Provider Defending a ZPIC Audit Fights Back With Significant Victory at Fifth Circuit

Imagine as a lawyer having to tell your client that the practice that they spent their career building may very well go bankrupt, without even the chance to have their day in court. That was exactly the situation at issue for a medical practice subject to a ZPIC audit. At issue was the ability of CMS to collect on alleged overpayments before final adjudication.

What the practitioner did in a case decided by the Fifth Circuit a few weeks ago provides a game plan for all providers confronting similar circumstances. In Family Rehabilitation Inc. v. Azar, attorneys representing the practice sought an injunction against CMS precluding the agency from recouping the alleged overpayment until the appeal had been decided by the Administrative Law Judge. The injunction was dismissed at the lower court level, but the group appealed the case and won.

The story behind Family Rehab is familiar to many medical providers. It all started with a ZPIC audit from CMS that sought recoupment of an alleged payment deficiency that was well beyond the provider's ability to pay. (In this case, it was $7.8 million secondary to deficiencies in medical documentation). The practice naturally appealed the decision and, as typically occurs, the group lost the first two levels of appeals before the Medicare Administrative Contractor (MAC).

The next level of appeal takes place before an Administrative Law Judge (ALJ). It is the first time that the defense is even allowed a live hearing to put on evidence and cross examine witnesses before an independent member of the judiciary. However, CMS is permitted to begin recoupment of the alleged overpayments after the second level of appeal and before the case can be heard before the ALJ. That means, in the case of Family Rehab, reimbursement for work that the provider would perform for all future Medicare patients will go back to pay-off the $7.8 million debt that the group practice contested and which not yet been adjudicated.

Although the Social Security Act requires that an ALJ issue a decision within 90 days of the timely hearing request (42 U.S.C. § 1395ff(d)(1)(A)), there is such a tremendous backlog of cases before the ALJ that they cannot handle these cases on a timely basis. In a June 2017 report, the Secretary of Health and Human Services identified over 600,000 appeals handled by less than 2,000 judges leading to a backlog that could cause a delay of 3-6 years between the date of appeal and the date of the hearing in front of the judge.

That would mean a provider who disputes an audit may very well find themselves paying off the audit for 6 years before it has its day in court. If the total amount of the alleged overpayment is as high as it was in Family Rehab, it essentially means going out of business or at least not taking any more Medicare patients for the years in which the case is pending.

On March 27, 2018, the 5th Circuit Court of Appeals ruled that due process allows a party to bring an injunction against CMS from collecting money under a ZPIC audit before the medical provider could have its case heard before an Administrative Law Judge.

This decision is significant for all providers faced with a ZPIC audit because it finally gives them a path to relief. In the past, there have been many medical providers that have been forced to either go out of business or provide medical care in a form of indentured servitude by working to pay off a debt that was disputed in the first place.

Medical providers should not have to make this choice simply because of the court's backlog that is very likely due to over aggressiveness of the ZPIC audit system and the MAC contractors. Finally, there is a case which allows a medical provider the mere opportunity to contest these cases before an independent judge. As we regularly defend medical providers in such cases, we hope that other circuits will follow suit or that the United States Supreme Court will affirm the 5th Circuit decision.

Any questions regarding this case, or ZPIC audits in general, can be directed to Thomas O'Carroll at

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