Every Medicare provider should understand the Medicare administrative appeals process. Providers are entitled to be reimbursed for their services and want to keep those reimbursements safe from audits. However, if Medicare makes an overpayment demand, understanding the process and what is required to defend those reimbursements can assist providers in better navigating the lengthy appeals process.

The Medicare administrative appeals process has five levels:

• 1st level: Request for Determination

• 2nd leve: Request for Reconsideration

• 3rd level: Request for ALJ Hearing

• 4th level: Medicare Appeals Counsil

• 5th level: Federal District Court

However, the Medicare appeals process starts well before the first level listed above when a provider receives a medical records request, also known as an additional records request. These requests can come from different Medicare contractors, for example, a Medicare Administrative Contractor (“MAC”) or a Unified Program Integrity Contractor (“UPIC”). The type of contractor who is sending the request lets providers know what type of audit is occurring. For example, if a provider receives a records request from a UPIC the provider is on notice that there are fraud and abuse concerns associated with those claims and counsel should be immediately engaged.

Responses to these records requests are critical to the outcome of the rest of the audit process. Providers should immediately reach out to their counsel and/or trusted consultant when gathering the responsive documents. Responses to these records requests should be thorough and sometimes will require that a provider provide documentation not requested or documentation from a referring clinician.

The contractors should review the records provided and make decisions on a per claim basis as to whether there was an overpayment or if there is evidence of fraud and abuse in the submission of the claim(s). Lack of medical necessity is a common basis for denying claims. Here is it important for providers to recognize that there is a difference between medical necessity for reimbursement and coverage purposes and a clinician’s determination of clinical medical necessity (what is the best care for the patient). The second one is immaterial to payment of the claim if it does not comply with Medicare’s reimburse and coverage requirements for medical necessity.

When the review is final, Medicare contractors have the option, under certain circumstances, to extrapolate the results to a total overpayment over a certain date of service range. For example, typically 20-60 records over a certain date of service range are requested. If the contractor feels 60% of those claims should be denied, then it can extrapolate that error, or denial, rate to the entire universe of similar claims in that same date of service range.  An overly simplistic description of this follows: if the contractor requests 100 records and of those records determines that 60 of them should not have been paid, it will then undertake a statistical extrapolation and the overpayment will be applied to 60 percent of all claims for those billing codes for that date of service range. This can, and has, resulted in extrapolating a claw-back amount of as little as, for example $8,000, into a total overpayment demand of over a million or several million dollars. This option to extrapolate is just one reason why it is critical to provide sufficient documentation to support every claim in the records requested as each denial can have a significant impact on the total overpayment demand. 

After reviewing the claims, if an overpayment is found, the contractor will send an overpayment demand, often called an Initial Request that triggers the deadlines associated with the Medicare administrative appeals process. It is recommended that if counsel and consultants are not already engaged that they be engaged immediately upon receipt of the Initial Demand. If the overpayment is extrapolated, then the provider should consider whether to engage an expert to analyze and if possible, challenge the extrapolation. If an appeal is not filed or is not timely filed, then the contractor can begin recouping the overpayment from other claims submitted by the provider. The provider has two opportunities during the appeals process to prevent recoupment, once at the 1st level, the Request for Redetermination, and again at the 2nd level, the Request for Reconsideration. However, once the Reconsideration Decision is issued, CMS will begin recoupment and there are no further opportunities to stop recoupment.

There are many other types of audits as well, including the Targeted Probe & Educate (TPE) audits, the Supplemental Medical Review audits, and the Recovery Audit Contractor (RAC) audits; each of which provide providers with an opportunity to obtain education on the claims reviewed directly from the relevant contractor.

Based upon the amount of money that was expended during the height of the COVID-19 public health emergency, Medicare (and all payors) will be aggressively reviewing claims trends and data to initiate audits to recoup as much as possible. Providers should be implementing and reviewing their proactive internal audit processes and records policies to hopefully avoid audits, and, if necessary, to more easily defend against the audits as they arrive.