Commercial Audits and Appeals White Paper - Part 3

In addition to the standard process discussed above, PRIRA also offers an expedited external review process for situations where (1) the normal time frame for review “would seriously jeopardize the life or health of the covered person or would jeopardize the covered person’s ability to regain maximum function as substantiated by a physician either orally or in writing,” and (2) the covered person has filed a request for an expedited internal grievance.⁸⁰ The request for expedited external review must be made within 10 days of receiving the adverse determination.⁸¹ Although the standards are substantially similar to the normal review process, the time frames for processing the expedited review are significantly compressed.⁸² The Director is required to give immediate notice to the health carrier, and assign an IRO if it determines the reviewability requirements, discussed above, are met.⁸³ The health carrier has 12 hours to provide the necessary documents and information to the assigned IRO, which it can accomplish by any expeditious method including by telephone, fax or e-mail.⁸⁴ The IRO may consider the same additional categories of information as in the standard external review process if that information is available and appropriate, including cases that involve issues of experimental or investigational services or treatment.⁸⁵ The IRO must deliver its recommendation to the Director no later than 36 hours from the date the Director received the request for expedited review.⁸⁶ As with the standard external review process, the IRO is not bound by any decisions or conclusions of the health carrier’s utilization review process or internal grievance process.⁸⁷ After immediately reviewing the recommendation to ensure that it is not contrary to the terms of coverage under the health benefit plan, the Director then has no more than 24 hours to complete her review of the IRO’s recommendation and notify the covered person whether to uphold or reverse the adverse determination.⁸⁸ The health carrier must immediately approve coverage upon receipt of the Director’s written notice, if the Director’s notice reversed the adverse determination.⁸⁹

Although the Director’s decision is the final administrative remedy available under PRIRA, a person aggrieved by the decision may seek judicial review no later than 60 days from the date of the decision.⁹⁰ The appropriate venue for appealing the decision is the circuit court where the covered person resides or in Ingham County Circuit Court.⁹¹ As the decision is a final decision of an agency, the aggrieved party may file a claim of appeal as of right.⁹² Because the time limit for filing an appeal of right is jurisdictional, it is critical to be aware of and meet the 60 day deadline.⁹³ The aggrieved party must timely file an appeal of right in the form and content prescribed by the Michigan Court Rules and include all other required documents.⁹⁴ In addition to considering the general requirements of MCR 7.104, the appealing party should consult Subchapter 7.100 of the Michigan Court Rules, which contains specific provisions governing circuit court appeals of final agency decisions.⁹⁵ The Director will be required to file the administrative record with the circuit court.⁹⁶ Once the claim of appeal is filed, the Court Rules will dictate the time frame for briefing and argument.⁹⁷ Notably, the Director’s decision does not preclude the health carrier from seeking other remedies under applicable state law, or the covered person from seeking other remedies under applicable federal or state law.⁹⁸ Review of a final decision by the Director is limited to determining whether the decision was authorized by law, which the Michigan Court of Appeals has held would exist when the decision is “in violation of statute [or constitution], in excess of the statutory authority or jurisdiction of the agency, made upon unlawful procedures resulting in material prejudice, or is arbitrary and capricious.”⁹⁹

Strategically, there are some limitations to PRIRA, but also some advantages that a provider or its counsel should weigh. As mentioned, the external review is on a written record and does not allow an opportunity for oral advocacy to the IRO or the Director. Because the statute gives the right to request external review to the covered person, it is not a right directly given to the provider. There would need to be some coordination between the covered person and the provider to use PRIRA as a vehicle to challenge an adverse determination. Judicial review of the Director’s decision is limited and not under a de novo standard, so any appeal of the decision must consider the strength of the record developed in the external review process and evaluation whether the decision was in some other way not authorized by law.

The advantages of PRIRA are several. PRIRA operates under strict deadlines and time frames that can lead to a relatively swift decision by the Director. Further, if some thought is given to using PRIRA, the requesting party can take the opportunity to assemble all of the relevant information and documentation, as well as supporting medical or scientific evidence, to build an effective and persuasive case for the IRO, and the Director. This evidence could include declarations from medical experts, peer-reviewed scientific studies and medical literature, medical journals, and applicable standard reference sources. PRIRA also provides essentially a de novo review since by statute the reviewing entity is not bound by any decisions or conclusions of the health carrier’s utilization review process or internal grievance process. Thus, there is no deference owed to the health carrier. Finally, exercising rights under PRIRA does not prohibit the pursuit of other remedies available under state and federal law.

