Craig S Steinberg, O.D., Esq. Optometric & Healthcare Law

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Published on Thursday, 26 May 2016 22:58

VSP STATISTICS 101*

 

Every targeted audit by VSP has three purposes:

1. Determine if you were or were not violating VSP rules in some manner.
2. If you were violating their rules, should your network provider agreement be terminated?
3. If you were violating their rules, how much have you been overpaid by VSP?

In this article I will focus on the third purpose above and will attempt to explain the statistical process VSP uses to determine how much restitution you owe back to them if you do not pass an audit. I will then explain exactly why I believe the VSP statistical process is mathematically and statistically incorrect.

 

I believe VSP's audit results can (and should) be legally challenged, and that ALL VSP audits that have determined money is owed back are incorrect and could be thrown out by a legal court challenge.

 

A. THE VSP PROCESS FOR DETERMINING RESTITUTION DUE

 

If you are audited by VSP, they typically follow this general process to determine how much you must repay them:

1. The auditor will copy and audit 40 records randomly selected from your last three years. All records will be of the type they are auditing (e.g., if they are auditing MNCL, they will all be MNCL patients).
2. From those 40 records the auditor determine your non-compliance rate and your "error rate", or what they now call your "dollars at risk." The auditor does this by stating first what you were paid, then what the auditor thinks you should have been paid based on the audit, then finally, what the auditor thinks you were overpaid. The total paid minus what the auditor says you should have been paid equals the amount you were overpaid. These will be columns on a spreadsheet. The total overpaid divided by the total paid, times 100, is your error rate, or "dollars at risk." Here is an example for three patients:
   
   

   Patient	Total Amount Paid	Correct Amount Paid	Amount Overpaid
   Smith	$150.00	$90.00	$60.00
   Jones	$275.00	$0.00	$275.00
   Johnson	$350.00	$350.00	$0.00
   TOTALS	$775.00	$440.00	$335.00

   
   In this example, Johnson passed the audit. But Smith and Jones did not. The error rate/dollars at risk is determined to be $335/$775 * 100, or 43.2%. 
   
   [NOTE 1: The error rate/dollars at risk is not the non-compliance rate. Non-compliance rate in this example is 67% because 2/3 of the audited records were found to be non-compliant. But, because Johnson was a larger dollar patient, the dollars at risk is lower than the non-compliance rate. This, of course, can be reversed, especially in MNCL cases, where the non-compliance rate is actually considerably lower than the calculated error rate.]
   
   [NOTE 2: While the non-compliance rate in this sample was 67%, one cannot necessarily conclude that the non-compliance rate for the entire universe of claims is 67%. In other words, you cannot necessarily extrapolate the non-compliance rate out to the universe of claims and maintain the 6.1% margin of error. To extrapolate out to all claims, as will be explained below, you must ensure that you have a sufficiently large sample so that your margin of error remains sufficiently narrow to provide useful information. This requires proper application of the "binomial equation."]
3. The auditor determines the total amount of money you've been paid for the last three years for the patient type/line of business that they audited (e.g., MNCL, elective CL, frame only claims, etc.).
4. Finally, the auditor multiplies your error/dollars at risk rate by the total money and that's the amount VSP will claim as restitution.
   
   If you've been paid $265,000 for the past three years, your restitution is $265,000 * 0.432 = $114,480.

Based on documents available in public records, VSP asserts that, statistically, they base their process on a 95% confidence level, with a margin of error of +/- 6.1%.

 

The goal of the sampling process (any sampling process) is to draw reliable conclusions about the entire population of claims (the "universe of claims") from the sample. The question raised is, is the process above a statistically/mathematically valid statistcal method to calculate restitution owed?

 

I believe it is not, because the methods to determine restitution are not correct.

 

The determination of "error rate" or "dollars at risk" lacks relationship to the representation of statistical validity. The sample size is statistically too small to determine anything more than if the doctor is or is not compliant. It is too small to determine the non-compliance rate of the entire population of claims within a reasonable margin of error. And it is entirely unknown what the relationship is between compliance rate and dollars at risk, the determination of which is the ultimate goal.
 

The first step in an audit process is to determine how many randomly selected records to examine in order to have a reliable result that can be extrapolated out to the universe of claims. It is essential that the sample fairly represent the universe of claims. That requires the sample to be random, without any bias being introduced, and that it be large enough. For purposes of this discussion the focus is on the size of the sample. No conclusions are reached with respect to whether or not the sample is truly random and without bias.

