DME Audits Explained: SMRC, CERT, TPE, RAC and UPIC

0:00Introduction: why we are talking about audits

Let's start today's session. Assalamu alaikum wa rahmatullahi wa barakatuhu. Today's session is about DME audits. Recently I got busy with an audit that came in on a DME supplier. They contacted me and asked me to help them out with it. So it was an SMRC-level audit. SMRC is a CMS contractor, and it was their audit. So while I was going through this audit, reviewing it, and building its action plan, I had an idea: why not make a YouTube video on it and share it with all of you, so that you also understand which things to avoid in DME, so that you can get through any audit successfully, okay?

0:45The audit landscape: who actually reviews your claims

So first, we will try to understand what CERT is, what TPE is, what SMRC is, what RAC is, what UPIC is, okay? First, let me tell you that CERT is the Comprehensive Error Rate Testing contractor.

0:59CERT and the national improper payment rate

It picks a couple of random samples from suppliers' claims, and from those it works out a ratio of proper payments to improper payments. This is a Medicare contractor that works on random claims. After that, in second place, comes TPE.

1:26TPE: Targeted Probe and Educate

That is Targeted Probe and Educate, the TPE program. They have five rounds, and they do sample reviews on behalf of the MAC of suppliers' entire claims and their documentation, to check that they are storing documentation properly and submitting claims properly. And sorry, they have 3 rounds. And if, within the 3 rounds, the supplier is billing completely correctly, with no issues in their billing, and they are up to the mark, then they give a green light. Otherwise they will move the supplier to another contractor, or they will revoke its PTAN and say they can't work with you, because we gave you training programs, but you are still doing inaccurate billing or improper billing.

After that comes this contractor, the Supplemental Medical Review Contractor, SMRC, which I told you about. This one, on behalf of CMS, the high-risk products that are on their list, mostly the red-flag products, the biggest ones being, for example, braces, CGMs, catheters, and power wheelchairs, motorized scooters, and absorbent supplies, diapers.

2:29SMRC: CMS-directed national studies

So this contractor audits those, okay? They will share the full report with you on what is missing in it, what you did right and what you did wrong.

3:01What actually triggers a review

And if they feel there are a lot of problems, a lot of issues, then you may also get a TPE education report from the MAC, telling you to take three programs, and it has three rounds, and if even after three rounds your billing still isn't accurate and proper, then there are chances of suspension, and for the post payments you have received, sorry, the payments you have already been paid, they can demand recoupment on those too. And on your post payments too, they will review them first and then push to recoup the payment. Okay, then this is the level 4 contractor, you can think of it as the Recovery Audit Contractor.

3:36RAC: contingency-fee recovery

Meaning, if the SMRC has, for instance, 10 claims where improper billing was found, then they will submit them to the RAC, and the RACs are basically third-party contractors who will contact you, and for the post payment, they will ask you for recoupment, that you within 60 days or within 120 days, within 120 days, you within 120 days, you should give that money back. After that, one more, you could say, After that comes what they call UPIC, the Unified Program Integrity Contractor, and what is its job?

4:25UPIC: fraud, waste, and abuse

It catches fraud. Fraud, waste and abuse are the three investigation categories. It catches those, and the big frauds that are happening, this contractor of theirs works on those. And once a case is handed over to them, consider your PTAN gone. Your PTAN will be revoked. You must have done something that goes beyond improper payment and inaccurate payment, toward fraud too. So CERT audits post payment claims, and the targeted one, TPE, does prepay and post payment, and likewise the Supplemental one, the SMRC, reviews post payment, and likewise the Recovery Audit Contractor does post payment, and this UPIC does both prepay and post payment claims, and its focus is mostly on fraud, okay?

4:53Prepayment versus postpayment, and why it matters

Alright. So okay, now let's try to understand this, that when an SMRC audit first comes to you, you have how much time in each of the 6 windows.

5:30Inside an SMRC review: the 45-day clock

First, when an ADR arrives, an Additional Documentation Request, so when the SMRC requests documentation from you, you have 45 days. And within those 45 days you have to submit all the documents, okay? Then within 30 days they review and give you a detailed report on the claim. And after that, there's an education session, a re-review discussion, and a re-review. That has a 14-day window, okay?