Regardless of the commercial payor or the avenues for challenging claim denials there are important strategic approaches that all providers facing a commercial audit must consider when preparing for a commercial audit and appealing subsequent denials. Providers challenging adverse determinations from audits must take into account the payor’s contractual language and published guidelines. Furthermore, various state statutory bases may also be applicable to defend the denied claims. Finally, it is essential that providers consider retention of independent experts to provide additional support throughout the appeals process for the claims that are subject to an audit and any claims that are subsequently denied by the payor.

There are a variety of documentation requirements that providers should consider and incorporate into the audit and appeals process. For example, providers that are in-network with the commercial payor either requesting the medical records or denying the claims at issue must consider the in-network contractual language and any additional administrative guides or documentation incorporated by reference into the provider’s contract with the payor. For example, many in-network contracts will outline the audit and appeals process or at least reference additional materials that contain essential information regarding the audits and appeals process. It is crucial that providers familiarize themselves with the content of this information as it will include important information regarding deadlines and the appeals process. Appeals processes will differ depending upon the commercial payor and, thus, deadlines will differ as well. A thorough understanding of the audit and appeals process will serve providers well in being thoroughly prepared in the event of an audit and subsequent adverse determinations. In some cases, the information regarding deadlines and the appropriate appeals process many not be clearly outlined and providers should work with legal counsel to contact the commercial carrier to obtain this information. Only with the appropriate information will a provider know (a) its responsibilities pertaining to audit and appeal deadlines and (b) whether the commercial payor audit and appeals process complies with the contractual requirements outlined in the provider’s contract or other relevant material.

In addition to the audit and appeals process deadlines and procedures binding contractual language is important for in-network providers regarding specific audit procedures such as statistical extrapolation and sampling criteria. In-network contractual language and/or policies incorporated by reference in the contract should provide the criteria by which the statistical extrapolation and sampling is conducted by the commercial payor. This information is very important for reviewing whether the commercial payor properly executed the statistical extrapolation and sampling and to hold the commercial carrier accountable to these standards.

Documentation requirements outlined in the contractual language also provide important substantive information regarding the criteria for providing services to patients and which will be the guiding principles for evaluating the substantive issues involved in the claims. In addition to contractual language for in-network providers, other important documentation guidelines include policies made available through the websites and provider portals. The guidelines will apply to any provider billing the commercial payor, whether they are in-network or out of network. As will be discussed in more detail below, it is important for providers to be aware of these policies as part of their compliance processes. However, the policies are integral aspects to respond to an audit and preparing appeals of denied claims. Types of policies that providers should take into consideration include service-specific policies that address the documentation and other requirements for rendering a specific service. These policies would likely include information regarding accepted indications for a service, medical necessity requirements and documentation requirements to demonstrate that the services provided were appropriate pursuant to the language in the policy. In addition to knowing the substance of the policy, it is critical for providers to also take into consideration the effective dates of policies and their revision history. In our experience, commercial payors may attempt to apply policies that were in effect after the services at issue were provided or apply outdated policies. Being attentive to effective and revision dates is an essential strategy for providers to take into account when responding to an audit and defending claims denied through an appeals process.

In addition to policies, other important documentation elements that providers should consider include any published materials made available by the commercial payor. For example, commercial payors often publish regular newsletters or bulletins that outline updates to policies. In representing providers through commercial audits and appeals processes we have utilized these newsletters and bulletins to effectively argue improper application of policies due to the effective date of the policies or revisions. Furthermore, newsletter and bulletins are valuable tools for providers to remain informed regarding notice of new policies or revisions to existing policies that may alter providers’ practices for rendering services or documenting the medical necessity of services.

Finally, commercial payors may also have provider manuals that outline general information applicable to all provider-types and services. Providers should also be aware of these general provider manuals to incorporate into their preparation of audits and appeals documentation.

While a thorough understanding of the various contractual and non-contractual language is essential for any provider to effectively respond to a commercial payor’s audit and proceed through the appeals process, there are also important tools that are helpful strategic methods for preparing an audit and/or appeal.

