CMS Proposed Rule on Overpayments – A 10 Year Burden

CMS recently published its proposed rules on reporting and returning overpayments.  These rules are intended to implement the 60 day overpayment reporting requirement pursuant to the Affordable Care Act (the “ACA”).  The ACA created a new section 1128J(d) of the Social Security Act requiring a person who receives an overpayment to return and report the overpayment to HHS, the State, a carrier or a contractor and notify the recipient of the reason for the overpayment.  The statute requires that all  overpayments be refunded within 60 days after the date the overpayment was identified or the date of any corresponding cost report (as applicable), whichever is later.

The proposed regulations only relate to Medicare Parts A and B.  Medicaid, Medicare Advantage, Part D, and managed care organizations are not covered by the proposed rules; however, the 60 day shot clock noted in the statute still applies.

Reporting Overpayments

The proposed rules rename the current voluntary refund process the “self-reported overpayment refund process” (described more fully in the Medicare Financial Management Manual).  Providers will use voluntary refund forms currently on the websites of their Medicare contractors.  Reports of overpayments will require the inclusion of the following information:

1)      Name;

2)      TIN;

3)      How the error was discovered;

4)      The reason for the overpayment;

5)      The health insurance claim number, as appropriate;

6)      Date of service;

7)      Medicare claim control number, as appropriate;

8)      NPI;

9)      Description of the corrective action plan to ensure the error does not occur again;

10)   Whether the person has a corporate integrity plan with the OIG or is under the OIG Self-Disclosure Protocol;

11)   The timeframe and the total amount of the refund for the period during which the problem existed that caused the refund;

12)   If a statistical sample was used to determine the overpayment amount, a description of the statistically valid methodology used to determine the overpayment; and

13)   A refund in the amount of the overpayment.

Under the proposed rules, providers are required to report the overpayment within 60 days of identification and refund the overpayment within the same 60 day period.  Providers may request a refund extension through the extended repayment schedule.  A person has “identified” an overpayment if that person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment.  Providers who retain an overpayment after the 60 day deadline for reporting and returning the overpayment are liable under the False Claims Act.  Additionally, any person who knows of an overpayment and does not report and return the overpayment may be found liable for Civil Monetary Penalties and excluded from participation in federal health care programs.

Significantly, the proposed rules also set a lookback period of 10 years, meaning that if a provider identifies an overpayment within 10 years of the date the overpayment is received it will have to report and refund such overpayment.

SRDP and OIG Self-Disclosure Protocol

CMS attempts to reconcile these proposed regulations with the OIG Self-Disclosure Protocol and the new CMS Self-Referral Disclosure Protocol (“SRDP”) (which allows reports of Stark Law violations).  The reconciliation falls flat and creates confusion which will hopefully be remedied in the final rule.

The 60 day deadline for returning overpayments will be suspended if the OIG acknowledges receipt of submission to the OIG Self-Disclosure Protocol.  This suspension will last until a settlement agreement is entered, the person withdraws from the OIG Self-Disclosure Protocol, or the person is removed from the OIG Self-Disclosure Protocol.  Additionally, a person satisfies the reporting requirements listed above by making a disclosure under the OIG Self-Disclosure Protocol which results in a settlement agreement.

Similarly, the 60 day deadline for returning overpayments is suspended if CMS acknowledges receipt of a submission to the SRDP until such time as a settlement agreement is entered, a person withdraws from the SRDP, or the person is removed from the SRDP.  However, the reporting requirement described above is not tolled by submission to the SRDP.


Regardless of these proposed rules, providers must currently report and refund overpayments within 60 days per the ACA.  CMS has opened public comment on these proposed rules through April 16, 2012.  If you would like assistance on drafting comments or assistance with reporting an overpayment please contact Don Black or Elana Zana.

OIG Launches Series on Provider Compliance

In December, the Office of Inspector General (OIG) launched a webcast series on provider compliance. Currently there are six short (approximately five minutes) webcasts on topics such as fraud and abuse, the anti-kickback statutes and the physician self-referral law (aka the Stark law).    These webcasts provide a short overview of these important compliance laws.  The OIG also has sixteen webcast modules that go into further depth on fraud and abuse enforcement.  The OIG plans on posting additional webcasts on a weekly basis over the next few months.

To access the webcasts click here.  Slides and handouts are also available on the OIG compliance training website.