5:57Review Results, Discussion and Education, re-review

Within 14 days, you have to have the discussion with them, or if you have any extra documentation to send, you send it to them. And the final review request is 14 to 30 days. The final review request, the final review result comes within 14 to 30 days. And after that there are 120 days if you want to file an appeal or challenge the decision that came, then those are the levels of appeals, and 120 days is the first window for you to file the appeal, okay?

6:31The MAC demand letter and your 120-day appeal window

So now, there are seven such things that, when I was preparing the audit, you should be able to see my screen too, right?

6:47Anatomy of an audit: the seven repeating findings

Okay. You should be able to see my screen as well. So these are seven such things, these seven things are the ones that, when I was reviewing this audit, when I was reviewing this audit, came up. So I identified them and put them into a report, saying, hey, in these four claims of yours, these are the issues. So Ansar has joined us too. Ansar, assalamu alaikum, how are you? Wa alaikum assalam, alhamdulillah. Usman bhai, how are you? I'm doing great too. Okay, Ansar, can you see my screen properly?

And is my voice coming through properly? Yes, yes, it's clear. Today, basically, we were reviewing an audit that we recently worked on together. We had just reached the section where I was telling viewers about the seven things I caught because of which the SMRC flagged its four claims. So we were trying to understand that. One was that, out of its four claims, in some of them the SWO, the standard written order, was missing, or else the person who signed it was a non-practitioner meaning a social worker at a nursing home had signed it.

So that SWO is not valid under Medicare guidelines. The signature on it has to be the practitioner's signature. So there was an issue there. You also have to check, in every claim, that there is an SWO, and that it has a valid Of the seven steps, you have clearly cleared one step. The second thing I saw was that this was also an issue with its software, which I tried to understand: the Charm system it was using was automatically populating on the claim, on the CMS-1500, the date of service, and getting it wrong because it took the encounter date as the date of service, but the encounter was added later, and because of that, issues were coming up.

Anyway, this should have been manually corrected. So in its CMS-1500 form, the date of service was wrong on all four claims. You could say that the date of service was after your bill, and the billing date was earlier, meaning the date the claim was submitted, the date of service came after that, due to the wrong encounter, due to its software glitch. That's what happened, but I caught it as an issue too and this is a high, you could say, high red flag that the SMRC caught and for its rebuttal, we will submit that this was a software glitch.

Okay, the third one, a very critical problem I caught, was with the KX modifier: out of them, there were two patients whose medical necessity was being met. They were CGM patients, and also hypoglycemic, and they were not taking insulin. If they were on insulin, there would be no need for a hypoglycemic event, but if they aren't on insulin, there has to be a hypoglycemic event. If not, you will not give them a CGM. This is the Medicare guideline. So for two of them it was met, but their other documentation was incomplete, meaning there was an issue with the SWO, an issue with the face-to-face sheet, but they still applied the KX modifier, and the KX modifier is an attestation that whatever the Medicare guidelines are, whatever the CMS guidelines are for documentation, all of that is on file.

So the misuse of the KX modifier is a very critical, you could say, red flag, because it is an attestation, and that is where I saw this problem. Okay, if you have these three things, for instance, you're working a claim, you checked the SWO, the date of service or date of delivery, and the KX modifier, then you can say that 59% of your claim is already clean, okay? Now the next four things are these: First, I want to tell you about the face-to-face chart, the deal with the face-to-face chart is that the face-to-face chart has to be valid within 6 months, okay?

The one you have, the face-to-face chart must not be older than six months. This is the patient's encounter that has to be in the doctor's office, it must be within six months, and this applies to refills too: if the six-month face-to-face sheet has expired, then you will need a new face-to-face sheet, because medical necessity is built from the face-to-face sheet, chart notes and addendum. It does not come from the SWO, and not from a certificate of medical necessity, because the certificate of medical necessity became obsolete in 2023, Medicare has removed it and it will not be accepted now.

So the face-to-face sheet must be on file, and medical necessity must be clearly met in it per the payer's guidelines. Out of these three documents, the most important document is the one in which medical necessity is shown, and that one is the most important document. One thing I want to add: another mistake people make is that on the signed prescription, on the standard written order, they mention the diagnosis code, and they think that in an audit this will not be an issue, so please clarify this too.

Absolutely, absolutely, you clarify it. You are absolutely right. I just wanted to say that the most common mistake is that we, on the signed prescription, write the diagnosis, any one that qualifies, after checking, so we think the audit won't have an issue. In an audit, the most important thing they don't look at the signed written order, the SWO. They look at your face-to-face notes, chart notes, on which they confirm the patient saw the doctor and qualified there. So this is very important. We should not go by the diagnosis code on this prescription, only by its medical necessity in the chart notes.

