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Under the Microscope: The OIG Payment Crackdown, Part 2

In the first of this three-part series, we provided the background on two recent OIG reports important to the ambulance industry (A-09-17-03018 and A-09-17-03017, respectively). Through data analysis, the OIG—Health and Human Services’ Office of the Inspector General—detected overpayments based on modifier and HCPCS combination issues for “impossible” and/or noncovered Medicare transports. In this article we explore the ripple effect of the government’s response to these reports.

First, although the OIG instructed the MACs (Medicare administrative contractors) to take steps to recover overpayments for the transports identified in the reports, the OIG actually took the lead in sending out some of these letters. Several ambulance services received letters indicating possible civil monetary penalties related to improper payments. All those cases involved a common thread: a significant number of claims (we’re talking thousands of transports) with noncovered destinations. These cases continue to progress with the exchange of information between the ambulance services and OIG—some are close to resolution and settlement, others still poring through data and individual claims.

One of these cases highlights an issue that might be more common than you’d think. The OIG identified over 2,000 transports made from H-D (hospital to diagnostic/therapeutic center). All these transports were actually made to a hospice facility, and the ambulance service used the D modifier believing it was appropriate, since hospice is a “therapeutic” service. Another case involved many transports that were billed to a D but could have more accurately been billed as an H because, even though the patient was receiving a diagnostic or therapeutic service, that service was being done in a hospital setting, and the patient was actually registered as an outpatient for the service.

For cases that involve a smaller number of transports, we’ve seen the MAC issue overpayment demands that seek immediate refunds. In some of these cases, the MAC merely cites an overpayment amount, giving minimal explanation of the affected claims or precise issue that triggered the alleged overpayment. In several cases an ambulance service received letters from both the OIG and the MAC. Thus, two arms of the government were both seeking refunds for the same transports!

Concessions and Appeals

Of course, as with any overpayment demand, the ambulance service has appeal rights. In order to prevent offset/recoupment, it might be important to appeal quickly or repay the identified overpayment amount. Of course, interest will continue to accrue if a refund is not made, and appeal rights are not lost if repayment occurs. In some cases there might be viable defenses, including coding errors. Seeking a reopening (in addition to, in lieu of, or in conjunction with the appeal) is advised, especially if there were coding errors. Naturally, if you agree the claims should not have been paid and you have no defense, you should concede the overpayment (in whole or in part).

However, conceding overpayment is not always a simple decision. On the one hand, making a few concessions shows that you’re acting in good faith with the government in the appeals process and fighting for those that you are most passionate about. On the other, there might be legal arguments to protect you in most (or all) of the overpayment demands (such as “without fault” provisions of the Social Security Act). If you are contemplating an appeal, consider using legal counsel experienced in the Medicare appeals process who can assess your case and make appropriate arguments to protect your interests.

A Third Arm

Another way we’ve seen the government respond to these OIG reports has been through the supplemental medicare recovery contractor (SMRC)—yes, a third arm of the government has reviewed these claims in some cases. The SMRC letters are not allegations of fraud or program abuse for which penalties exist (as with the OIG letters) or overpayment repayment demands (like the MAC letters). Instead, the SMRC makes an additional document request. Usually only a handful of claims are requested by the SMRC. The SMRC is a legitimate Medicare contractor with every right to seek additional information and perform audits. If you receive a letter from the SMRC, you must respond, even if it means conceding that claims were paid in error and even if your MAC has also requested repayment. After reviewing the documents, the SMRC will ultimately determine whether overpayments exist and, if so, refer the matter to the MAC for processing. In responding to any SMRC document request, you should explain what may have occurred to lead to the billing decisions and subsequent overpayments.

Moving forward, we recommend that organizations do not wait for a letter from the OIG, their MAC, or the SMRC. Instead be proactive and perform some self-audits. Use your billing software to run a report looking for things like A0427 (ALS emergency) or A0429 (BLS emergency) HCPCS codes with destination codes other than H. Similarly, you could run a report seeking transports made to D or S as noncovered destinations. Once you review such transports, make refunds if things were billed and paid incorrectly. Alternatively, if you discover a coding error such that the trip is still payable but should have been billed differently (i.e., with a different modifier), consider making a reopening request to correct this error and still keep your money. Being proactive by making voluntary refunds should not (and we have never seen it) trigger further audits or other negative ramifications from the government. Instead, making voluntary refunds of self-identified overpayments is expected by the government and is an indication of an effective compliance program.

Dan Pedersen and Christopher Kelly are lawyers with Page, Wolfberg & Wirth LLC, who focus on regulatory healthcare law as it relates to the EMS and ambulance industry. This article is not intended as legal advice. For more information or assistance with any overpayment appeals, reach them at 717/691-0100 or by e-mail at or

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