ACO Fraud and Abuse Law Waivers

In conjunction with the issuance of the final rules related for Accountable Care Organizations (“ACOs”) under the Medicare Shared Savings Program, the OIG published an interim final rule establishing waivers to fraud and abuse laws in connection with the Shared Savings Program.

The waivers were created to address industry concerns that restrictions in certain laws aimed at preventing fraud and abuse of federal health care programs, i.e., the Physician Self-Referral law (commonly known as the “Stark Law”), the federal anti-kickback statute (“AKS”), and the federal civil monetary penalties (“CMP”) law, would limit or otherwise impede development of innovative integrated care models envisioned by the Shared Savings Program.  The goal of the waivers is to effectively balance the need for ACO innovation and flexibility in the Shared Savings Program while protecting beneficiaries and the Medicare program.

The interim final rule establishes five waivers to the fraud and abuse laws which CMS and the OIG deemed necessary to carry out provisions of the Shared Savings Program.  Parties seeking to ensure that an arrangement is covered by a waiver for a particular law may look to any waiver that applies to that law.  An arrangement may meet the criteria of more than one waiver.

Key Points/General Overview:

  • To qualify for a waiver, the arrangement must meet all of the conditions set forth in the waiver.
  • A waiver of a specific fraud and abuse law is not needed for an arrangement to the extent that the arrangement: (1) does not implicate the specific fraud and abuse law, or (2) implicates the law, but either fits within an existing exception or safe harbor, as applicable, or does not otherwise violate the law.  Arrangements that do not fit a waiver have no special protection and must be evaluated on a case-by-case basis for compliance.  Failure to fit in a wavier is not, in and of itself, a violation of the fraud and abuse laws.
  • For purposes of the waivers, “reasonably related to the purposes of the Shared Savings Program” means the purposes of promoting accountability for the quality, cost, and overall care for a Medicare population; managing and coordinating care for Medicare fee-for-service beneficiaries through an ACO; and encouraging investment in infrastructure and redesigned care processes for high quality and efficient service delivery for patients, including Medicare beneficiaries.
  • CMS, OIG, and HHS will closely monitor ACOs entering into the program in 2012 through June 2013, and plan to narrow the waivers if they result in the unintended effect of shielding abusive arrangements.  The waivers could be narrowed by modifying the waivers to add or substitute conditions to the waivers; limiting ACO arrangements involving referral sources to those that are fair market value or commercially reasonably or involve services performed by the referral sources; preclude waiver protections for arrangements that involve individuals or entities that are not part of the ACO; or include a requirement that ACOs submit reports regarding their arrangement.  CMS and the OIG seek comments on these approaches to narrow the waivers.

Detailed summaries of the five waivers are provided below:

“ACO Pre-Participation” Waiver.  This waiver of the Stark Law, the AKS, and the gainsharing CMP applies to ACO-related start-up arrangements in anticipation of participation in the Shared Savings Program, but which pre-date an ACO’s participation agreement.

  • The parties must act with the good faith intent to develop an ACO that will participate in the Shared Savings Program starting in a particular year, must submit a completed application to participate in a Shared Savings Program for that year, and must be taking diligent steps to develop an ACO.
  • The ACO’s governing body must make a bona fide determination that the arrangement is reasonably related to the purposes of the Shared Savings Program.
  • Certain documentation of the arrangement must be maintained for at least 10 years following completion of the arrangement and made available to HHS upon request.
  • An ACO may use the pre-participation waiver (including any extensions granted) only one time.
  • As used in the waiver, “start-up arrangement” means any items, services, facilities, or goods (including non-medical items, services, facilities, or goods) used to create or develop an ACO that are provided by such ACO, ACO participants, or ACO providers/suppliers.  Commentary on the waiver provides a non-exhaustive list of examples of items, services, facilities and goods considered as start-up arrangements.
  • The start and end dates for when the waiver applies varies based on the ACO’s target year, whether an ACO’s participation application is accepted or denied, whether the ACO failed to submit an application for the target year, and whether the ACO was granted an extension of the waiver.
  • This pre-participation wavier does not cover arrangements involving drug and device manufacturers, distributors, DME suppliers, or home health suppliers.

