Claim reversals are among the many financial and legal risks that pharmacies face on a daily basis. When accused of improperly billing Medicare or Medicaid, pharmacies can face full liability for the alleged overpayments; and, in many cases, these accusations can lead to other penalties as well.

As a result, avoiding overpayments (and the risk of pharmacy claim reversals) needs to be among pharmacies’ top compliance priorities. Since facing billing audits and investigations is an omnipresent concern, pharmacies need to be prepared to respond to claim reversals as well. By taking a comprehensive approach to Medicare and Medicaid billing compliance management, pharmacies can not only mitigate their risk of facing scrutiny, but they can also ensure that they are prepared to respond to scrutiny when necessary.

“Pharmacy owners and executives must acknowledge the very real risk that compliance program shortcomings and inadvertent billing errors can both lead to recoupment liability. In light of this risk, all pharmacies that bill Medicare and Medicaid need to take a comprehensive and custom-tailored approach to managing billing compliance.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

From ineffective Medicare and Medicaid billing compliance protocols to inadequate internal monitoring and enforcement, numerous issues can lead to improper claims, overpayments, and pharmacy claim reversals (among other penalties). With this in mind, a comprehensive approach is essential for mitigating pharmacies’ enforcement risk on an ongoing basis.

5 Tips for Avoiding Pharmacy Claim Reversals (and Reducing Reversal Rates)

This article covers tips for both avoiding and responding to pharmacy claim reversals, with an emphasis on mitigating pharmacies’ risk of inadvertent noncompliance. By identifying potential compliance concerns and addressing these concerns proactively, pharmacies can minimize their risk of facing a billing compliance audit or billing fraud investigation—both of which can lead not only to claim reversals, but to other penalties as well.

Here are five tips for avoiding pharmacy claim reversals:

1. Take a Practical (and Comprehensive) Approach to Medicare and Medicaid Billing Compliance

While pharmacies’ Medicare and Medicaid billings are subject to strict standards, there is not a “standard” approach to billing compliance that will work for all (or even most) pharmacies. Instead, when implementing Medicare and Medicaid billing compliance programs, pharmacies must take a practical approach focused on doing what they need to do in order to maintain compliance within the unique aspects (and confines) of their practices.

With that said, comprehensiveness is essential as well. When it comes to Medicare and Medicaid billing compliance, even a single shortcoming can lead to improper billings and the risk of facing pharmacy claim reversals. By taking a custom-tailored approach to complying with all pertinent Medicare and Medicaid billing rules when billing for prescription medications dispensed to covered patients, pharmacies can bill both of these programs with confidence.

2. Ensure that All Pharmacy Personnel Understand Their Role in Billing Compliance Management

A key aspect of Medicare and Medicaid billing compliance management is ensuring that all pharmacy personnel understand their role in the process. From creating and storing accurate patient records to choosing the correct billing codes, all personnel will have an important role to play.

This means that adopting a pharmacy billing compliance program involves much more than disseminating the pharmacy’s written policies and procedures. Training is also essential. Training programs need to be custom-tailored to individual roles within a pharmacy’s organization; and, along with clearly explaining what employees need to do (and avoid doing), these training programs should emphasize the importance of compliance (and the potential consequences of noncompliance) as well. This includes compliance at all stages of the prescription fulfillment lifecycle--from accepting prescriptions from physicians and other healthcare providers to dispensing prescription drugs and billing Medicare and Medicaid.

3. Implement Procedures to Systematically Document and Monitor Billing Compliance on an Ongoing Basis

Even when pharmacies take the necessary steps to implement effective billing compliance policies and procedures and provide adequate training to their employees, it is still essential that they document and monitor their Medicare and Medicaid billing compliance efforts on an ongoing basis. Not only are inadvertent billing mistakes still possible (and, ultimately, to be expected); but, when facing scrutiny from the Centers for Medicare and Medicaid Services (CMS) or one of CMS’s fee-for-service auditors, being able to affirmatively demonstrate compliance can be essential for avoiding unwarranted pharmacy claim reversals.

By implementing systematic procedures for documenting billing compliance and conducting regularly scheduled internal billing compliance audits, pharmacies can both effectively manage compliance and ensure that they have the documentation they need to withstand scrutiny when necessary. As discussed below, these steps are critical for managing compliance with the Overpayment Statute (which is also critical for avoiding claim reversals) as well.

