Overpayment Rule Sets 6 Year Lookback

Nearly 6 years after the passage of the Affordable Care Act, CMS published the final 60 day rule for Medicare Parts A and B overpayments. The rule requires a person who has received an overpayment to report and return the overpayment to HHS, the State, an intermediary, a carrier or a contractor within 60 days after the date the overpayment was identified or the due date of any corresponding cost report, as applicable. The final rule is codified at 42 CFR 401.301 – 305; 401.607. Failure to properly identify and return overpayments may lead to liability under the False Claims Act.

The Final Rule sets a 6 year lookback period and clarifies what it means to identify an Overpayment. Prior to publication of the Final Rule, CMS previously published final rules for Medicare Parts C and D. As we previously reported, the New York District Court considered the “identification issue” in Kane v. Healthfirst, Inc. Unlike the Final Rule, the Court in Kane did not allow for quantification of an overpayment prior to commencement of the 60 day clock.

A. Ten Year Lookback Burden ‘Reduced’ to Six Years.

As we described in a February 2012, blog post, CMS initially proposed a ten year lookback period. The final rule eases this burden and requires that an overpayment be reported and returned within six years of receipt of the overpayment. In CMS’s view, “[c]reating this limitation for how far back a provider or supplier must look when identifying an overpayment is necessary in order to avoid imposing unreasonable additional burden or cost on providers and suppliers. Yes, 6 years is better than 10, but CMS declined to adopt a 4 year lookback as contained in the current reopening rules at 42 CFR 405.980. In reaching the 6 year rule, it appears that CMS contemplated burden, statutes of limitation in enforcement statutes, and state law record retention rules that require providers to retain records for 6 or 7 years.

B. Clarification of Meaning of ‘Identification’ of An Overpayment.

When does the 60 day clock start? The ACA provides that an overpayment must be reported and returned by the later of (i) the date which is 60 days after the date on which the overpayment was identified; or (ii) the date any corresponding cost report is due, if applicable. The Final Rule clarifies that “a person has identified an overpayment when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.” 81 Fed. Reg. 7654. Conversely, the Final Rule provides that “a person should have determined that the person received an overpayment and quantified the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.” 81 Fed. Reg. 7661, 7683. Moreover, it identifies specific examples of where an overpayment may be identified. 81 Fed. Reg. 7659.

1. Reasonable Diligence in Quantifying an Overpayment – The commentary to the Final Rule provides guidance on what constitutes reasonable diligence. In terms of quantifying an overpayment, reasonable diligence is demonstrated “through the timely, good faith investigation of credible information, which is at most 6 months from receipt of the credible information, except in extraordinary circumstances.” Extraordinary circumstances are fact specific but may include unusually complex matters. Reasonable diligence in the Final Rule replaced the concept of “all deliberate speed” in the proposed rule.

2. Reasonable Diligence Through Compliance Activities – Under the Final Rule, reasonable diligence includes both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments and investigations conducted in good faith in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment. The Final Rule admonishes the provider and supplier community to engage in meaningful compliance activities:

We believe that undertaking no or minimal compliance activities to monitor the accuracy and appropriateness of a provider or supplier’s Medicare claims would expose a provider or supplier to liability under the identified standard articulated in this rule based on the failure to exercise reasonable diligence if the provider or supplier received an overpayment.

81 Fed. Reg. 7661.

C. Reporting.

A person will satisfy the reporting obligations by making a disclosure under the OIG’s Self-Disclosure Protocol or the CMS Voluntary Self-Referral Disclosure Protocol. Otherwise, providers are required to use “an applicable claims adjustment, credit balance, self-reported refund, or other reporting process set forth by the Medicare contractor to report an overpayment.” Those SRDPs submitted prior to the effective date of the Final Rule will still be governed by the 4-year lookback period. Going forward the 6-year look back period will apply, though CMS still needs to modify this period with the OMB with regard to the financial analysis they are allowed to collect under the Paperwork Reduction Act. Therefore, at this point providers may voluntarily provide information for the 5th and 6th year. 81 Fed. Reg. 7673.

D. Conclusion.

In light of the Final Rule, providers should evaluate their compliance and auditing activities and evaluate the extent to which they could demonstrate “reasonable diligence.” In general, providers should work diligently to quantify and report overpayments by no later than 8 months (6 months to quantify, 2 months to report).

Adam Snyder is Chair of the Ogden Murphy Wallace Business Department and is a Part-time/Adjunct Faculty member of the University of Washington School of Law. For additional information regarding the Medicare 60 Day Overpayment Rule, Corporate Compliance, or internal investigations, please contact Adam Snyder.

