The Audacity of Audits

The Audacity of Audits
Sarah Fenwick, MBA

Most pharmacies have felt the keen sting of an audit, more so since Medicare Part D went into effect in 2006. That sting can turn into a gaping wound when it is accompanied by recovery of payment. Loss of revenue as a result of an audit recovery can be detrimental to pharmacy cash flow and may cause the pharmacy to be unable to pay wholesalers, employee salaries, building expenses, and in many cases go into significant debt to keep the pharmacy operating to serve its patients. This article will examine health plan audit practices and expose the devastating impact that audit abuse is having on pharmacies.

The Department of Health and Human Services, alone with its Office of Inspector General, the Justice Department, the Centers for Medicare and Medicaid Services (CMS), and other government agencies launched a campaign in 2007 to detect and prevent fraud, waste, and abuse (FWA) in government-sponsored health care programs. As part of this campaign, CMS developed regulations that impose responsibilities on health plan sponsors to police health care provider claims and payments. While health plans and CMS need to be fiscally responsible with taxpayer dollars, these regulations do not have the right to recover payment on monies legitimately owed to health care providers such as in the situations described below. Unfortunately, and to the detriment of pharmacies, health plan sponsors are recovering payment for legitimate services rendered and drugs consumed by beneficiaries, often in the name of “fraud.” Webster’s Dictionary defines fraud as: “an intentional perversion of truth in order to induce another to part with something of value.”

The Problem
Over the years, health plan sponsors have unilaterally created and enforced audit requirements on the pharmacy, calling it a contractual obligation or CMS compliance, resulting in pharmacy audits that look back as far as three years. Pharmacies often have little to no negotiating leverage with health plans with respect to audit provisions in contracts. Moreover, each health plan has its own set of audit requirements. Pharmacies often must comply with 40 or more variations of audit and appeal practices by different health plans in Medicare Part D alone. As a result, pharmacies spend hundreds of thousands of dollars each year in employee salaries to address audits in an effort to keep revenue they are legitimately owed.

Although audit appeals typically are permitted by health plans, they can be fraught with its own set of problems. Pharmacies encounter any one of the following appeal issues on a regular basis, which can have a disproportionate negative effect on pharmacies:

·         Auditors failing to respond to phone calls by pharmacies

·         Improperly trained auditors

·         Insufficient time to provide supporting documentation

·         Ignorance of federal/state law/CMS regulations

·         Prescribers no longer in practice

·         Deceased patients

·         Claims audited belong to a pharmacy that has been sold

Any one of the challenges described above can create problems for pharmacies proving that payment is owed to the pharmacy. The other disturbing issue is that the monies recovered from an audit may not be reported to CMS through the direct and indirect remuneration process. If the dollars are not reported, health plans can pocket the money and create a revenue stream.

It is clear that many audits performed by health plans have little to do with detecting or preventing FWA as illustrated in the following types of situations affecting pharmacies. Each example is taken from a real pharmacy audit.

Example 1 – Software/Clerical Errors
The NCPDP pharmacy standard for claim submission is a complex system and requires continuous effort to stay updated with the required codes, which is often difficult to fully comprehend even for well-trained pharmacy employees. As a result, the pharmacy may have coding errors in a claim. In these instances, health plans may opt to recover payment of the claim instead of allowing a pharmacy to correct the claims. It should be noted that a coding error does not result in any clinical harm to the patient.

In the 2014 CMS “Call Letter,” CMS has acknowledged this issue and states, “Discussions between CMS and both pharmacies and sponsors reveal that retrospective audits of previous years’ claims are resulting, in some cases, in complete recoupment of the amount originally paid to the pharmacy when non-financial data on the claim transaction, such as prescription origin codes or prescriber identifiers, are determined to be erroneous. The increasing incidence of these adjustments for ‘routine clerical errors’ instead of incorrect payment amounts (financial errors) may be related to the incentives in contingency reimbursement arrangements with claim audit vendors. We are concerned that the growing practice of post-audit total claim recoupments from pharmacies is distorting Part D payment, as well as compromising Part D data integrity and impairing our ability to oversee the program.”

