ZPICs are the next, most aggressive layer of the CMS audit process

Short stays targeted in early investigations

If the experiences of the first hospitals targeted by the Zoned Program Integrity Contractors (ZPICs) are any indication, at some point this year, your hospital may receive a surprise visit from an investigator with a law enforcement background who will request medical records to be examined for possible waste, abuse, or fraud.

If your hospital can't defend the cases, the implications could go far beyond just paying back the reimbursement. Penalties may range from stiff fines to an investigation by the Department of Health and Human Services' Office of the Inspector General (OIG) or Department of Justice.

The ZPICs are another layer of scrutiny that the Centers for Medicare & Medicaid Services (CMS) has created in an effort to assure that hospitals and other providers are appropriately paid.

First, CMS established the Recovery Audit Contractors (RACs) to conduct a three-year pilot project and rolled the program out nationwide last year, followed by the Medicaid Integrity Contractors, which focus on Medicaid reimbursement.

CMS has established seven ZPIC zones, which conform to the Medicare Administrative Contractors (MAC) regions. The first ZPIC contractor hired by CMS, Health Integrity LLC, which received the contract for Zone 4 (Colorado, New Mexico, Oklahoma, and Texas), began pursuing investigations in mid-2009. The program is expected to be rolled out across the entire country by the end of this year.

The ZPICs are mining data and looking for patterns and trends that may look like fraud, says Deborah Hale, CCS, president of Administrative Consultant Services LLC, a health care consulting firm based in Shawnee, OK.

"They have a lot of teeth, and hospitals that are targeted can experience a lot of anxiety and grief. This isn't just a matter of the hospital arguing to support medical necessity. If a hospital attracts the attention of a ZPIC, it can face legal action," Hale adds.

The new Zoned Program Integrity Contractors are focusing on all aspects of Medicare, looking for waste, fraud, and abuse. The program's focus is starting with hospitals but eventually will include all providers of Medicare services.

Because they will be able to investigate all health care providers in a geographic region, they will be able to detect cross-billing and relationships between health care providers and to identify fraudulent activities between Medicare and Medicaid programs.

'Shift in the war on fraud'

Kim Brandt, director of the CMS Program Integrity Group, calls the ZPIC program "a major shift in the war on fraud."

The ZPICs are looking beyond merely recouping money that was improperly paid to the hospital, according to Brian Flood, managing director for KPMG LLC and a board member of the Health Care Compliance Association.

ZPICs are investigating the reason a hospital was overpaid and looking at hospital governance to determine if it's an institutional mistake or oversight, if it's a problem the institution is unable or unwilling to control, or if it's intentional conduct.

"When they show up at the door, they've already used an audit protocol to identify the records, and they have a reason to be there. They aren't just dropping by for a random visit," Flood says.

The rollout of the ZPIC program makes it more important than ever for hospitals to make sure up front that all patients admitted to the hospital are appropriate inpatient admissions, either meeting inpatient screening criteria or approved in writing by the UR committee physician advisor, Hale says.

Hospitals must have a knowledgeable gatekeeper on the premises 24 hours a day, seven days a week in order to avoid the prospect of paying back reimbursement or facing penalties, she adds.

More staff will be necessary

"It's no longer going to be enough to have cases reviewed for medical necessity within 24 hours or first thing Monday morning if the patients are admitted over the weekend. This presents a challenge for small hospitals, which may have to add staff or train existing staff to review just one admission during the night. It's going to mean more staff for the larger hospitals as well," Hale says.

The role of the case manager is absolutely essential in addressing the medical necessity of admissions and making sure the admission is appropriate, the admission order is clear, and the case is well documented, Hale says.

This means that hospitals are going to have to invest in the overhead necessary to hire knowledgeable staff that can assure that patient status is correct up front, Flood adds.

Otherwise, the cost to the hospital is likely to be far more than increasing staff, he adds.