Naughty or Nice – 60 Day Overpayment Reporting Rule

According to a recent New York District Court decision, whether providers are subjected to an enforcement action under the False Claims Act for failing to report and return an overpayment within the sixty-day window should turn on whether they have been naughty or nice after learning of the potential of an overpayment.  In this case, at least at the motion to dismiss stage, the court concluded that the providers had been naughty, which, based on the factual recitations seemed a pretty easy call.  Essentially, the providers were alerted to the potential of substantial overpayments by an employee tasked with examining an overpayment issue.  Four days after providing his employer with a spreadsheet detailing the overpayments, the employee was fired and his spreadsheet “filed”.  A couple months later, the employee filed his qui tam action in which the United States and the state of New York eventually intervened.

 

Naughty or nice became important because of the court’s analysis of what constitutes “identification” of an overpayment for purposes of triggering the 60 day report and return obligation.  In this regard, according to the decision, at least one thing is certain.  The answer is not when the amount of the overpayment is finally calculated with certainty.  In response to this argument by the defendants, the court observed this would create ” . . . a perverse incentive to delay learning the amount due . . . relegating the sixty-day period to merely the time within which they would have to cut the check.”

 

The Government took the position that an overpayment is identified when the recipient is put on notice that a certain claim may have been overpaid.  The court agreed that defining “identified”  ” . . . such that the sixty day clock begins ticking when a provider is put on notice of a potential overpayment , rather than when the overpayment is conclusively ascertained, is compatible with the legislative history of the FCA and the FERA highlighted by the Government.”

 

The court characterized the rule derived from a review of legislative history as “unforgiving”, noting that it provides no leeway for the recipient of an overpayment who ” . . . struggles to conduct an internal audit, and reports its efforts to the Government within the sixty-day window, but has yet to isolate and return all overpayments sixty-one days after being put on notice of potential overpayments.”  ”  . . .it nowhere requires the Government to grant more leeway or more time to a provider who fails timely to return an overpayment but acts with reasonable diligence in an attempt to do so.”  Any relief for the provider that is diligently attempting to determine whether the potential overpayment is factually and legally an actual overpayment and, if so, the amount of the overpayment to be returned rests with prosecutorial discretion, which according to the court, ” . . . would counsel against the institution of enforcement actions aimed at well-intentioned health care providers working with reasonable haste to address erroneous overpayments” because in such a  situation the provider would not have acted with reckless disregard, deliberate ignorance or actual knowledge of the overpayment, a requirement of a FCA claim.

 

In fact, in comments to the court in this case, the Government made clear that this was not a case of a provider working diligently on the claims and on the sixty-first day is still scrambling with its spreadsheets.  “You know, the Government wouldn’t be bringing that kind of claim.”

So the moral of the story is if a messenger notifies you of a potential overpayment, be nice, act with diligence to investigate and quantify any overpayment, and for goodness sake don’t shoot the messenger.

To learn more about refunding overpayments please contact Greg Montgomery or Adam Snyder.

 

Delay in Return of Overpayments Leads to False Claims Act Suit

The generally accepted wisdom is to move expeditiously to investigate and return federal health care program overpayments once you become aware of them.  Now we know the potential downside of failing to do so even when all overpayments are eventually returned.

Late last month the United States Attorney’s Office filed a false claims act complaint in intervention against Continuum Health Partners.  The complaint seeks treble damages, civil penalties and costs.

Relevant facts:

  • From early 2009 to late 2010, due to a computer glitch, defendant submitted improper claims to Medicaid for additional payments for services
  • September 2010  New York state comptroller notified defendant of a small number of these claims improperly billed to and paid by Medicaid
  • February 2011 defendant became aware of much larger batch of improper claims totally over $1,000,000 that may have been submitted to and paid by Medicaid
  • Defendant repaid improper claims in dribs and drabs eventually repaying everything by March 2013 – 300 improper claims were repaid only after the Government issued a Civil Investigative Demand to defendant regarding payment of these claims in June 2012

“Continuum thus intentionally or recklessly failed to take the necessary steps to timely identify the claims affected by the software issue or to timely reimburse DOH for those affected claims that resulted in overbilling to Medicaid.”

For more information about this case or for assistance with reporting overpayments please contact Greg Montgomery.

OIG Launches New Online Submission Process for the Self-Disclosure Protocol

On July 8th, the Office of Inspector General (OIG) launched a new online submission process for the Self-Disclosure Protocol (SDP).  The SDP allows health care providers to voluntarily identify, disclose, and resolve instances of potential fraud involving federal health care programs, including Medicare and Medicaid.   The OIG has stated that individuals and entities that utilize the SDP will pay a lower amount of damages for violations than would normally be required in resolving a government-initiated investigation.

You can access the online submission process here.

