Using an Improvement Standard to Deny Claims - Part 2 - DoctorsManagement Using an Improvement Standard to Deny Claims - Part 2 - DoctorsManagement

Using an Improvement Standard to Deny Claims, Part 2

“Another Illegal and Unfair Tactic by Some at Payors”

by Sean Weiss, Partner & VP of Compliance

As I sat down to write the remainder of Part II today, I received an email from one of our employees whose family member has been waiting for both a kidney and pancreas for transplant. This morning, the family was notified they found a match of both organs and they are heading to the transplant hospital to get the show on the road. As I shared with our employee this AM, the email brought tears of happiness and sadness for 3 reasons:

  1. A person is being given the most amazing gift of a second chance to live life to the fullest extent, which is just beautiful;
  2. The selflessness of another to gift his/her organs so that others may continue on after they leave this earth;
  3. The fact that someone had to lose their life for another to continue theirs.

While you go throughout your day as a health care professional think about those in need of medical attention and the fact you; regardless of your role as a coder, biller, auditor, educator, administrator, compliance professional, clinician, etc.; play a vital role in the overall care of people. Take pride in knowing that because of your role, you are making a difference in the lives of patients and their families who are going through what might be their greatest struggle. If you have considered being an organ donor, do it, it is the greatest gift you can give and who knows, your organ(s) just might wind up saving the next President of The United States or the next health care professional who saves a life! For more information on Transplantation Services click here.


And now… Part II:

Through many years of handling of ZPIC audit appeals, I have been able to demonstrate that they often fail to comply with Medicare published standards as well as uphold the definition of “Medical Necessity” when making determinations of overpayment. This, again, appeared to be the case with my client. In their findings regarding “Medical Necessity,” the ZPIC painted with broad strokes, excluding or ignoring facts contained within provider documentation that clearly established “Medical Necessity.” The term “Medical Necessity” must refer to what is medically necessary for a particular patient and hence entails an individual assessment rather than a general determination of what works in the ordinary case.


“The terms “Medically Necessary” or “Medical Necessity” shall mean health care services that a physician, exercising prudent clinical judgment, would provide to a patient for the purpose of preventing, evaluating, diagnosing or treating an illness, injury, disease or its symptoms, and that are: a) in accordance with generally accepted standards of medical practice; b) clinically appropriate, in terms of type, frequency, extent, site and duration, and considered effective for the patient’s illness, injury or disease; and c) not primarily for the convenience of the patient, physician or other health care provider, and not more costly than an alternative service or sequence of services at least as likely to produce equivalent therapeutic or diagnostic results as to the diagnosis or treatment of that patient’s illness, injury or disease. For these purposes, “generally accepted standards of medical practice” means standards that are based on credible scientific evidence published in peer reviewed medical literature generally recognized by the relevant medical community or otherwise consistent with the standards set forth in policy issues involving clinical judgment.” Second Circuit Court of Appeals, cited in Kaminski, Defining Medical Necessity


“Medical Necessity” is defined under Title XVIII of the Social Security Act, Section 1862 (a) (I) (a): “Notwithstanding any other provision of this title, no payment may be made under part A or part B for any expenses incurred for items or services which, except for items and services described in a succeeding subparagraph, are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” The preceding is a legal doctrine by which evidence-based, clinical standards are used to determine whether a treatment or procedure is reasonable, necessary and/or appropriate. The Medicare statute requires that any “rule” or other statement of policy (other than a material coverage decision) that establishes or changes a substantive legal standard must be promulgated by regulation, 42 U.S.C 1395hh. However, CMS often fails to promulgate a standard for determining whether a service is reasonable and necessary, which is why courts give deference to the determination of the “treating physician” (Yes, this has been removed but only for claims after 2018; all pending claims are still subject to this rule). United States v. Prabhu, 442 F. Supp 2d 1008 (D. Nev 2006) Clarity of Medical Necessity issues affect whether a claim is “false” and whether the requisite “knowledge” exists. “Claims are not ‘false’ under the False Claims Act (FCA) when reasonable persons can disagree regarding whether the service was properly billed to the government.” Prabhu “A Defendant does not ‘knowingly’ submit a ‘false’ claim when his conduct is consistent with a reasonable interpretation of ambiguous regulatory guidance.” Prabhu

It is important to keep in mind that “Medical Necessity” at the MACs is evaluated on a case-by-case basis, which then opens the door to subjectivity and interpretation as to what potentially benefits the payer. Judge Sam Ervin III of the 4th Circuit Court during the Rehab. Association of Virginia v. Kozlowski, 42 .3d 1444, 1450, stated that Medicare Law is, “[O]ne of the most completely impenetrable texts within human experience” and “dense reading of the most tortuous kind.”

