Home Health Agency Appeals ZPIC & Wins

Home health agencies know that overzealous survey and fraud programs can do more harm than good.  A Texas agency knows this all too well. Family Rehabilitation Inc. located in Texas went head to head with its Medicare Administrative Contractor and Fiscal Intermediary, Palmetto GBA, and received some relief.

The Family Rehab story begins with a Zone Program Integrity Contractor (ZPIC) auditing 43 charts and claims in 2016.  The ZPIC determined that 93% of the claims submitted and audited were overbilling Medicare.  The ZPIC, under authority of CMS, who was forced to create the program as part of prior healthcare legislation, used the overbilling rate to determine fraud.

The ZPIC’s calculated error rate for Family Rehab turned out to be 93%.  Medicare, as in many home health agencies, made up the majority of the payer mix for Family Rehab totaling 94% of all reimbursement.

Family Rehab received a demand letter from Palmetto which requested the agency repay $7.89 million in excess reimbursement. For any agency, a demand letter to repay a large amount can be crippling. But to owe almost $8 million without the ability to appeal or go through a process of adjudication is against the regulations and statutes.  However, as many agencies know, intermediaries often create their own rules.

Rules from intermediaries vary widely and do not always conform to federal regulations.  At the same time, CMS tends to look the other way, taking a victory lap as they declare themselves a winner in the war on healthcare fraud.  Anyone that has been in healthcare for more than 6 months knows the terms fraud, abuse, and waste are fluid and seem to have varying definitions depending on whom you ask.

The agency tried to use the formal appeals process, first requesting Palmetto to redetermine and review the overpayment.  Palmetto decided that they didn’t want to do this (you’re really shocked at this point, right?). Family Rehab then moved on to the second step which is another request for reconsideration to a ‘Qualified Independent Contractor’ which Palmetto agreed to, but the result was not favorable for the agency.

In any situation like this, agencies have a third level of appeal which is to have a hearing before an administrative law judge to have the claims and issues reviewed.  However, a little-known caveat to this third level appeal does exist.  Once a Qualified Independent Contractor makes a judgment favorable to the government, the contractor, Palmetto in this case, can move forward with the recoupment.  So much for being innocent until proven guilty, right?

Family Rehab had few choices left at this point.  Facing a recoupment starting in November 2017, the agency pressed on.  They escalated the issue to the third level of appeals, the administrative law judge.  The request was granted as it usually is, but then the devastating news came back. An appearance before the administrative law judge would not occur for at least three to five years.

Now with the agency essentially being forced to close, Family Rehab went to court.  The first proceeding was held in district court and the judge threw the case out based on jurisdiction.  Family Rehab appealed and took the case the Fifth Circuit Court of Appeals.  Finally with some success, the judge was able to grant the agency some relief.

The Fifth Circuit ruled that because of the harm caused to the agency by Palmetto, they remanded the case, sending it back to district court. During this process, the Fifth Circuit judge also issued an injunction preventing Palmetto from collecting on the supposed over billing.

This case is going to be closely monitored all over the healthcare community.  These types of determinations by ZPICs and intermediaries effect more than home health agencies. Almost all providers are subject to claim reviews and different types of recovery audits.  While not every agency is perfect, most do try to provide services in accordance with all regulations and few try to skirt the rules.

Should this case succeed, the ability for CMS to force providers to pay large sums back for what’s deemed overbilling – potentially abuse and waste, will be reexamined. Providers may actually have the ability to go through proper appeals and receive an actual response rather than just a forced acceptance of the situation.

Providers also have another case on their side regarding the long overdue adjudication of claims. As previously reported, CMS has been getting sued for many different reasons related to its long delay of processing third level appeals with an administrative law judge.

Our take on this situation is this:  The agency has every right to appeal as any agency does.  It is always recommend to appeal and push more appeals.  However, we also have to look at the agency in question and determine – is there really something going on that doesn’t look right?

Not every agency charged with fraud or being investigated for fraud is guilty. But at the same time with the massive amounts of data CMS has at its fingertips, why aren’t more targeted audits and recoupments being made? The industry as a whole should not be forced to succumb to ridiculous regulations while at the same time being forced to accept less to do more.

Advanced data mining and analytics can easily pinpoint those agencies who seem to have poor billing practices and questionable tactics. But why aren’t CMS and the intermediaries using this data? It’s a question that really needs to be answered and it should be brought up by the national and state associations.  However, we have learned over time that neither group of these ‘advocates’ do much unless you’re a big VNA or a publicly traded agency.

For small agencies – for profit or non-profit – the national association and the state associations don’t have your back, but we do and we’ll continue to look out for you.  If you are a member of any of these associations, it might be worth it to reevaluate your contributions and whether or not the value still exists.  Over and over again, we hear how the little guy gets left behind while only the big boys get to play.

We’ll be providing more information and analysis over the coming months on this case as it progresses.  We’d love to hear from you as well. Please send us thoughts, comments and experiences to hht@tortolanoandco.com. Our goal is to keep you informed, up to date and in compliance while making money in accordance with regulations.  –  HHT

CONTACT US