“ACO Participation” Waiver.  This waiver of the Stark Law, the AKS, and the gainsharing CMP applies to ACO-related arrangements during the term of the ACO’s participation agreement under the Shared Savings Program and for a limited time thereafter.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • The ACO’s governing body must make a bona fide determination that the arrangement is reasonably related to the purposes of the Shared Savings Program.
  • Certain documentation of the arrangement must be maintained for at least 10 years following completion of the arrangement and made available to HHS upon request.
  • The waiver period starts on the start date of the participation agreement, and ends six (6) months following the earlier of the expiration of the participation agreement (including any renewals thereof) or the date on which the ACO has voluntarily terminated the participation agreement.  If CMS terminates the participation agreement, the waiver period ends on the date of the termination notice.

“Shared Savings Distribution” Waiver.  This waiver of the Stark Law, the AKS, and the gainsharing CMP applies to distributions and uses of shared savings payments earned under the Shared Savings Program.  The waiver permits shared savings to be distributed or used with the ACO in any form or manner, including “downstream” distributions or uses of shared savings funds between or among the ACO, its ACO participants, and its ACO providers/suppliers.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • The waiver applies to distributions and uses of shared savings earned during the term of the ACO’s participation agreement, even if the actual distribution or use of the shared savings occurs after expiration of the agreement.  The waiver also applies to individuals or entities that were ACO participants and ACO providers/suppliers at the time the shared savings were earned, even if they are not part of the ACO at the time of the actual distribution.
  • The waiver does not protect distributions of shared savings to referring physicians outside the ACO, unless those referring physicians are being compensation (using shared savings) for activities that are reasonably related to the purposes of the Shared Savings Program or were ACO participants or ACO providers/suppliers during the year in which the shared savings were earned by the ACO.
  • Under this waiver, payments of shared savings distributions made directly or indirectly from a hospital to a physician are not made knowingly to induce the physician to reduce or limit medically necessary items or services to patients to patients under the physician’s direct care.

“Compliance with the Physician Self-Referral Law” Waiver.  This waiver of the AKS and the gainsharing CMP applies to ACO arrangements that implicate the Stark Law but which meet an existing exception under the Stark Law.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • The financial relationship must be reasonably related to the purposes of the Shared Savings Program.
  • The financial relationship must fully comply with an exception under the Stark Law, as set forth at 42 CFR §411.255 through 411.357.
  • The waiver period begins on the start date of the participation agreement, and ends on the earlier of the expiration of the term of the participation agreement (including any renewals thereof) or the date on which the participation agreement has been terminated.

“Patient Incentive” Waiver.  This waiver of the beneficiary inducement CMP and the AKS applies to medically related incentives offered by ACOs under the Shared Savings Program to beneficiaries to encourage preventive care and compliance with treatment regimes.  More specifically, those fraud and abuse laws are waived with respect to items or services provided by an ACO, its ACO participants, or its ACO providers/suppliers to beneficiaries for free or below fair market value.

  • The ACO must have entered into a participation agreement and remain in good standing under its participation agreement.
  • There must be a reasonable connection between the items or services and the medical care of the beneficiary.
  • The items or services must be in-kind, and must be either preventive care items or services, or advance certain clinical goals (i.e., adherence to a treatment regime, drug regime or follow-up care plan, or management of a chronic disease or condition).
  • The waiver does not protect financial incentives to beneficiaries, such as waiving or reducing patient cost sharing amounts (i.e., co-payments or deductibles).  (Note that the Shared Savings Program itself prohibits ACO, ACO participants, and ACO providers/suppliers from providing gifts or other remuneration to beneficiaries as inducement from receiving items or services from, or remaining in, an ACO.)
  • The waiver also does not protect or the provision of free or below fair market value items or services by manufacturers or other vendors to beneficiaries, the ACO, ACO participants, or ACO providers/suppliers, including any discount arrangements between a manufacturer and an ACO.
  • The waiver period begins on the start date of the participation agreement, and ends on the earlier of the expiration of the term of the participation agreement (including any renewals thereof) or the date on which the participation agreement has been terminated.  However, a beneficiary may keep items received before the participation agreement expired or was terminated, and may receive the remainder of any service initiated before the participation agreement expired or was terminated.

For more information regarding the OIG’s fraud and abuse waiversor ACO’s in general contact Lee Kuo.

New Stark Disclosure Rule Regarding CT, MRI and PET Services

On Tuesday, November 2nd, CMS issued the 2011 Physician Fee Schedule Final Rule.  Embedded in the over 2000 pages of the rule was the amendment to the Stark in-office ancillary services exception.  CMS finalized the rule, required by PPACA (the Healthcare Reform Act), regarding the requirement of physician groups to provide notice of other “suppliers” of CT, MRI and PET services. 

