pharmacy audits: what every pharmacist should know

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Pharmacy Audits David L. Rogers & John R. Wright Rogers Mantese & Associates, P.C. www.healthlex.com

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Page 1: Pharmacy Audits: What Every Pharmacist Should Know

Pharmacy Audits

David L. Rogers&

John R. WrightRogers Mantese & Associates, P.C.

www.healthlex.com

Page 2: Pharmacy Audits: What Every Pharmacist Should Know

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Who will I be talking about today?

Pharmacists subjected to audits Those who own, operate or work in

pharmacies This presentation will be focused at

pharmacists who are in a managerial role, but will still be informative for pharmacists who are strictly employees

Payers who perform, or hire a company to perform audits Insurance companies Pharmacy Benefit Managers

(PBMs) Medicare and Medicaid

Page 3: Pharmacy Audits: What Every Pharmacist Should Know

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What will I be talking about?

Audits, in general Internal Audit

Self-Audit a pharmacy performs on its own volition

A parent company’s audit of its stores Insurance

Private insurance company audits often performed by private audit companies

PBMs Express Scripts CVS Caremark Prime Therapeutics United Health

Government payor: Medicare/Medicaid Medicare within 1 year, within 4 years

for good cause, or anytime for fraud

Page 4: Pharmacy Audits: What Every Pharmacist Should Know

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Auditors are looking for problems to be remedied All prescriptions however generated Logs: Signature, prescription, shipping, controlled

substances Policies and procedures Invoices Pricing information Staff: Full-time, part-time and temporary

Will often take a statistical sample and extrapolate the amount owed from that

Auditors are almost never allowed to look at financial information regarding the business operations of the pharmacy

An audit is distinguished from an “investigation” or “inspection” looking for problems to be corrected or punished

What is audited?

Page 5: Pharmacy Audits: What Every Pharmacist Should Know

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Where will an audit take place?

Desk audit Auditor will contact

pharmacy by e-mail, phone or fax

By mail Auditor will contact

pharmacy by letter On-Site

At the pharmacy itself Behind-the-scenes

Technically, pharmacies are always being audited by automated systems

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Audits are typically announced beforehand, two to three weeks in advance These are more efficient, but potentially less reliable since there is time to “clean

up,” so to speak There is typically an audit notification letter identifying documents that the auditor

wants to review These are typically chosen by a statistical sampling method that might not be

revealed until after the audit Always clarify the scope of the audit

Ask for clarification in writing and keep it in your records Notification letters can be accompanied by a questionnaire asking for general

information about the pharmacy Do not take such a questionnaire lightly Even an answer to a seemingly innocuous question could have consequences

Never, under any circumstances, alter records Altering records can have consequences that are worse than what a person is trying to

cover up The time to supplement information is in the rebuttal/appeal process

When will an audit take place?

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DSS brought unsuccessful action against pharmacy Sought to recover Medicaid overpayments Pharmacy sought attorney fees – Hearing referee denied, but circuit court reversed

and awarded $38K Attorney fees only available when claim is frivolous 3-year audit (1983-1985) 120 of 150 random samples showed overpay, example of statistical sampling and

extrapolation. 8.4 percent error factor, total paid claims $265K, overpayment $22K, later reduced

to $21K DSS Manual recommended 100 prescriptions per year (300) Court of Appeals reversed the circuit court Not frivolous, reasonable basis in fact, not an abuse of discretion

Sherman Pharmacy, Inc. v Department of Social Services, unpublished opinion per curiam of the Court of Appeals, issued May 16, 1997 (Docket No. 188114).

Sherman Pharmacy, Inc. v. Department of Social Services

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Unannounced audits These types of audits are less efficient, but more reliable indicator of day‐to‐day

operations Random or triggered

Triggered audits may be caused by patient complaints substantiated by false information Example: Could be patient complaint that medication paid for by insurance, but not

dispensed when, in fact, medication was dispensed All the more reason to take the time to communicate with each and every patient If you do not, the patient’s next step could be a complaint

Along with patient complaints, other triggers are complaints by competitors, significant variances from a group of other similar pharmacies, substantial change in billing pattern, cost of ingredients, quantity dispensed, compounds, and schedules of drugs

Anonymous tips: See US v Little, 59 F Supp 2d 177, 180 (D Mass 1999). If there is a variance from a group, confirm that the pharmacy is assigned to an

appropriate group

When will an audit take place?

Page 9: Pharmacy Audits: What Every Pharmacist Should Know

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DEA investigated a physician writing improper prescriptions in 1995

Licensed pharmacist opened a Medicine Shoppe pharmacy

Two years later, DEA investigators found that Medicine Shoppe continued to fill doctor’s prescriptions even though other pharmacies in the area had stopped

DEA then audited the pharmacy in 1999, 2001 and 2002 and found a number of discrepancies

DEA then revoked registration and denied renewal application

The court denied Medicine Shoppe’s petition for review

Med Shoppe-Jonesborough v Drug Enforcement Admin, 300 F App'x 409 (6th Cir 2008).