The OIG hopes that the online submission tool for the SDP will streamline the process for providers that want to resolve violations without the time and expense of a government-directed investigation.  With that said, we suggest that providers have an attorney analyze any potential SDP issues prior to completing the online form.  As always, the health law attorneys at OMW are happy to help.

For more information about the SDP online submission process please contact Casey Moriarty.

Whistleblowers Expected to Receive $2.8 Million in Settlement of Stark Based False Claims Act Lawsuit

The Department of Justice recently announced a settlement with Adventist Health System/West under which the Department of Justice and the state of California will collect $14.1 million in settlement of False Claims Act allegations.  The lawsuit was initially filed by private individuals as whistleblowers who will receive a significant portion of the settlement.  There was no determination or admission of liability.

According to the announcement, the lawsuit alleged that Adventist Health improperly compensated physicians at one of its facilities by transferring assets to the physicians at less than fair market value and by compensating physicians for teaching services at rates contended to be above fair market value.  These payments to physicians were alleged to violate the Stark law and anti-kickback laws.

In commenting on the settlement, a representative of the Office of Inspector General observed:

“Payouts by hospitals and clinics – as the government alleged in this case – raise substantial concerns about physician independence and objectivity.  Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued.”

As part of its on-going quarterly lunch time webinar series, the Ogden Murphy Wallace Healthcare Practice Group will provide a presentation on self-disclosure options and avoidance of state and federal False Claims Act liability in its June 4, 2013 webinar (to register click here).  If you have questions regarding self-disclosure and overpayments in general please contact Greg Montgomery.

False Claims Act Recoveries Top $14.2 Billion

On May 1, 2013, the  Department of Justice announced a settlement with two Montana hospitals that added $3.95 million to its recoveries under the False Claims Act.  According to the announcement, with this additional recovery,  the Department of Justice has used the False Claims Act to recover more than $14.2 billion in federal healthcare payments since January, 2009.

Once again, allegations of hospital-physician financial relationships that violated the Stark law prohibition against self-referral were the stated basis for the allegations of False Claims Act liability.  In this case, according to the announcement, it was alleged that the hospitals paid incentive compensation to certain physicians in a manner that took into consideration the value or volume of the referrals by the physicians to the hospital by improperly including certain designated health services in the formula for calculating physician incentive compensation.

This situation was voluntarily disclosed by the hospitals.  In this regard, an OIG representative was quoted as commenting:

 “There is an expectation that corporations providing services to Medicare and Medicaid beneficiaries adhere to the provisions of the Stark Law.  I applaud St. Vincent Healthcare and Holy Rosary Healthcare for recognizing their potential liability in this matter and making a disclosure”

As part of its on-going quarterly lunch time webinar series, the Ogden Murphy Wallace Healthcare Practice Group will provide a presentation on self-disclosure options and avoidance of state and federal false claims act liability in its June 4, 2013 webinar (to register click here).  If you have questions regarding self-disclosure and overpayments in general please contact Greg Montgomery.

CMS PROPOSES TO INSPIRE MORE WHISTLE BLOWING

In a recently published proposed rule, CMS and HHS propose to substantially increase financial rewards available to individuals who report information regarding individuals or entities engaging in acts or conduct that are subject to Medicare sanctions.  The existing reward incentive program offers 10% of the amount of overpayment recovered or $1000 whichever is less.  Under the proposed rule, the reward could take a substantial jump up to 15% of $66,000,000, equaling $9,900,000.

 

CMS explains that under the existing reward incentive program which has been in effect since July 1998, only 18 rewards have been paid in a total amount of less than $16,000 and less than $3.5 million in overpayments have been collected.  It notes that after the IRS increased the rewards available under its rewards program in 2006, it has collected almost $1.6 billion and paid approximately $193 million in rewards.  CMS also tips its hat to the success of the whistle blower provisions of the False Claims Act, noting that rewards under this Act range from 15% to 30% of amounts recovered.

 

CMS estimates that with the proposed rule in place annual recoveries will increase by $24.5 million.  There will, however, be no whistle blower double dipping.  While conduct may entitle a whistle blower to recover under both the False Claims Act and the Reward Incentive Program, whistle blowers are going to have to pick only one whistle.  Regardless of which whistle is chosen, the bottom line is that with this new rule more individuals are going to be looking much harder at the conduct of providers and entities that seek payment for services and supplies from Medicare.

 

As part of its on-going quarterly lunch time webinar series, the Ogden Murphy Wallace Healthcare Practice Group will provide a presentation on self-disclosure options and avoidance of state and federal false claims act liability in its June 4, 2013 webinar.  If you have questions regarding these updated protocols or self-disclosure and overpayments in general please contact Greg Montgomery.