4. Implement Procedures to Comply with the Overpayment Statute When Necessary

Not only do pharmacies have an obligation to properly bill Medicare and Medicaid; but, when they improperly bill Medicare or Medicaid, they have an obligation to fix the issue promptly. This obligation exists under the federal Overpayment Statute and the regulations implemented under the statute by CMS.

Under recent amendments to CMS’s regulations, pharmacies must rectify overpayments within 60 days of “knowingly receiv[ing] or retain[ing] an overpayment.” Here, the term “knowingly” has the meaning prescribed to it under the False Claims Act (which imposes penalties for improperly billing government programs). Under the False Claims Act, “knowingly” retaining an overpayment can include not only intentionally ignoring an obligation to repay, but also failing to take the necessary steps to determine whether repayment is necessary.

5. Be Prepared for the Possibility of Facing Scrutiny from CMS or a Medicare or Medicaid Auditor Focused on Reversing Claims 

Taking a comprehensive and good-faith approach to Medicare and Medicaid billing compliance won’t necessarily prevent pharmacies from facing scrutiny. In fact, all pharmacies should expect to face scrutiny of their program billing records from time to time. In many cases, being prepared for this scrutiny can be the difference between facing unwarranted claim reversals and coming out at the other end unscathed.

Being prepared for the possibility of facing scrutiny from CMS or a Medicare or Medicaid auditor means adopting protocols for responding to inquiries from these entities. Just like the compliance process, the process of fending off allegations of non-compliance requires a systematic approach tailored to a pharmacy’s specific risks and capabilities.

5 Tips for Responding to Pharmacy Claim Reversals

Now, let’s say it’s already too late. If your pharmacy is facing claim reversals due to allegations of Medicare or Medicaid billing non-compliance, what can (and should) you do?

Here are five tips for responding to pharmacy claim reversals:

1. Promptly Assess the Validity of the Claim Reversal

Not all pharmacy claim reversals are valid. In fact, pharmacies routinely face unwarranted allegations of noncompliance from MACs, RACs, UPICs, and other fee-for-service Medicare and Medicaid auditors. As a result, when faced with a claim reversal, it is critical to promptly assess the reversal’s validity. When claim reversals are invalid, pharmacies should focus on identifying and correcting the auditor’s flawed assumptions, calculations, or interpretations of the pertinent billing rules. On the other hand, when claim reversals are valid, an entirely different approach is necessary.

2. Conduct a Comprehensive Internal Medicare and Medicaid Billing Compliance Audit

Regardless of the validity of any individual claim reversals, when facing Medicare or Medicaid-related scrutiny, it is important to have a clear and comprehensive understanding of the pharmacy’s compliance record. This means conducting a comprehensive internal Medicare and Medicaid billing compliance audit. Understanding any and all billing-related risks will be critical for making informed and strategic decisions going forward.

3. Realistically Assess the Pharmacy’s Risk of Facing Additional Recoupment Liability (and Other Penalties)

Medicare and Medicaid billing violations can present a variety of financial and legal risks. Along with pharmacy claim reversals, billing violations can also lead to prepayment review, fines, loss of Medicare or Medicaid eligibility, and even criminal prosecution in some cases. With this in mind, if your pharmacy is facing claim reversals, it is important to realistically assess what other risks it may be facing as well.

4. Develop a Targeted Strategy to Work with CMS or the Medicare or Medicaid Auditor

In many (but not all) cases, taking a proactive approach to working with CMS or a fee-for-service auditor like a MAC, RAC, or UPIC will help facilitate a favorable resolution that avoids unnecessary claim reversals and other adverse consequences. However, this requires a targeted strategy with a specific end goal in mind. Once you have assessed your pharmacy’s risk, you should be able to determine what outcomes you can reasonably expect to achieve, and then you should work toward achieving your targeted outcome efficiently and cooperatively—but without unnecessarily sharing records or information that could lead to further scrutiny.

5. Implement Billing Compliance Program Reforms as Necessary to Mitigate the Pharmacy’s Risk Going Forward

Finally, if your pharmacy has overbilled Medicare or Medicaid, it will be important to implement appropriate billing compliance program reforms to prevent similar issues going forward. Here too, a comprehensive and custom-tailored approach is essential. From accurately billing Medicare and Medicaid to complying with the Overpayment Statute when necessary, implementing practical reforms that allow your pharmacy’s personnel to efficiently manage compliance will be critical for avoiding additional recoupment liability (and potentially additional civil or criminal penalties) in the future.