Do the Math

Just last week I spoke with a hospital Utilization Chairman from Indiana who is concerned about ZPIC and its relationship to RAC denials.

In the course of our conversation he mentioned the challenge he is facing in trying to get other physicians to get serious about RAC.    He wants to alert his colleagues to the danger of assuming the RACs won’t affect them.  A lackadaisical attitude toward RAC issues could expose them to ZPIC investigations, which in turn could result in serious consequences up to and including imprisonment.

Our Prediction

It has long been our belief that it’s only a matter of time until the RACs will be coming after physicians.   Mainly it’s an issue of manpower and priorities.   At present, they’re auditing hospitals because they represent big-ticket claims with the highest commissions.   But it won’t always be that way.  Here’s why.

Do the Math

Everybody knows that hospitals receive the lion’s share of Medicare payments.   The figure we hear most often is that 17% of Medicare claims are paid to doctors.   That sounds like such a small, insignificant amount doesn’t it?   Only 17% – surely the RACs won’t bother to audit physicians, right?

Wrong!   Think about it.  Medicare’s budget is about $500 Billion dollars a year.   RACs can look back 3 years.   Three times $500 Billion comes to about $1.5 Trillion, and if about 17% of this is paid to physicians, that figures out to $255,000,000,000.00.   Two Hundred and Fifty-Five Billion dollars is a lot of money!

Now … Just a Little More Math

Did you ever play “What If”?   What if the RACs were able to recoup only say one dollar out of every 25 that was paid out to physicians?   That would be four percent.   Four percent of $255 Billion would come to $10,200,000,000.00.   And while RAC commissions vary from 9% to over 12%, just using a conservative average of 10% would result in $1.2 Billion of commissions paid to RACs.

When the dust settles, will you as a physician be left with 24 out of every 25 dollars you were paid by Medicare?   I can’t answer that – nobody knows.  If you’re honest – like most doctors – I hope you do better than that.

Once you understand the magnitude of the commissions involved, how could any thinking person still believe that RACs won’t audit physicians?    And if they’re going to audit you, wouldn’t it be wise to seek professional help and see what your exposure is?   If you’re concerned, e-mail me and let’s discuss it.

Winston Creath is an independent healthcare consultant working in the compliance and revenue cycle management arenas on behalf of physicians and clinics.  He serves as President of National Business Solutions of GA, LLC.  He can be reached at for questions or comments.

ZPIC? What’s a ZPIC?

Just when you think you’ve got a handle on this RAC thing, here comes another alphabet soup acronym – ZPIC.   You gotta to hand it to CMS – they really know how to cook ’em up!

ZPIC stands for Zone Program Integrity Contractor.  Here’s a brief sketch of their history, what they do and the dangers they pose.

Where They Came From

The Medicare Prescription Drug Improvement and Modernization Act of 2003 called for CMS to phase out fiscal intermediaries and carriers and establish MACs (Medicare Administrative Contractors) to handle the processing of Medicare claims.  Whereas fiscal intermediaries and carriers were previously responsible for detecting and reporting fraud and abuse cases, by 1999 a new enforcement arm called Program Safeguard Contractors (PSCs) had been created.  Now the PSCs are being renamed ZPICs.   ZPIC jurisdictions align with the MACs.

There are seven ZPIC zones:

Zone 1 – California, Nevada, American Samoa, Guam, Hawaii, and the Mariana Islands.
Zone 2 – Alaska, Washington, Oregon, Montana, Idaho, Wyoming, Utah, Arizona, North Dakota, South Dakota, Nebraska, Kansas, Iowa and Missouri.
Zone 3 – Minnesota, Wisconsin, Illinois, Indiana, Michigan, Ohio, and Kentucky.
Zone 4 – Colorado, New Mexico, Oklahoma, and Texas.  (Contract awarded to Health Integrity, LLC)
Zone 5 – Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia. (Contract awarded to AdvanceMed Corporation, but under dispute.)
Zone 6 – Pennsylvania, New York, Maryland, Washington D.C., Delaware, Maine, Massachusetts, New Jersey, Connecticut, Rhode Island, New Hampshire, and Vermont.
Zone 7 – Florida, Puerto Rico and Virgin Islands. (Contract awarded to SafeGuard Services, LLC)

CMS wants to have all Zone contracts awarded ASAP.  As of the date of this writing, zone 4 and zone 7 contracts have been in operation since February 1, 2010.  A dispute is delaying zone 5.

Their Assigned Duties

ZPICs are a recent part of the “integrity” focus of CMS.  They detect, investigate and gather evidence of suspected fraud and abuse to be turned over to the Office of Inspector General (OIG) for criminal or civil prosecution.  These cases may result in prison sentences, monetary penalties, or certain forms of administrative sanction.   ZPICs are not to be taken lightly.

Potential Dangers Posed by ZPICs

ZPICs have access to CMS National Claims History data, which can be used to look at the entire history of a patient’s treatment no matter where claims were processed.  Being able to look at the overall picture will enable them to more readily spot over billing and fraudulent claims.

Among other things, ZPICs will look for billing trends or patterns that make a particular provider stand out from the other providers in that community.

While they’re not bounty hunters working on commission, they will nevertheless have to be very aggressive to justify their lucrative contracts.  For example, the zone 5 contract now under dispute pays AdvanceMed Corporation $107,957,737.00 for a 5- year period.   You can bet CMS will expect them to earn that kind of money!

ZPICs can examine medical charts to see whether a particular service actually occurred, and whether it was a medically necessary and reasonable treatment.

Here’s a comforting thought  –  ZPICs are not required to have Physician review of denials.   It is presumed that nurses will conduct the reviews.

And now,  here’s a sobering thought – just because a provider has had a RAC denial and recoupment does not prevent the ZPIC and OIG from prosecuting for fraud or abuse connected with that overpayment.

Since ZPIC actions can potentially lead even to imprisonment, extreme attention should be focused on any contact from a ZPIC.    Click HERE for assistance if you are contacted by a ZPIC.

Winston Creath is an independent executive healthcare consultant working in the compliance and revenue cycle management arenas on behalf of physicians and clinics.  He serves as President of National Business Solutions of GA, LLC.  He can be reached at for questions or comments.