 

1. The Binomial Equation for Determining Sample Size

 

There is an equation (the binomial equation) for determining the sample size necessary where there are two possible choices (a binomial), such as compliant or non-compliant. The equation has two variables, "p" and "e". There is one constant whose value is based on the confidence level you want. For 95%, that constant is 1.96. Thus, the formula for determining how many records are needed in the sample (n) is:

 

 

 

Where:

"p" is the "expected error rate." (The best advance estimate of what VSP thinks the non-compliant rate will be.)

"e" is the "precision", aka the margin of error, you want to have.
 

2. Applying the Binomial Equation to Determine the Sample Size

 

VSP's values for p and for e result in a sample size of about 40 records.

3. VSP's "p" Value Only Allows VSP To Determine If You Are or Are Not Compliant

 

The first problem is "p." The doctor has been selected to be audited, not randomly, but due to a belief by VSP that the doctor may be non-compliant. The number of records to be audited must take into account that this doctor was selected for an audit due to a belief he/she is not compliant, and "p" must account for this.

Because at the outset the error (non-compliance) rate is unknown, it is common in the statistics industry to use a value of 50% (0.5) for p. This results in the largest sample size and ensures a large enough sample for results that can be extrapolated to the universe of claims while maintaining an appropriate margin of error. If a value of "p" less than 0.5 is used, once doing the initial audit, the results of that sample can be used to adjust "p" and determine how many additional records are needed in the sample to proceed to step 2 of the process. 

 

If we give VSP the benefit of the doubt and assume the sample size is statistically large enough, the ONLY thing VSP is actually testing in this first step, whether this doctor is compliant or is not compliant. But, what does this tell us about the non-compliance rate or dollars at risk in the larger universe of claims?

 

4. The "p" Value and Resulting Sample Size Is Too Small

 

Based on the audit of 40 records, only two things can be determined with statistical validity:
 

(1) whether or not the doctor is compliant and, (2) the rate of non-compliance among the audited records.

 

But, what about the non-compliance rate in the universe of claims?

 

a. Using the Corrected Value of "p" Results in a Margin of Error that Violates Due Process

 

First, if the non-compliance rate for the audited records audited is extrapolated out to the universe of claims, the margin of error increases to about +/-15% if a corrected or actual value of "p" is considered.

 

This is determined by using basic algebra to solve for "e" in the binomial equation. By way of example, using 40 for the sample size (n), and setting "p" equal to 35%, we find that "e", the margin of error, is +/-15%. This is a very large margin of error. Indeed, in Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 756-757, as discussed by the California Supreme Court in Duran v. U.S. National Bank (2014) 59 Cal.4th 1, 46,  the California courts rejected a damages calculation where the margin of error was +/-16%, stating that the "margin of error was so large that the resulting damages award violated due process." Id.

 

Having determined from the initial audit that the doctor is non-compliant with VSP's rules, VSP has actually determined the correct value of "p" for determining the compliance rate! But VSP does not modify the size of their sample before calculating non-compliance rates. That often results in a margin of error that is very large due to the small sample.

 

Again, if you do not know the actual non-compliance rate, it is common to use 50%. This results in a sample size of 249 records and at a 95% confidence level with a +/- 6.1% margin of error. If you do know something about the non-compliance rate, as is the case after the initial audit, one can adjust "p" to that known value for the purposes of ensuring a large enough audit sample for determining non-compliance rates. Assuming p = 50%, if the margin of error is +/- 4%, FAR more records would be needed to achieve a 95% confidence that the non-compliance rate is correct.

 

However,  with a non-compliance RATE margin of error of +/-15% (it varies a bit, +/- 1%, depending on the actual or expected error rate) it means, if they determine you were non-compliant in 30% of the 40 records in the sample, they can be 95% sure you are non-compliant somewhere between 15% and 45% of the time. This is a huge range, and really doesn't provide much useful information. Several Courts have found that margins of error of this magnitude constitute a denial of due process.

 

b. The Goal of the Audit is to Determine Restitution, Not the Non-compliance Rate

 

Second, the goal and purpose of the audit is to determine restitution dollar amount owed. So, no matter what the non-compliance rate may be, or its margin of error, the real issue is the amount of money owed back due to the non-compliance.