Absolutely right. This, I have seen as an issue. People have a misconception, they think that if we put all the diagnosis codes on the order and check it, and at the doctor's office, then medical necessity is established. That is wrong. Checking diagnosis codes still does not establish medical necessity. It must ultimately show in the chart notes, face-to-face sheet, or addendum, or the progress notes. The second thing is the one I want to explain to you. First, I saw this in it, that in its supply periods there was overlapping.

In the CGM refills, there was overlapping, because you have to follow a calendar for it, and you have to bill according to it, so you have a window for it. So when you give refills and bill for refills, you need to check this, it is very important. Okay, if you have checked this too, then your claim becomes even cleaner. Okay, the second thing I saw was this that the SWO it had, for instance, had refill written on it, a refill order had come, but it gave a receiver on its own Whatever product you are giving the patient, whatever HCPCS code you are giving, that HCPCS code, in full proper detail and along with the HCPCS code, must be on the SWO.

It means you should not think that the order is for refills, there's no receiver, that's clear, so we'll give a receiver No, the receiver must be mentioned on the SWO too, and the supplies must be mentioned on the SWO. Whatever product you give, it must be in the SWO. If you give any add-on, that too, and whatever you bill to insurance, that too, must be in your SWO. It is mandatory. Okay, I saw that the supplier had made this mistake in one or two claims. So I felt it was important to discuss this with you all.

Okay, this last thing, after which I think your claim will be a 100% clean claim, was this: the patient was in a facility, and on the claim, the place of service that was written was his home. Okay, meaning the code you enter on the claim for the place of service, was entered for his home, but the patient was in a facility, meaning in a nursing home, so the nursing home code should have been entered. So this too is a very high red flag. So this too, you need to look at, it is essential that where the patient, for instance, came to your store, then you enter your store as the place of service.

If he is at home, then home. If he is at a facility, then the facility. Okay, Ansar, would you like to add to this? No, no, just the thing I was about to say, you have already cleared up. They make this mistake: they would write 12, home service, while the patient was getting service in the store, so they don't mention that. They would write 12, they have no idea, so these small mistakes cause issues in audits. Just this one thing is important: whenever you get ready for an audit, your SWO, chart notes for medical necessity, and proof of delivery, these three things keep in your drive. Absolutely right. So now let's understand what things cause problems, because of which an audit gets triggered.

15:30Root causes: why this keeps happening

The first is no proof of necessity in the record, in the record, of this product's medical necessity not being there. The criteria the insurance company set is that if the patient has this problem, this issue, then medical necessity for this product is met, so they can control the budget. It isn't being met, but the supplier has already given it, and the claim even gets approved, and once an audit comes, they say, look, medical necessity wasn't met, and then they recoup the money. The second is the incorrect use of modifiers.

In most of the audits I see and work on, there is one thing I know: the modifiers are applied wrong. Now it's the age of AI, so even if you study a whole claim with AI, there should not be a modifier mistake. There should be no KX modifier misuse at all. If documentation is not complete, then you must not apply the KX modifier at all. That is very high risk because it attests that all documentation is complete and medical necessity is met Of course, so many AI bots have been built, we have built some too.

Extracting medical necessity with them, and based on it, if an addendum is needed, and requesting an extra addendum from the doctor's office, then this is not an issue for you, but mistakes are still showing up in it. This is a very big question. Anyway, the third thing is regarding accreditation, meaning something we have been seeing, that suppliers are not accredited for those products, but they are billing, and once an audit comes, they also check the accreditation list, and then an issue comes up. Okay? And one more thing you need to understand is that audits follow fraud, meaning products in which a lot of fraud is happening, like CGMs, braces, and the products I told you about, in those products, if you don't do billing correctly, I do not mean that, since it is the high-risk category, you should stop billing in it altogether.

What I mean is that you should take extra care with high-audit products, which include CGMs, braces, catheters, and also diapers, power wheelchairs, and motorized scooters. My advice to DMEs, to whoever asks me, is start with low-ticket products: walkers, rollators, manual wheelchairs. Then slowly learn to bill other products correctly, then bill them. This also affects patient care: if your documentation isn't quick, the product will reach the patient late and the patient will have to suffer. So the patient is involved in this too. So my advice is always this: first work in low-ticket products, learn to bill them, learn to manage them properly, after that move to medium-ticket products, and then on large-ticket products or high-ticket products, where you will also have good margins.

