By Wayne van Halem, President, The van Halem Group
What can you expect to see from an audit and compliance perspective in 2024? I think it’s going to be an interesting year. There are a number of things happening that could impact our clients. We are monitoring them, but would like to break down a few for you.
Audit Volumes
Audit volumes already began increasing as the Public Health Emergency (PHE) ended. We are seeing Targeted Probe and Educate (TPE) audits on respiratory equipment return. Unfortunately, for a variety of reasons, we anticipate that this volume will continue to increase through 2024. This probably does not come as a shock to most of you, but there is more to it than just the end of PHE. For example, the Administrative Law Judge (ALJ) backlog is now resolved, and hearings are being decided within the required 90-day time frame. This is good news for suppliers. But the reality is that the Office of Medicare Hearings and Appeals (OMHA) was staffed up to manage the backlog, and the appeal volume is still lower than usual, which means the judges will have some spare time. The only way to fill their time is to have more appeals in the system to work on—and audits lead to appeals.
The Recovery Audit Contractor (RAC) program will be the most likely tool that CMS will use, although I am hopeful that CMS learned from past mistakes and does not let the RACs have carte blanche to audit. This approach is what led to the previous appeal backlog, but CMS has implemented a new approval process for the RACs where they are only given provisional approval to audit a certain volume of claims. Once that is done, they analyze the impact on the administrative appeal system.
As long as CMS maintains this process and has necessary oversight of the RAC, I am hopeful we will not see the extreme volumes we saw previously. That being said, the FY 2024 President’s Budget proposes $164 million for OMHA, a slight increase over the FY 2023 Enacted. At this level, OMHA maintains support for 107 administrative law judge teams and the number of full-time equivalent staff needed to meet the 90-day requirement, so the lack of budget cuts being proposed is an indication that they anticipate the workload will increase.
Program Integrity
Additional funding has also been proposed for program integrity activities in FY 2024. The budget invests $5.2 billion in new mandatory and discretionary Health Care Fraud and Abuse Control (HCFAC) resources over the next decade at HHS and the U.S. Department of Justice to address rapidly growing fraud, waste, and abuse threats and schemes. These HCFAC investments, plus new legislative authorities to strengthen program integrity oversight, is expected to yield $19.7 billion in savings over 10 years. This type of spending increase will likely result in an increase of audit and investigative activities by both commercial and government payers, as the HCFAC is a comprehensive program that was designed to combat fraud committed against all health plans, both public and private.
Audit Targets
I see the following product categories being a focus on audits in the coming year:
- Continuous Glucose Monitors (CGM) and Supplies – When CMS waived the CGM requirements during the pandemic, the flood gates were opened. Suppliers throughout the country entered the CGM market. As a result, claim volumes increased significantly. In communicating with CMS, they have indicated they have concerns over the increased volume. They indicated they have no desire to take CGMs away from beneficiaries, but they would like to make sure that the equipment is being utilized as intended. While they expanded coverage for CGM, they did reinstate the requirement that the beneficiary is seen every six months, which will be a likely focus of future audit activity. In addition, I believe there are a number of bad actors who have gotten into this market who may be utilizing similar business practices as the unscrupulous orthotic bracing suppliers, with lead generation and questionable marketing practices. This had led to an increase in beneficiary complaints alleging that they were receiving CGM and supplies they had never requested.
- Oxygen – We are now seeing the first TPE audits in the oxygen product category since the policy was waived at the outset of the PHE back in 2020. This, coupled with the fact that there is a significantly revised coverage policy that has been implemented, means there is a lot of uncertainty with how these audits will go and what the DME Medicare Administrative Contractors (MACs) will be looking for. It is still too early to tell.
This is challenging for suppliers as you have to train and retrain staff on what to be reviewing for since there have not been audits in this product category for the past three years.
- Positive Airway Pressure (PAP) Devices and Supplies – Similar to oxygen, this product category has not seen audits in quite some time, but that has changed. PAP and supplies seemed to be the first area where CMS picked back up with the audits, and we anticipate that continuing. While the policy has not changed, the lack of audits for the past three years makes it difficult to ascertain what they will focus on as part of their reviews. Regardless, previous Office of Inspector General (OIG) audits in this product category resulted, in my opinion, in an inflated and exaggerated error rate, so it is likely that the contractors will focus efforts in this category.