 

Let's assume as an example the non-compliance rate found in a hypothetical audit. A total of 40 records are audited and non-compliance is found in 24 of the 40 records, a 60% rate of non-compliance. $3,153 in over-paid in those 24 records, out of a total of $5,219 paid. That was a "dollars at risk" rate of also 60%. This resulted in a restitution demand of $820,000. Now, here is the problem. The actual non-compliance rate was not 60%, it was 60% +/- 15%. Thus, the number of non-compliant records in the population as a whole was just as likely to have been 45%, or 18 records, as it was 60% (24 records). Both are 95% likely to be correct. This dramatically changes the "dollars at risk" because there is no way to know which of the 6 "extra" records would not be in the larger population. And, because the dollars at risk are not yes/no values, and are not a normally distributed (e.g., are not a "Bell Curve"), we know nothing about just how much having only 18 records (or 30 records for that matter) being non-compliant would change the restitution amount. If we assume the dollars are, in fact, normally distributed, then we may be able to say that instead of 60% dollars at risk, it would drop to as little as 45%. That would reduce the restitution by more than $200,000! But, scientifically, we cannot even say that, because a single outlier could dramatically change the dollars at risk values and resulting restitution.

 

5. Determining Restitution Due

 

The goal of the statistical process, its ultimate objective, is to determine RESTITUTION, not non-compliance or non-compliance rates. Here, there are no statistics applied to the non-binomial, non-normally distributed, dollars paid or dollars overpaid amounts. The binomial equation does not apply and cannot be used for calculating dollars owed because those are not a binomial (yes or no) values or answers, nor are they necessarily normally distributed (that is, the distribution of dollars paid, or amounts overpaid, may be skewed).

 

We simply cannot say that, for instance, that the restitution of $114,480 calculated in the sample above is 95% likely to be a correct representation of the universe of claims (within the margin of error) because nothing is known about the dollar data. In particular, the upper and lower limits, the mean, and the standard deviation are all unknown. For instance, assume there are 1000 claims. There may be only one claim with a value above $100, and that one might be $1200. The 40-record sample may have selected that $1200 claim. This will substantially skew the extrapolation and result in having to repay FAR more than you actually owe back. A proper determination of the dollars owed back requires applying statistical methods that normalize the data, then considers the standard of deviation of the non-binomial data.

 

VSP uses the binomial compliance vs. non-compliance to calculate non-compliance RATES, but then uses that to extrapolate to non-binomial non-normally distributed restitution. There are no margins of error or confidence interval values for the restitution calculation. When testing a data set with a non-normally distribution like reimbursement, the binomial equation isn't accurate. 

 

C. CONCLUSION

 

Because doctors are not randomly selected for audit, VSP actually needs to audit more records to determine, at the 95% confidence interval and 4% margin of error, if the doctor is or is not compliant. We have no idea how many records are needed to determine how much a non-compliant doctor owes back in restitution, as no valid statistical methods are used to make that calculation.

 

So, when VSP says you owe restitution, they cannot say what the margin of error is on that determination, or what level of confidence they have that this is the correct amount. This is not to say if you've billed VSP incorrectly you don't owe them money back. You may, and it could be a lot more or less than VSP's conclusion. But determining the amount should to be done properly. If VSP is going to rely on sampling, the statistical methods should be correct to avoid the risk of substantial error.

 

 

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* The foregoing is my opinion based on my analysis of the VSP process. Note that I am not an expert in statistics, and this only represents my beliefs based on information in public files and what has been explained to me by statistics experts. VSP contends it's methods, developed by a statistics expert, are statistically valid. 

VSP Targeted Audits

VSP performs two kinds of audits: quality control (QC) audits, and targeted audits. Every practice should expect a QC audit every few years. These are routine audits in which you are asked to send VSP about 10 patient records, and receive back a report assessing your compliance with VSP rules.

A "targeted audit" is performed by a special division of VSP called their SIU, or Special Investigations Unit. The SIU is made up of a small group of 4-5 trained fraud investigators. They regularly examine data to watch for billing patterns which suggest to them that you may be billing improperly or even commiting fraud.

For instance, billing a high volume of visually necessary contact lenses, having a high dispensing rate compared with other offices in your area, billing for a high volume of punctal plugs, and billing a high number of low-power prescriptions (+/- 0.50D) have all been recently known to trigger a "targeted audit." Anything you bill VSP for more than others in your area puts you on their "radar" and may trigger one of these audits.

In a targeted audit a VSP fraud investigator from the SIU will come into your office unannounced, and ask for anywhere from 30-50 charts, and will wait for you provide them. These charts are copied, and the auditor returns to his/her office and determines if you appear to be violating VSP rules. Targeted audits often lead to demands by VSP that you repay VSP $100,000 or more in "restitution," and/or removal from the VSP panel. Then, to add salt to the wound, VSP will begin withholding all VSP payments to you to pay down the restitution, even before you have a chance to appeal the audit findings.