Here you have to do more documentation, but the margin is good in it, so a good profit margin comes out of it. But before that, patient care is more important, because the industry and segment we are in, most of the people there are senior citizens, so we really enjoy serving them. So serving them comes first, everything else after. So now let's try to understand that each document, the whole document, the one that is serving as proof, the SWO, the standard written order, must have your doctor's proper signature, the date must be mentioned properly, the proper HCPCS code must be in it, the patient's demographics must be reflected, and if there are no ICD codes in it, that is no problem, because an ICD code is not an SWO requirement at all, people just put it in anyway Okay, you must have the face-to-face sheet and clinical notes.

18:30The audit-ready standard

And in them, the relevant ICD code should be there. If it isn't, meaning if you see a condition in the patient that you want covered, ask the doctor's office for an addendum for it, saying, please elaborate a bit more so that medical necessity is established. So yes, you can request an addendum from the doctor's office, and if the doctor feels, yes, I couldn't put together the chart notes, then he can add it now. Okay, but you also need the addendum before delivery. Meaning it's not that you deliver first and later ask for it.

No, it won't be after delivery, okay? You must have proof of delivery. People make a lot of mistakes on eligibility and benefits, bhai. Now even if you ask AI, it will make it completely accurate for you, but I think with products like lifts and so on, people get very confused. Sometimes we get confused too, because the HCPCS code at the doctor's office has not been given completely accurately, so we have to understand the product type, according to what the patient needs, understand that lift, and then Medicare covers some of its parts, and does not cover others, so the patient responsibility becomes higher.

So eligibility and benefits, you could say, for most products, are very easy, and for some products they get a little complex. But this is also an easy step, and people make many mistakes. Prior authorization, now you can build the whole thing using AI, there should be no chance of mistakes in it. If you feel that a prior authorization will be denied, there's no need to even send one, because it will lower your score. See, prior authorization has an approval ratio: your 90%, as I explained in previous classes, so automatically you could say you will get an exemption from prior authorization, if your score of 90% is maintained within a year.

Okay, and that can be done easily with AI. Okay, coding and modifiers. I told you that the coding must be completely correct, the modifiers must be completely accurate, and your refill documentation must be completely clear, and records retention. Meaning the ADR package, the additional documentation request on any audit, all of that information should be ready with you, so that you can send them all the documents within 24 to 48 hours, and not be collecting the documentation at that time. If you have taken care of these things, then you could say your claim will be a clean claim. Okay, so Okay, you do not fix exposure at the claim, you fix it at intake. Meaning, during intake, you have to fix these things in advance, okay?

21:03The prevention system: fix it at intake, not at the claim

That includes a pre-billing QA gate. Okay, every claim, before it is billed, meaning before the product ships, there should be a QA team, there should be a QA gate that reviews it fully and properly, then deliver, and after delivering, bill, okay? And the LCD coverage, verify it. Check the LCDs and NCDs, which are the latest guidelines. And check your modifier discipline, and your refill compliance, check that too. And there should be an internal audit within the DME, meaning someone reviewing the full weekly report, the full monthly report, of claims and documents, to see they're complete and claims were submitted properly, so that you don't keep making mistakes, and find out only at the audit that, okay, their audit has come now, but there are more errors ahead too.

So there should be an internal audit, so you know that if a mistake happened, then you improve your processes, okay? So these are basically the things you need to take care of. Another thing you have to remember: Look, if an audit comes, you should never create or alter anything yourself, because those UPICs, the contractors, look at the metadata, they can tell when this document was created, and if it was created at the time of the audit, then it becomes an even bigger red flag. A big penalty can be imposed for that.

Remember this. So this is a small triage for running a claim, and we have built a small demo of it, where the SWO is valid and signed by the treating practitioner, and we obtained it before the delivery date. In the same way, the face-to-face encounter we have, is documented, and likewise the patient's medical records, is medical necessity being proven in them, is the coverage determination being made per the LCD and NCD, is medical necessity being established in it, and do all the documents support the KX modifier?