The first section of the Medicare statute is the prohibition that states “Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided.” From this, one could conclude that the beneficiary’s physician should decide what services are medically necessary for the beneficiary, and a substantial line of authority in the Social Security disability benefits area holds that the treating physician’s opinion is entitled to special weight and is binding upon the Secretary even when contradicted by substantial evidence since the practice of medicine and treatments for disease or injury continue to evolve. To further illustrate the point above, in Holland v. Sullivan, the court concluded: “Though the considerations bearing on the weight to be accorded a treating physician’s opinion are not necessarily identical in the disability and Medicare context, we would expect the Secretary to place significant reliance on the informed opinion of a treating physician and either to apply the treating physician rule, with its component of “some extra weight” to be accorded that opinion, even if contradicted by substantial evidence, or to supply a reasoned basis, in conformity with statutory purposes, for declining to do so.”

The other aspect in this case was tied to The Limitation/waiver of liability provides coverage. If the provider “did not know, and could not reasonably have been expected to know,” that payment would not be made due to the reasonable and necessary exclusion (42 U.S.C. S 1395 pp – Prohibition against any Federal interference). The problem that this client, as with so many providers, has run into is how CMS defines Medical Necessity. The fact is there are no actual regulatory provisions, leading CMS to issue broad and nondescript National Coverage Determinations (NCDs) from time to time. Local Coverage Determinations (LCDs) may also be issued but oftentimes are ignored or the ZPIC tries to depend on coverage guidelines not in effect at the time the services were rendered.

In this case as the regulatory expert, it was my professional opinion the ZPIC potentially conducted business on behalf of the United States government that borders on a dereliction of contractual responsibilities. The ZPIC failed to provide due process as evidenced with them using boilerplate responses (Failed to meet “Medical Necessity” without a clear explanation as to what actually constitutes the term) to uphold initial determinations.

There is a lack of appropriate oversight with these contractors resulting in significant abuse of their powers. In a 2015 OIG Report to Congress, the ZPICs are heavily criticized based on their behavior and heavy-handed approach to investigations by those lacking the experience and skills to conduct such investigation. The report states, “Often the ZPIC contractors have had no experience in the areas of fraud and abuse for which they should be accountable. The result is a loss to CMS of fraud and abuse funds and providers, many of which are small to medium sized businesses, are forced to spend thousands of dollars to address unfounded audits and investigations.” According to the report, “The significant lack of oversight of ZPIC contractors, is evidenced by the extreme and ill-founded actions taken by some ZPICs in unwarranted efforts to show CMS a return on investment.” This appeared to be another one of those cases whereby the ZPIC was hoping to prove their worth to CMS by making unjustified claims of impropriety against our client without evidence or proof of improprieties. It was clear in this case that the ZPIC was employing significantly aggressive and over-zealous audits, claims reviews and investigations against a legitimate, not fraudulent, group of healthcare providers. The behavior was irresponsible and reprehensible yet condoned by the Office of Inspector General given the demand made of $29 million from our client. The application of heavy-handed processes in a punitive manner against legitimate providers over minor document infractions was crystal clear in the matter coupled with the fact they knowingly deployed an illegal “Improvement Standard”.

It also demonstrated that the ZPIC failed to comply with Section of the Medicare Claims Processing Manual, which requires that reviews of coding determinations, likewise, must be made by certified coders, “but should also be made by those who possess the requisite skills in the specialty they are reviewing.” We requested a copy of current credentials and demonstration of their requisite skills in Home Health, PT/OT and Skilled Nursing Care to satisfy our right to confirm these reviews were performed by those who actually have a demonstrated knowledge in these areas and that they are not deploying an illegal “Improvement Standard” in making their determinations for disallowing services.

The other frustration we ran into was regarding FOIA requests that were denied improperly, which will be the subject of my next blog. At the end of the day, we got what we needed with a bit of force and a lot of navigating a sometimes-corrupt system, which is supposed to work for the people not against them. So, I am guessing you are wondering what ultimately happened. For the first time in my 24-years of working on health care cases, my Executive Summary for the law firm I was working for was submitted to CMS Region I in Boston who reviewed all of the facts in the case and recognized the unethical and borderline illegal behavior of the ZPIC and the fact that the OIG failed in its duty to ensure integrity and a fair investigation. Our client received a notice 45-days after our submission to CMS Central that they were suspending any and all further action against them in the matter. However, pending further review they may reopen the case and seek damages. It took approximately another 3-4 months to hear back from CMS that they determined the matter was handled wrong and that they agreed with our arguments resulting in them closing the case permanently and reversing the demand of $29 million. While this was a great win for the client, it did come at a significant cost both financially and reputationally. But here we are 15-months or so later and with hard work and a show of dedication to the local community, they are again a thriving organization!

What to do next…

  1. If you need help with an audit appeal or regulatory compliance concern, contact us at (800) 635-4040 or via email at
  2. Read more about our: Total Compliance Solution

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