Providers should respond to audit requests as thoroughly as possible with a goal to presenting the documentation in a manner that renders it as easy as possible for the commercial payor to review and agree that the services were provided appropriately. With this goal in mind, there are specific strategies that providers may consider in responding to an audit. For example, upon receipt of an audit request from a commercial payor a provider should carefully review the claims requested and consider retaining an independent expert to review the claims to provide narrative support for submission with the documentation to the commercial payor. The type of expert will depend upon the claims at issue. For example, if evaluation and management (“E/M”) codes are the focus of the audit request the provider may consider retaining a coding expert to review the claims and provide an independent report outlining that the services were properly coded. Other experts that a provider may consider retaining are those with expertise in the specific field to review the provider’s services and draft narrative reports outlining the support for the services provided. Expert support is an important component to responding to an audit as it often provides the reviewer with a “roadmap” to reviewing the medical documentation requested and correctly concluding that a service was provided appropriately. Furthermore, in the event of a claim denial already having an expert involved in the case is helpful for proactively preparing for the appeals process.

Another expert to consider retaining in the event of claim denials that result in a statistical extrapolation is a statistician to review the commercial payor’s documentation pertaining to the statistical sampling and extrapolation. A statistical sampling and extrapolation over a universe of claims during a specific period of time often significantly changes the impact an audit may have on an individual provider. While the sample actual denial amount may be bearable, if extrapolated over a significant period of time it could have devastating impact on a provider’s practice. As such, retaining a qualified statistician to review the commercial payor’s data and statistical extrapolation methods is an essential component to the appeals process. At times, commercial payors may insist that the statistical sampling and extrapolation is outside the scope of the “substantive appeals process” that only addresses the specific claim denial issues (e.g. medical necessity or coding). However, statistical extrapolation has a profound impact on the ultimate amount at issue in an audit and unless the commercial payor is willing to drop the extrapolation, the commercial payor must provide all relevant information to the provider pertaining to the statistical extrapolation so that it may be independently analyzed and tested by the provider’s expert. Although the statistician’s challenges may not result in the commercial payor reversing its findings during the internal appeals process, an analysis challenging extrapolation and sampling methods may be very effective before an independent appeals reviewer and/or a judge.

In addition to addressing the merits of the audit denials through expert reports, it is also appropriate strategy to submit a substantive position paper or brief that outlines general arguments defending the claims as billed and challenging any denials. The position paper should summarize the provider’s positions challenging the audit claim denial. In appeals where there are several claims at issue, the position paper may address the general substantive issues and refer to exhibits where the specific claims are addressed in greater detail. Alternatively, a position paper could be drafted for each specific claim with the issues of each claim addressed in detail.

While a position paper is a beneficial tool for outlining support for the claims at issue, it is also an important tool for outlining any available legal arguments for challenging the claim denials. For example, there are state law challenges that may be helpful to outline in a position paper to fortify the other substantive challenges to the claim denials. A thorough understanding and research into applicable state law could be beneficial to a fully developed position paper.

While providers should be engaged in prospective compliance on a regular basis regardless of audit activity from commercial payors following an audit providers should consider engaging in additional compliance. Where an audit results in adverse claim denials a provider may disagree with the auditor’s findings and determine that appealing the denials is an appropriate next step. However, even if a provider disagrees with the claim denials prospective compliance is still a worthwhile next step to consider.

Prospective compliance includes a number of actions that providers should consider instituting in their regular compliance programs. For example, as discussed above in reference to responding to or appealing an audit, as part of compliance programs a provider should regularly gather, review and maintain commercial payor policies and guidelines that relate to the provider’s practice. The provider’s compliance program should identify regular intervals for the policies to be reviewed to determine if the payor has made any changes and update the provider’s practices accordingly.

In addition to regularly reviewing policies and other materials published by commercial payors, an audit as an excellent opportunity for providers to consider retaining independent experts to engage in a pre-billing prospective educational audit. Depending upon the volume of the provider’s practice, an appropriate and representative number of claims should be selected for review by the independent expert before the claims are submitted for payment. We recommend that our clients work with legal counsel in retaining independent experts and maintain that all communication with independent experts occur within the attorney-client relationship.

Prospective compliance should be integrated in all providers’ normal policies and procedures, but experiencing an audit reaffirms the importance of regular compliance activities. A thorough compliance program that includes, but is not limited, to the suggestions discussed herein is a critical component to the provider’s practice that should not be overlooked or ignored.