In the same way, the place of service you have, have you checked it, and is that same one actually put on the claim? That means your claim is a clean claim. Okay, you could say that after this, you know, our Anyway, this audit class of ours came in the middle, but our class was on documentation only, and the next class, God willing, will be next week, where I will tell you what a face-to-face sheet looks like, what chart notes look like, what proof of delivery looks like, and besides that I will show you all the documents in it, they will be illustrative documents.

There will be no patient health information in them, no PHI, because that is a compliance risk, so I will only show you all the documents from it. But Ansar and I discussed it, and we felt this is more important to do first, to train our team on it first, then we will move on to that, God willing. I am trying my best to finish this 13-video course of ours within next week. And after that, I have also started making short videos, on the important topics and questions that come up, so please watch those too.

So anyway, let's go through these 18 checkpoints for the claim. If you have verified these 18 checkpoints properly, then consider your claim audit ready, meaning if an audit comes to you tomorrow, you will give all the documentation, and there is no need to worry.

24:00Live audit-readiness scorecard walkthrough

Just recently, a supplier started telling me, he said the fee schedules are like this now, there isn't much margin, and then audit after audit keeps being sent, so it is very difficult to get through their audits. So I told him exactly this: if you have audit-ready documents, you will be stress free. Anyway, the SWO on file should have the signature, the signature and date must be on the SWO, and the practitioner must have signed the SWO, and the billed HCPCS code must be on the SWO.

The face-to-face encounter, you must have on hand, within whatever the required window is, the clinical notes you have must be signed, they must be dated too, and they must be legible. Along with that, the coverage criteria for that HCPCS code, you know, medical necessity must be met in the face-to-face notes and clinical notes. In the same way, proof of delivery must show the correct delivery method. Okay, the date, item and quantity in the file must match the claim. And the date of service must be exact.

Okay, meaning it should not be that the date of service is one date, and then the date on which you are billing is another, so the two dates have an issue, okay? So dates must be completely accurate. Okay, eligibility, you must have run it completely properly, verification and benefits, you must have checked them properly, prior authorization obtained. Remember, I told you in one class: in prior authorization, you get an affirmation or a non-affirmation, and for a non-affirmation too, you have to save the code, because if you are filing an appeal, then there you have to enter the non-affirmation code.

For prior authorization, go and look at the previous class. Okay, the correct place of service must be entered on the claim, in coding, every modifier must be supported by the record, the KX modifier only when you can attest, when your documentation is complete. Accreditation: your DME accreditation for the product, must be valid, and you must be accredited for the product you are billing. In the same way, the refill request must be documented, the patient must truly need it, not that they aren't using it and you keep giving refills.

In the same way, the records must be retrievable. Meaning for the ADR window, all your records will be in one place, so you can submit it all within 45 days. And a complete internal QA system should be in your workflow, so that you can avoid any kind of wrong practice that you keep doing and that keeps happening, and you can't understand what is going on. So you can avoid that with this. So this was basically a summary of an audit, I thought I'd discuss it with you all.

26:33Final takeaways

So I hope that if you have watched till the end, you will surely have had the chance to understand many things from it. But because I am now talking at a different level, it is important that you have watched the earlier videos. If you have been watching the earlier videos, then you are following my video and this topic properly, because now this is a little at an intermediate level. We are still not talking at the advanced level. We are still at the intermediate level. I will talk about the advanced level too, but I will cover the advanced level with you after a month or so, once you understand these things.

What do you say, Ansar? Yes, yes, for now we should cover this so everyone gets the basic knowledge, and after that, God willing, when we do the advanced level, everything at the next level will come into view. Absolutely, and as I keep saying, God willing, when this course is complete, and because in this segment, in DME, and in home health agencies too, and besides that, diagnostic labs are a very big topic, that is a very big course, and I think when I start teaching it, it may take about 3 to 5 months too.

So anyway, you should be an expert in one domain, and that is enough for you, but God willing, when this course of ours is complete, then, for instance, many people start watching the videos, and then when they complete this whole course, their level will go to the next level, because I am telling you one thing: the information and documents I am sharing with you are completely end-user information. So your experience will go to the next level, because I am sharing live examples with you too, so God willing, we will meet again soon in the next video, which is about our documents, After that, we will teach you how to read the CMS-1500 form, and after that, our 3 classes will be left, I think, but I am trying my best to finish this course next week.

Jazakallah khair to all of you for staying with us till the end. Thank you so much. God willing, see you in the next video. Assalamu alaikum wa rahmatullahi wa barakatuhu.