VSP CL Professional Services

 

VSP has recently begun "cracking down" on doctors that do not fully and/or properly document annual contact lens professional services. If you are audited, and you billed VSP for contact lens professional services (not materials), the VSP auditor will be looking for specific documented items to validate your right to payment for those services. If those test results are not found in your records VSP will consider you to have been overpaid for contact lens fitting services, and you may be facing a large restitution order. Don't make it hard for the VSP auditor to find -- have a clearly identified contact lens services areas in your charts!

 

There is much confusion in VSP's CL service rules, and as a result, many doctors do not have adequate (e.g. VSP compliant) documentation to support having provided professional services to their contact lens patients. It is commonplace, especially with a patient that is doing well with their contact lenses, for doctors to evaluate the patient's current lenses and issue an updated prescription (along with selling a new annual supply of materials), but to have minimal documentation related to those contact lens-related professional services. Following these guidelines, and using the model CL exam forms below, should help you address these issues and protect you against a strikingly adverse VSP audit outcome.

 

VSP recognizes three kinds of professional CL services:

• New Fit
• Refit
• Routine Progress evaluation

 

A new fit is for a patient that has not worn contact lenses before. A refit is for patients that have been wearing contact lenses, but you are making a change to the lens type or lens parameters. VSP does not consider issuing a new prescription to constitute a "refit", and they require that certain data be recorded to justify payment for a "refit." Routine progress evaluations are for the annual contact lens check of a patient that has been wearing lenses when you are not changing or do not change the lens parameters, only checking the patient and updating the prescription and/or dispensing a new annual supply of lenses. In each type of service there are specific things which VSP expects to be recorded, such as CL History (including wearing time, cleaning, replacement schedule), certain findings (SLE, Over-refraction, Keratometry, VA's w/ lenses), Assessment, and Plan for the new prescription. 

 

VSP pays according to your usual and customary charges for Fits, Refits, and Routine Progress Evaluations, subject to the limits of the patient's coverage (note: for visually necessary, the plan limits do not apply and you will be paid according to your U&C, which can be well over $1,000 for fitting certain lenses). Your fees for each contact lens service (fit, refit, evaluation) may be the same, or may vary (e.g. new fits costing more than refits, etc.). It is important -- essential -- that you have an established and up-to-date Fee Schedule that reflects your U&C charges for these services. It may be conveniently broken down by lens type (e.g. soft spherical, soft toric, soft multifocal, GP, Hybrid, Scleral) and may include several levels for each of those categories (e.g. Routine, Complex, Custom).

 

Tip: Use a Contact Lens fee schedule, and update it regularly. At least every six months. Date the schedule so the last update is noted on it. Be sure it includes all your professional service fees. It may be convenient to use a "unit charge" and then set each service as a certain number of units. That way you can change your fees easily by adjusting the unit charge, or the units for any given service.

 

To make it easier to meet the VSP requirements I have developed for myself the CL forms here. In every case that VSP is being billed for contact lenses, either materials, professional services, or both, one of these forms will be completed. Dispensing and a follow-up visit will be documented at the bottom of the form (in ALL cases, VSP wants documentation showing date dispensed). These forms are offered for you to use at your discretion. I cannot guaranty that they satisfy all VSP requirements, but they are what I use after having participated in dozens of VSP audits arising out of CL billing issues.

 

Model VSP Contact Lens Exam Record:

The model exam record is designed for use on VSP patients for CL fits, refits, and progress checks. Progress checks refer to annual (yearly) CL evaluations in which you do not change the lens parameters. I use one of these forms for each patient that I bill VSP for ANY contact lens related materials or services, completing the parts of the form that are applicable.

• For a Word DOC File of the model CL Exam Record, click here.

• For a PDF file of the model CL Exam Record, click here.

 

VSP Out-Of-Network Billing

Not everyone is aware, but you can bill VSP as an "out-of-network" (OON) provider if you are not a contracted VSP provider. In fact, this is how many commercial and "big box" businesses and others are able to represent that they "accept" VSP -- they bill OON. If you are not "in-network" (e.g. a VSP contracted provider), the trick is in knowing what the VSP benefits will be for any given patient, and in establishing policies for what you'll charge your patients.

 

However, effective July 1, 2018, VSP has built a wall to try and make it as difficult as possible for an OON provider to serve their patients. VSP will no longer provide an out-of-network PROVIDER (OD, Ophthalmologist, or Optician) with information about the patient's OON benefits. They will not tell you if the patient is eligible, nor will they tell you what the OON benefits are for the patient. VSP now requires that the patient or VSP member speak directly with VSP member services to obtain any information about their OON benefits or coverage. Moreover, reports are that VSP uses this opportunity to suggest that the patient will obtain better benefits if they go in-network, effectively trying to convince the patient to NOT do business with you or any other OON provider.