Example 2 – Denial of Refills Associated with Audited Claims
Refills of an audited prescription are always subject to recovery by the health plan. In this instance, the health plan may assume that if there is missing or invalid documentation for a prescription, then all refills associated with that prescription must also be invalid and therefore eligible for recovery of payment. This is often a false assumption by the payer. In many cases the health plan has audited a refill and the pharmacy may have provided the documentation associated with the refill and not the original documentation that supports the prescription. Documentation associated with a refill comes in many forms, usually a preprinted form that the facility has created for the nurse to fax to the pharmacy with instructions to refill a drug for a patient. This is done under the direction of the physician and ensures that patients do not go without their medication. The refill is based on a signed physician’s orders, or POF, for a variety of valid reasons. When this happens the plans have stated that they will not accept the POF from the pharmacy as post audit documentation. By not allowing any documentation, this ensures the plan can recover payment from the pharmacy.

Example 3 – Scrutiny of High-Cost Medications
Pharmacy audits conducted by health plans may not be entirely random. Audits often target costly drugs to yield the most money for the third party auditor and health plan. Frequently, pharmacy audits contain drugs worth $20,000 to $50,000 or more. Repeated audits with this kind of recovery could very well put independent pharmacies out of business and, in turn, reduce competition in the marketplace, driving up health care costs.

Example 4 – Documentation Problems
Health plans and their third party vendors have begun interpreting the language that is acceptable on physicians order forms (POFs) in a manner that is favorable to their recovery efforts. Most POFs contain language that indicates the order is good for 60, 90, or 180 days from the date of the original signed order. When audited, the pharmacy will provide the signed POF that covers the date of the audited claim. Health plans are beginning to recoup payment by indicating that refills associated with the POF are not covered because the refill for another month is not included within the one month stated on the POF. Health plans have stated that orders to refill a prescription cannot be supported by the language on the POF that allows for refills up to 60, 90, or 180 days. In this case the payer has chosen to ignore the instructions of the physicians order to substantiate recovery of payment. One particular pharmacy is facing a $35,000 recovery for this issue alone.

Example 5 – New Terminology – Non-Compliance
Pharmacies are typically audited for claims that are one to three years old. Recently, health plans have begun establishing new audit requirements for older claims and calling it “Non-Compliance.” This type of retroactive recoupment based on new audit requirements that were not in place at the time the claim was submitted can cause significant problems for pharmacies.

To compound the problem, when the pharmacy is informed of the non-compliance the health plan often will not accept additional pharmacy documentation to substantiate the claim. Instead, the pharmacy must contact the prescriber and request a statement validating the prescription. This is an enormous compliance burden given that auditors only allow 15 days to submit supporting documentation. In some cases prescribers may no longer be practicing and the pharmacy is left without necessary documentation. When the pharmacy does not have recourse to the audit, it is forced to incur the cost of the drug because the health plan “deems non-compliance.” Such an event can mean a loss of payment for all claims in the audit which could exceed $20,000-$50,000 per audit.

The Solution
Only an act of Congress will stop the abusive auditing practice of payers. States have begun to pass fair audit legislation that protect pharmacies, but state laws are unable to address claims for federal or state-funded health plans. So it is left to Congress to fill this gap and step up and take action to protect the businesses in the communities they represent.

The implementation of Medicare Part D provided much needed access to prescription drug coverage, but with it came opportunities to defraud health plan sponsors and ultimately taxpayer dollars. The audit practices that were created to find and prevent fraud are now being used against legitimate businesses. Pharmacies are paying a heavy price to provide access to health care. When did it become acceptable and permitted to exert this kind of abuse on pharmacies that serve patients and provide needed health care while complying with the law? Action needs to be taken on these unfair practices now before legitimate pharmacies start selling their business or choose to close instead of enduring one egregious audit after another.

At the beginning of the article “fraud” was defined as an intentional perversion of the truth to induce another to part with something of value. These examples do not meet the definition of fraud. What’s more, often health plans fail to meet their burden of proof to show the pharmacy set out intentionally to pervert the truth.