Historically, audits conducted by the New Jersey Medicaid Fraud Division (MFD) or a state Managed Care Organizations (MCO) were treated similarly to an audit from a private payor. Providers would receive an overpayment demand, an appeal would be filed, and based on different interpretations of codes and regulations, a settlement would be reached with both parties “agreeing to disagree” with one another’s findings. While the system had many flaws, practices at least had some peace of mind that the original demand was not the best and final number.
Now, medical practices in New Jersey with a high volume of Medicaid patients must ensure their coding and billing is compliant due to the MFD’s recently issued directive to MCOs limiting their ability to negotiate. The MFD requires that overpayment demands be resolved without negotiated discounts unless those discounts are merit-based. Merit-based appeals include those that highlight auditing errors, such as referencing non-existent or inapplicable policies, overlooking documentation that demonstrates services were provided and medically necessary, failing to recognize that the documentation complies with the relevant code policy, or neglecting that deficiencies, such as missing signatures, can be rectified with attestations. The MFD would also consider supplemental documentation, such as additional clinical notes or supporting documents provided during the audit process that auditors may have overlooked, as part of a merit-based appeal that would qualify for a discount.
Since reductions must stem from overturned audit findings, not from arbitrary settlements, providers need to understand the legal and coding requirements in depth. For providers, this policy underscores the importance of airtight compliance strategies and careful handling of audits and investigations.
The Risks of Noncompliance: Overpayment Demands and Potential Admissions
Medical practices with high Medicaid populations are at heightened risk of audits due to their inherent outlier status. This means overpayment demands due to coding or documentation errors can result in extrapolations in the six figures. The MFD’s hardline stance removes the option of negotiating discounts without overturning audit results. Providers must, therefore, be proactive in defending their claims and avoiding the risks of adverse findings.
Additionally, providers should be extremely cautious when approached by investigators. It is vital not to engage in conversations with investigators without legal representation. Unintentional admissions or inconsistencies can significantly harm a practice’s position. Instead, redirect any inquiries to legal counsel who can guide the process and safeguard your rights.
Proactive Steps for Compliance: Building a Strong Defense
The key to mitigating risks lies in creating a culture of compliance and conducting ongoing reviews to identify and correct potential issues before they escalate.
- Engage an Independent Certified Professional Coder (CPC) for Chart Reviews
An independent audit of your coding and billing practices by a certified professional coder is one of the most effective ways to identify compliance gaps. A detailed review can uncover errors such as:
- Improper use of ICD and/or CPT codes.
- Missing or incomplete documentation to support billed services.
- Errors in Modifier use.
- Upcoding or downcoding.
- Improper bundling or unbundling of procedure codes.
An experienced CPC can help correct these issues and train staff to prevent recurrence. When hiring a CPC, it is advised to hire them through legal counsel to ensure communications are protected.
- Ensure Proper Credentialing for All Providers
Every provider within your practice must be independently credentialed with Medicaid MCOs before rendering services. Allowing uncredentialed providers to bill under another provider’s credentials is a compliance red flag that can lead to substantial penalties and recoupments, and in some cases, civil or criminal exposure. Failure to credential providers can result in overpayments for use of “non-credentialed providers,” which are often extrapolated. Establish internal protocols to verify credentials and limit access to billing systems for non-credentialed staff.
- Implement a Robust Compliance Program
Compliance is often thought of as a “four letter word,” but in this case, compliance can save a practice hundreds of thousands of dollars, and in some cases, discover money left on the table. Every practice should have a compliance officer and healthcare legal counsel to ensure that it is protected and proactive to avoid exposure.
A strong compliance program includes regular staff training on Medicaid billing rules and fraud prevention, written policies and procedures aligned with state and federal guidelines, and periodic internal or third-party audits to monitor adherence to coding and billing standards.
What Should Your Practice Do Next?
The MFD’s directive eliminates leniency in overpayment settlements, making it essential for practices to defend against overpayment demands with clear, documented compliance. Failing to do so could result in significant financial liability, damage to reputation, and civil or criminal exposure.
By implementing proactive compliance measures, medical practices can reduce the risk of costly audits and maintain a strong standing in their Medicaid participation. Engaging healthcare legal counsel and professional coders to guide compliance efforts is no longer optional but a critical investment in your practice’s future.
In the current regulatory environment, preparation and vigilance are the best defenses. Do not wait for an audit or investigation to identify problems, be proactive and safeguard your practice today.
How Frier Levitt Can Help
Frier Levitt handles hundreds of audits, including Medicaid and Manage Care Organization audits and overpayment demands, and works with vetted experts in coding and compliance. If your practice has a significant Medicaid population, reach out to Frier Levitt to see how we can help protect your practice. If your practice is audited by the MFD, an MCO, or another payor, contact us immediately before making any statements to auditors.