 

VSP will still accept claims from OON providers, and will pay OON providers directly if the claim form indicates the provider is accepting assignment of benefits. They just will not tell OON providers what the benefits or payment will be, thus hinduring your ability to provide information or good service to your patients.

 

Possible Solutions

 

Providers are trying a few different methods of dealing with this "new reality" from VSP. In most cases, OON providers do not want to burden their patients with having to call VSP, nor do they want to allow VSP the opportunity to tell patients they should go elsewhere to use their VSP benefits. Here are a few suggestions on how providers may continue to provide their patients with the best possible OON care and benefits.

 

1. Start building your own database of the VSP OON benefits for various employers in your community. Begin by reviewing the OON benefits paid over the past year, identifying the employer or plan ID, and the amounts paid for exam, frames, single vision, bifocal, and progressive lenses, add-ons (scratch coat, anti-reflective coat, high-index, etc.) and for contact lenses. The fact is, those benefits change little, if at all, from year to year. OON Providers in an area can meet and share their data so that the OON benefits are simply already known.

 

2. Estimate the VSP OON benefits for the patient, and, for patients that pay using a credit card, obtain patient credit card information and authorization to charge them for any shortfall when the VSP payment comes in. Use a form that advises the patient you will use the credit card information to refund to them any over-charge, or charge them any under-charge.

 

3. Estimate the VSP OON benefits for the patient, but, if they don't want to use suggestion 2 above, let them know that if they want you to accept payment from VSP, you'll need to get that payment before their glasses can be dispensed so that the correct charge can be determined. In most cases VSP pays within 2-3 weeks.

 

4. If you want to the patient to call, have them do so in your office, and develop and use a SCRIPT for the patient to use so that the process is as streamlined as possible. It may also be advisable to warn the patient that VSP may try and convince them to go elsewhere, and have a script ready for the patient to use to cut that off (i.e., "Thank you, but I do not want to go somewhere else, so I'd appreciate it if you'd just tell me my benefits.")

 

HANDLING VSP INQUIRIES & VERIFYING OON BENEFITS

Patient calls to schedule appointment – asks if you accept their insurance (which is VSP): Inform patient that you accept VSP's payment, plus the VSP co-payment, as payment in full for the examination, and for materials the patient is charged only the amount which is over and above VSP's coverage for whatever they purchase. A simple script goes like this: "we accept your VSP payment and copay in full for your examination, and we apply your VSP allowances towards the cost of any eyeglasses or contact lenses you purchase. So, we try and ensure you receive the most value VSP offers when you obtain services or materials in our office."

When the patient arrives, use one of the methods above, or, if you choose option 4, help the patient call VSP. Have the patient tell VSP he/she would like all benefits: exam, frames, lenses, and contacts, and have a form where the patient can write the amounts down as they are provided. 

o Exam: Copay $_____  Dr’s reimbursement $_______
o SV: $_______, pt pays the difference .
o BF/Progressive: $______, pt pays the difference .
o Trifocal: $______, pt pays difference.
o Lenticular: $______, pt pays difference .
o Contact Lenses: $______. They usually say this can be used against the fitting/evaluation as well as materials.
o Make sure you write down the authorization/reference number they give you.

To file the VSP claim use the ordinary CMS 1500 Form

 

o Fill in 1, 1a, 2, 3, 4 (can use same if same pt), 5 all, 6, 7 all (can use same if same pt), 8, 10a-c, 11a (if a guarantor – dob & sex), 11d no, 12 SOF & DATE, 12 SOF, 17, 17B, 20 no, 21, 23 (this is where you put the VSP authorization/reference number), 24 a, b, d, e, f, g, j, 25, 26, 27 yes, 28, 30, 31, 32, 32a, 33, 33a

o Fax the claim to VSP 916-858-4985; or mail to:

 

(this address has to go on top of claim as well)

 

VSP provides some OON billing information at this website: https://www.vsp.com/faqs/s/article/Submitting-an-Out-of-Network-Claim

VSP will only provide patient allowance and copay over the phone, so have your staff fill out this form (here is a PDF version of the form) and put it in the patient's chart:
 

PATIENT NAME:_________________________________________  DATE OF BIRTH:____________
GUARANTOR’S NAME:____________________________________ DATE OF BIRTH: ____________