The Recovery Audit Contractor (RAC) program is an integral part of the Center for Medicare and Medicaid Services’ (CMS’) “benefit integrity” efforts that seek to identify and recoup alleged overpayments paid to Medicare providers.

While the RAC program is still being expanded in many parts of the country (to cover not only hospitals, but also other providers and types of Medicare claims), health care providers should be aware that the Zone Program Integrity Contractors (ZPICs) are already active in many areas and actively auditing physicians, home health agencies, hospices, DME companies, therapy clinics, chiropractors and other small to mid-sized health care providers.

Despite the “hype” surrounding RACs, ZPICs currently represent a significantly greater risk to nonhospital providers than RACs. The purpose of this article is to examine a number of the differences between these Medicare contractor programs.

What are the chances of your practice getting reported by a ZPIC or RAC to HHS-OIG or DOJ for possible fraud violations?

While both contractor programs are designed to “find and prevent waste, fraud and abuse in Medicare,” the fact is that to date, ZPICs have been much more likely than RACs to report possible incidents of “fraud” that are identified while conducting a medical review. 

Frankly, it makes sense. RACs make money by identifying alleged overpayments, not by making fraud referrals to law enforcement. Notably, as a result of recent criticism by HHS-OIG, CMS will will require RACs to be much more diligent in the future about making referrals to law enforcement when it appears that a health care provider’s conduct represents fraud rather than merely an overpayment.

CMS has provided training to RACs on how to identify fraud in the near future. Importantly, an RAC denial of claims that results in a provider repayment will not necessarily prevent HHS-OIG from investigating and making a referral to DOJ for possible prosecution, as appropriate, if there are allegations of fraud or abuse arising out of the alleged overpayment.

To reduce the likelihood of referral, it is essential that Medicare providers take affirmative steps to better ensure that their practices are compliant with applicable statutory and regulatory requirements. This year – 2011 – is the “Year of Compliance.” All providers, regardless of size, should take steps to implement an effective compliance program.

What is different about ZPICs and their predecessors, PSCs?

Both ZPICs and Program Safeguard Contractors (PSCs) readily point out that they are not “bounty hunters.” ZPICs are not paid contingency fees like RACs, but are paid directly by CMS on a contractual basis. Nevertheless, common sense tells us that if ZPICs aren’t successful at identifying alleged overpayments, the chances of a particular contractor getting a contract with CMS renewed are pretty slim. 

Experience has shown that neither ZPICs nor PSCs always appears to strictly adhere to medical review standards established by Medicare Administrative Contractors (MACs) and approved by CMS. In our opinion, there appear to have been cases where these contractors applied their own unwritten standards, often denying claims based on conjecture and speculation rather than a strict application of the applicable LCD or LMRP.

In any event, over the last year, both ZPICs and PSCs have been increasingly placing health care providers on pre-payment review, conducting post-payment audits and recommending suspensions of payment. Additionally, in many cases, they have been extrapolating the alleged damages based on a sample of claims reviewed.

Finally, as previously discussed, identified instances of potential fraud are being referred by ZPICs and PSCs to HHS-OIG for possible investigation, referral for prosecution and/or administrative sanction.

What sources of coding/billing data are used by ZPICs?

ZPICS are required to use a variety of techniques, both proactive and reactive, to address any potentially fraudulent practices. Proactive techniques will include the ZPIC IT Systems that will combine claims data (fiscal intermediary, regional home health intermediary, carrier and durable medical equipment regional carrier data) and other sources of information to create a platform for conducting complex data analyses.

By combining data from various sources, ZPICs have been able to assemble a fairly comprehensive picture of a beneficiary’s claim history regardless of where the claim was processed. The primary source of this data is reportedly CMS’ National Claims History (NCH) database.

How do ZPICs conduct medical reviews?

ZPICs conduct medical reviews of charts to determine, among other things, whether the service submitted was actually provided, and whether the service was medically reasonable and necessary. Based upon their findings, ZPICs may approve, downcode or deny a claim. To date, we have never seen a ZPIC conclude that a claim should have been coded at a higher level – only a lower level.

Regrettably, ZPICs are not required to have a physician review a claim in order to deny coverage. In most of the cases on which we have worked, the contractor’s medical reviewer has been a registered nurse. While some federal courts have found that a treating physician’s opinion should be given paramount weight, others have ruled that the opinion of a treating physician should not be given any special consideration.

Generally, ZPICs have completely disregarded the “Treating Physician Rule,” despite the fact that a patient’s treating physician was the only provider to have actually seen and assessed the patient at issue.

How should you respond to a ZPIC audit?

In responding to a ZPIC audit, it is important to remember that although they may not technically be “bounty hunters,” in our opinion, they are in the business of finding fault. Moreover, they are quite adept at identifying “technical” errors, many of which they will readily cite when denying your Medicare claims.

Regardless of whether you are contacted by an RAC, a ZPIC or a PSC, it is essential that you take care when responding to a request for medical records. Contact a qualified health lawyer when responding to a Medicare audit.

Robert W. Liles, J.D., M.S., MBA, is a health lawyer and managing partner with Liles Parker PLLC. Liles Parker has offices in Washington, D.C., Houston, Texas, and San Antonio, Texas. Prior to entering private practice, Liles served as an assistant U.S. attorney. He now represents health care providers around the country in connection with administration, civil and criminal health law issues. He has extensive experience defending providers in audits by ZPICs, PSCs and other Medicare/Medicaid contractors.

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