If a hospital has a pattern that appears to be waste, abuse, or fraud, in addition to recouping the overpayment, the ZPIC program can assess penalties ranging from one to three times the amount of the overpayment. In addition, the situation will put the hospital on the ZPIC's radar, and it likely will be investigated again next year, Flood says.

If the errors appear to be egregious, the hospital may face scrutiny from theOIG or the Department of Justice, he adds.

"Hospital administrators are going to have to make the choice of increasing the case management staff and making sure the patient status is correct up front or spending 10 times as much on lawyers, accountants, and experts to defend itself. It's pay now or pay later," Flood says.

The early ZPIC investigations focused on short stays, going up to 72 hours, and patient status, Flood says.

Hale adds that among her clients, hospitals targeted by the ZPICs had a high volume of cardiovascular procedures and received requests for records of one-day and short-stay patients, primarily those with cardiovascular DRGs.

"These are not hospitals I would think of as being at risk for committing fraud," Hale says.

What sets the ZPICs apart from other auditors is their data mining, looking for patterns and trends that could be construed as fraud, Hale explains.

For instance, if a hospital had a high number of cases assigned to DRG 313 (chest pain) and the majority stayed just one day, it may appear that there is a pattern of admitting people with chest pain to inpatient status rather than ruling out a heart attack in the outpatient setting, she says.

However, the issue of medical necessity and the importance of getting it right is the same regardless of whether a RAC, a MAC, or a ZPIC is looking at the record, Hale points out.

"Hospitals have got to get it right the first time. They need a process for assuring that the patient status is correct and that the admission order is complete and a utilization review process that includes physician input to address questions of medical necessity," Hale says.

Physician advisors should be knowledgeable about Medicare criteria and should be people who won't just rubber-stamp their peers' decisions, Hale says.

"Hospitals can have an on-site physician advisor or contract with someone at a remote location, but they must have a knowledgeable physician advisor to review cases when there is a question about medical necessity. Once the order for the inpatient admission is written, there isn't anything a hospital can do to change it without a physician advisor," she points out.

No playing with 44

Don't play around with Condition Code 44 rules, Hale admonishes.

"Case managers should never try to change inpatient status to outpatient without going through the formal utilization review process," she says.

In addition to making sure that their medical records are complete and well documented, hospitals should take steps to be prepared when a ZPIC investigator arrives, Flood suggests.

"My experience with the ZPICs is that they are very aggressive. These inspectors are going to be asking very pointed questions with the mission of finding waste, abuse, or fraud and reporting it to CMS, the OIG, or the Department of Justice. They are paid a contract rate plus an award for positive performance, and they have an incentive to dig as deep as they can and uncover as much as they can," he says.

Hospitals already should have put together a team to respond to the RACs and MICs and can use the same team to respond to requests from the ZPICs, Flood suggests.

Develop policies and procedures outlining what is going to happen when the ZPIC investigator requests records, and designate someone to respond to the requests and work with the investigator, he adds.

Keep in mind that whoever is working with the investigators should leave a good impression and have the right approach, he says.

"Look for the skill set of who will be the best person to find out what the inspector really needs to get the job done. It should be someone who can put the hospital in the best light," he says.

Most of the inspectors hired by the ZPICs to visit the hospitals have a law enforcement background, Flood says.

"It's important for hospitals to keep in mind that the field investigators are not likely to have direct experience with the information they are collecting. However, they are going to write a report with their impression of the interaction with the hospital staff. It's important for the hospital staff to help the inspectors get the information they need and leave with a positive impression," Flood says.

It's a good idea for the hospital to make sure that CMS gets comprehensive information even if the investigator asks for incomplete information, Flood says.

"Make sure CMS gets the entire picture and not just the piece the investigator requests. By helping an investigator get the information he needs, you are helping yourself," he adds.

(For more information, contact: Brian Flood, CHC, CIG, Esq., managing director for KPMG LLP, e-mail: bgflood@kpmg.com; Deborah Hale, president, Administrative Consultant Services LLC, e-mail: dhale@acsteam.net.)