- Ventilators – Vents were a focus of audit activity prior to PHE and we are likely to see that return. The OIG has been doing a survey of ventilator suppliers to determine the amount of time and costs associated with taking care of vent patients, which is interesting. There have also been some fairly recent enforcement actions taken against some large suppliers related to monitoring usage of the equipment, so I do believe that, along with medical necessity, will be a driving factor in these audits. Managed care plans have also been denying a large volume of ventilators during the prior authorization process, which has drawn criticism from the supplier community, and involved a response from CMS. There are several potential possibilities of changes with this product category, from reduced reimbursement and adjusted benefit category to development of additional policy guidelines or utilization parameters, that it will make for an interesting year.
- Orthotic Braces – This continues to be a focus of all oversight entities, primarily driven by the Operation Brace Yourself initiative, where Department of Justice (DOJ) estimated $1 billion in fraudulent activity exposed by orthotic bracing suppliers utilizing illegal marketing practices, paying kickbacks, and billing for services not rendered or not needed. The Supplemental Medical Review Contractor (SMRC) just recently added braces to their list of upcoming audits, and they were already included on the RAC and TPE list. There is also a concern that with the pause of the competitive bid program for bracing effective Jan. 1, 2024, there will be a return to the questionable billing practices that occurred previously.
However, it does appear that CMS has a much more rapid and effective response to these activities as they did previously. I say this because in recent months, we have received calls from multiple suppliers of braces who were new to the DME and bracing business, who had CMS payment suspensions implemented within the first six months of doing business. I hope that CMS and the contractors are on top of this issue and close down the unscrupulous suppliers quickly and effectively. Unfortunately for the legitimate suppliers following the rules, this will also put a target on the claims you submit for these products.
- Repairs – The OIG has released two reports in the past year that focus on Power Mobility Device (PMD) repairs. In the first report, the OIG estimated $8 million in overpayments stating specifically, documentation did not adequately support the charges for PMD repairs, the labor time associated with PMD repairs was not documented, or PMD repair charges were not reasonable and necessary. This report is flawed because we represented clients in almost 40 appeals of these claim denials and 100% of the denials were overturned. The second report, which was performed solely on data analysis, focused on the cost of cumulative repairs during the five-year reasonable useful lifetime exceeding the 60% of the cost to replace the items. This report, which is also flawed and biased, estimates approximately $30 million in overpayments. As a result of these two reviews, we are already seeing an increase in audit activity on wheelchair repairs, which many suppliers stopped doing already because they were not getting reimbursed properly. I anticipate this trend will continue in 2024.
Increased Medicaid and MCO Activity
The last topic I want to focus on is the result of yet another OIG report recently released that audited the Unified Program Integrity Contractors (UPICs). This report found that the UPIC, who are funded to perform audits for Medicare, Medicaid, and MCOs, were performing a higher volume of Medicare audits than they were on Medicaid and managed care claims. As a result of this, the OIG recommended that the UPICs focus more oversight efforts on Medicaid and managed care claims. Therefore, we are already seeing an uptick of activity with Medicaid and anticipate that will continue through 2024 as well.
Final Thoughts
2024 will be an interesting year for suppliers. While we have some clues on what we can anticipate, much of it is still up in the air. As the return to higher audit volumes and changes in policies are implemented and reviews are completed, we may know more about their focus, but for the time being, it looks like we will continue to monitor the situation and advise our clients when we see new trends that could impact them. One thing I feel confident in is that audits are back and will be an issue that suppliers will be dealing with throughout 2024. I will recommend taking advantage of the administrative appeals process again since the backlog is resolved. With a well-presented case, we still see a majority of the denied claims we appeal reversed in the appeal process. For more up-todate information, follow our blog here.
This article was originally featured in the VGM Playbook: Forecasting 2024. To read the full article and more like this, download your copy of the playbook today!