthcare, Life Sciences & Technology practice at Kilpatrick Townsend & Stockton, LLP, where she counsels clients on transactional, regulatory, administrative law, and litigation matters on a national basis. Welch earned a master’s in Public Health from George Washington University School of Medicine and Health Sciences and a Juris Doctorate from Samford University. You may contact her at email@example.com.
Jeremy P. Burnette, JD, MA, is an associate at Kilpatrick Townsend & Stockton, LLP and represents healthcare providers in litigation, white collar defense, administrative law, and regulatory matters. He earned a Juris Doctorate from Georgia State University and a Master of Arts in Clinical/Professional Psychology from Marshall University. You may contact him firstname.lastname@example.org.
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