2010-02-11 / Front Page

Appeals Denied in LMAS Claims

By Michael Ayala

The Luce, Mackinac, Alger, and Schoolcraft (LMAS) Health Department may be on the hook for 11 of 28 client billings so far reviewed by the Centers for Medicare and Medicaid Services, LMAS Health Officer Nick Derusha revealed at the Board of Health meeting in Newberry Monday, February 1. The billing reviews are part of an ongoing investigation into Medicare over-billing that could cut deeply into the department's coffers. Mr. Derusha did not want to speculate on how much the overall investigation could cost the department, although he said it could lose $42,000 from the recent claims that have been denied. He also touched on several other financial matters during the meeting, including annual appropriations paid by counties to support the operations of the department, the department's 2009 cost report, a building lease agreement between LMAS and Mackinac County that LMAS would like to see lowered, and the scheduling of a finance committee meeting.

In August 2008, the health department was notified by the Centers for Medicare and Medicaid Services (CMS) that it detected abnormal billing patterns for Medicare. The letter said 52% of home health care patients had a length of stay longer of 120 days.

As part of the investigation, the health department had 40 of its Medicare client claims examined, and in March 2009 the probe revealed a 75% billing error rate. Of the 40 cases, 31 were denied because the nursing care provided was unnecessary, according to the analysis. The department appealed the decision on all 33 claims, which together total roughly $55,000 in department revenue, and was denied on each one. The investigators then requested a second batch of 40 claims to be submitted for review, and have reviewed about 28 of those so far. Of the 28, 18 were denied, amounting to roughly $42,000. Like before, the department appealed all 18, of which the centers have reviewed 11. Mr. Derusha notified the board last week all 11 of the appeals were denied.

Mr. Derusha told the board he asked the department's attorneys if appealing at a higher level should be considered. The attorneys replied that sometimes appeals are successful, giving the example of another home health agency under CMS review that appealed six denials and won five.

The attorneys were unsure if a second appeal by LMAS would be successful, however, and asked for additional documentation, Mr. Derusha said. Pursuing more appeals could be risky, he added, as legal fees may become greater than the amount the claims were worth. He told the board he would submit the requested documents to the attorneys and determine if another round of appeals would be viable.

County Payment Amounts


The board examined the payments the four counties make to receive services from the health department. Mr. Derusha explained to the board the expected appropriations from counties were abnormal and that he was unable to figure out how the finalized appropriations were made. Ultimately, the board agreed to divide costs among the four counties, coming as close to the originally forecast numbers as possible.

According to a document given to the board, in September 2009 the Board of Health discussed receiving appropriations from Mackinac County amounting to $88,000, Alger County $76,500, Schoolcraft County $68,000, and Luce County

48,000. Afterwards, the department budgeted for $84,000 from Mackinac County, $67,000 from Alger, $67,000 from Schoolcraft, and $52,000 from Luce.

The health officer said he saw several problems. First, Alger county's appropriation is far lower than originally discussed, although he said that was likely a typographical error. The second problem was he could not figure out what information the department used to arrive at the budgeted amounts.

Typically, the department uses the population of each county and divides it by its total operating costs. Appropriations were assessed at roughly $8 per person in each county for 2010.

Counties throughout the state typically pay about $6 to $8 per capita to support their health departments. Luce, Mackinac, Alger, and Schoolcraft counties in the past were paying well below that amount, at about $1.25 per capita. Much of the money that bolstered the department then came from home health and hospice services.

Mr. Derusha said he used population numbers for the counties based on the 2008 estimated U.S. Census data, as well as populations listed in the 2008 annual LMAS report. Neither of the amounts matched the budgeted figures.

Part of the difficulty in puzzling out what information was used, he said, was that he was not the health officer at the time when the department developed the budgeted figures. High turnover in financial staff also makes it difficult to solve.

Mr. Derusha's solution was to use the lowest figures for each county developed from either the census data, the population from the 2008 LMAS annual agency report, and what was discussed at the September 2009 Board of Health. The result is each county pays a few thousand dollars less than originally planned. Mackinac County, for example, would be expected to pay $82,230.

The 2008 annual LMAS report estimated Mackinac County's population at 10,877, Alger County's at 9,612, Schoolcraft County's at 8,518, and Luce County's at 6,728. Based on the population, the department charged $7.56 per resident. The result was Mackinac County's share would be $82,230, Alger County's share would be $72,667, Schoolcraft County's would be $64,396, and Luce County's would be $50,863.

According to the 2008 estimated census data, Mackinac County's population was 10,627, Alger's was 9,438, Schoolcraft’s was 8,220, and Luce's was 6,614. Based on those population figures, the department charged $7.74. Based on those figures, Mackinac County would pay $82,230, Alger County's share would be $73,050, Schoolcraft County would pay $63,623, and Luce County would owe $52,192.

The amounts discussed during the September 2009 meeting for each county would cost Mackinac County $88,000, Alger County $76,500, Schoolcraft $68,000, and Luce County $48,000.

The department originally budgeted for $270,000, but under Mr. Derusha's proposal the department would collect $266,520. The board unanimously approved his suggestion.

Department Down $50,000

A 2009 cost report showed the health department owes Michigan $71,717 in home health and hospice program reimbursements. Mr. Derusha said the state typically paid for the program in three phases, and by the time the department discontinued the home health and hospice program, two of the phases had been paid for in advance. The department must reimburse the state for the unused amounts. The report was prepared by Ramsey Badre and Associates.

On the other hand, the department will receive $20,741 from Blue Cross of Michigan, leaving a net liability of $53,976. Mr. Derusha said the department will not have to pay the amount out of pocket. Instead, any future reimbursement from the state will be withheld up to that amount.

Final 2009 Audit Report

Ready Soon

Mackinac County's leasing of a building at Hombach and Burdette streets in St. Ignace that the department uses for its operations was also discussed. The Mackinac County Board of Commissioners developed a monthly lease for $2,350 per month between it and the department during its Thursday, January 28 meeting. Mr. Derusha wants to negotiate a lower price on the lease.

The health department originally paid the Northern Health Foundation for the building, but Mackinac County later purchased it in April 2009. Since then, the department did not have a lease agreement with the county, although it continued to operate a branch from it.

Mackinac County commissioners and Board of Health members Calvin "Bucky" McPhee and Lawrence Leveille said the lease amount was set by the county attorney, and they were unsure how the amount was determined.

Last year, the health department, faced with cash flow problems and with a state recommendation that the agency extend its building financing by 10 years, asked the county to support extending the financing in March 2009. County commissioners argued at the time that purchasing the building, rather than refinancing, would be the best option and would save the county interest expense, and opted to pay off $100,000 in debt owed on the building, and then to negotiate new leases with LMAS and Allied EMS.

Mr. Derusha said the department had planned to refinance the building, which would have reduced payments before Mackinac County purchased it. The commissioners replied Mr. Derusha could discuss it with them further during the next county commission meeting. Mr. Derusha said he plans to attend.

The health department's final 2009 audit report will be complete within a week, and Mr. Derusha suggested the finance committee, which is composed of the entire Board of Health, should meet and discuss it. The committee should also make several budget adjustments based on the auditor's suggestions, such as including building rent payments. Mr. Derusha said the payments were not included in the budget at the time because a lease agreement was still in the works with Mackinac County.

The LMAS finance committee will meet Tuesday, February 23, at 9:30 a.m. in the Newberry LMAS office.

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