Medicine Shoppe-Jonesborough v DEA

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Prevent Fraud, Waste and Abuse (Commonly: “FWA”) Find overpayments and underpayments, believe it or not Health Care Fraud and Abuse Control (HCFAC) Program

brings in $8.10 for every $1.00 spent on enforcement Fiscal Year 2012: The government won or negotiated over

$3.0B in health care fraud judgments and settlements

Why are there audits?

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Pharmacy owner sought to annul finding of Administrative Law Judge Court: NY State Dept of Health (DOH) allowed to seek recoupment However, determination of overpayment “irrational and unreasonable” “An extrapolation based upon an audit utilizing a statistical sampling method

certified as valid will be presumed, in the absence of expert testimony and evidence to the contrary, to be an accurate determination of the total overpayments made or penalty to be imposed. The appellant may submit expert testimony challenging the extrapolation by the department or an actual accounting of all claims paid in rebuttal to the department’s proof.” 18 NYCRR 519.18(g).

Medicare Program Integrity Manual (MPIM): “In simple random or systematic sampling the total overpayment in the frame may be estimated by calculating the mean overpayment, net of underpayment, in the sample and multiplying it by the number of units in the frame.” MPIM § 8.4.5.1; see § 3.1[A].

Bulmahn v New York State Office of Medicaid Inspector Gen, 106 A D 3d 1504, 1506, 964 NYS 2d 853, 855 (2013) reargument denied, 109 AD3d 1220, 972 NYS 2d 140 (2013) and leave to appeal denied, 22 NY 3d 860, 981; NYS 2d 370 (2014).

Bulmahn v. New York State Office of Medicaid Inspector Gen.

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How should audits be handled?

Don’t take it personally Consider audits to be inevitable Also consider negative findings

in an audit to be inevitable Don’t give information beyond

what is requested Ask for proof of authorization to

perform the audit Clarify the scope of the audit Accept that, either way, once

the audit starts, it does not stop

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Organization and documentation are of utmost importance Allow access to originals, provide copies

Keep originals on‐site Have all licenses and certifications for the facility and staff

in order Print off records requested by the auditor and put them

where the audit will take place Set aside an empty room or space away from the daily

operations of the pharmacy Make sure there is a desk and chair, as well as an outlet to

plug in a laptop

What should be done prior to an audit?

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Ask for the identification and credentials of everyone who arrives with the auditor

Have everyone who arrives with the auditor sign a visitor log Obtain a business card from everyone who arrives with the

auditor The auditor may bring an assistant or a supervisor

If the auditor is accompanied by a law enforcement officer or someone from the Department of Health and Human Services, Office of Inspector General, this should be a red flag

You should call an attorney if you have not already

What should be done during an audit?

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Show the auditor to the space you set aside Provide instructions on how to access a restroom, if

necessary Be cooperative and polite

The auditor may be polite or rude It is easy to remain wary of a rude auditor, but be wary

of a polite auditor too Offer coffee or water

What should be done during an audit?

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What should be done during an audit?

Supervise the auditor at all times Do not delegate supervision to

staff You may have to leave the

auditor to go get a document or file, in which case you will leave the auditor in the room or space you set aside

Feel free to ask the auditor questions, but only provide answers or information when asked

Take detailed notes

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Exit Conference If you are not offered an exit conference, ask for one They are generally conducted after an audit and can give

you an idea of how the audit went Evaluation/Discrepancy Report

You will receive a report with findings either at the conclusion of the audit or within approximately 30‐60 days

Typically there will be a finding and typically there will be a demand for money

The amount of money may dictate whether you decide to pay or appeal

What should be done after an audit?

Page 18: Pharmacy Audits: What Every Pharmacist Should Know

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Appeal Process Medicare/Medicaid appeals are governed by extensive

regulations The appeal process for private insurances is found in a

provider Participation agreement, provider manual, or payer

publications Often time‐sensitive

Typically a 30‐day deadline

What should be done after an audit?

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The Department of Health and Human Services, Office of Civil Rights Is sending surveys out to 800 covered entities and 400 business associates The survey is designed to assess size, complexity and

fitness for an audit Number of patients/insured lives, use of electronic

information, revenue and location of business Survey should take 30 minutes Date to be announced, but expected soon Receiving a survey does not guarantee an audit An audit does not guarantee an investigation

Also note: Upcoming HIPAA Audits

Page 20: Pharmacy Audits: What Every Pharmacist Should Know

Questions?David L. Rogers

[email protected] John R. Wright

[email protected] Mantese & Associates, P.C.

Phone: (248) 702-6350www.healthlex.com