The final rule did not expand the PPACA list of services, and limited the disclosure requirement only to CT, MRI and PET advanced imaging services.  This disclosure requirement applies to all in-office referrals that are categorized as “radiology and certain other imaging services” by the list of CPT/HCPCS Codes (defined in §411.351).  CMS noted that a request by a radiation oncologist for radiation therapy or ancillary services necessary for, and integral to, the provision of radiation therapy is not a “referral” under §411.351, if certain other criteria are satisfied.  The disclosure requirement would therefore not apply if the request is not a “referral.” 

 CMS has also removed CPT code 77014 (computed tomography guidance for place of radiation therapy fields) from the CPT/HCPCS Codes because the service is always integral to, and performed during, a nonradiological medical procedure. 

The disclosure notice should be written in a manner that can be reasonably understood by the patient and must include the following: 

  1. Must be in writing;
  2. Delivered to the patient at the time of the referral;
  3. Must contain a list of 5 alternative suppliers that can provide the same services;
  4. These suppliers must be located within a 25 mile radius of the referring physician’s office;
  5. The list should include the supplier’s name, address and telephone number.

The rule does allow an exception for providers practicing in areas where less than 5 suppliers are located within a 25 mile radius.  Those providers should list all of the suppliers within the area.  Hospitals are not considered suppliers, but may also be listed (CMS recommends that rural providers list hospitals). 

In the final rule, CMS removed the requirement that the physician group obtain the signature of the patient on the disclosure form.  CMS recommends that the physician be able to document or otherwise establish that he/she has complied with the disclosure requirement.  The disclosure notice must be provided at the time of the referral, which means that providing the notice at the initial visit will not suffice.  The disclosure requirement applies to all services furnished on or after January 1, 2011.

If you would like more information or assistance in drafting a disclosure notice please contact Don Black or Elana Zana.

CMS Releases Self-Referral Disclosure Protocol

On September 23, 2010, the Centers for Medicare and Medicaid Services (CMS) posted on its web site the long awaited voluntary “Self-Referral Disclosure Protocol” which it refers to as the “SRDP.”  Information about the SRDP is available on the CMS website, and the SRDP is available here.

In March 2010, Congress enacted the Patient Protection and Affordable Care Act (sometimes referred to as the “PPACA” or “ACA”).  Section 6409 of the ACA required CMS to promulgate a Stark law self-disclosure program by September 23, 2010, which it has now done.  CMS intentionally decided to establish the SRDP without going through rule making.  While it is good news that there exists a formal mechanism for resolving Stark law violations, the SRDP raises as many questions as it answers.  Important aspects of the SRDP include the following:

  • The SRDP is separate from the advisory opinion process and cannot be used to obtain a CMS determination about an actual or potential violation;
  • CMS makes no guaranty about the treatment a disclosing party will receive, i.e., that overpayment amounts will be compromised in any particular manner or at all;
  • CMS will coordinate disclosures it receives with the DHHS Office of Inspector General (OIG) and Dept. of Justice (DOJ) as appropriate;
  • The disclosure must be comprehensive, address all of the elements set forth in SRDP, and include a comprehensive financial analysis;
  • Disclosures made within 60 days of the overpayment being identified will suspend the obligation to return any overpayment until a settlement agreement is entered or the disclosure is removed from the SRDP;
  • The disclosing party or an appropriate officer of the disclosing party must certify that the submission is truthful and based on a good faith effort to resolve any potential liabilities under the Stark law;
  • CMS will verify the submission, including requesting additional information and requiring cooperation from the disclosing party to provide information that may be subject to the attorney-client or attorney work product privileges; and
  • Repayment of any overpayment will not be accepted prior to CMS’s completion of its verification and inquiry.

Throughout the process, CMS will require the diligent and good faith cooperation of a disclosing party.  Failure to provide cooperation will be considered by CMS as it assesses appropriate resolutions.  If a disclosing party provides false or misleading information, or intentionally omits relevant information, CMS may refer the matter to the DOJ or other appropriate agencies.  Disclosures must be made within 60 days of the date the original overpayment was identified, or the date any corresponding cost report is due, if applicable.  Finally, CMS has set forth factors that it will consider in determining whether to reduce the amounts that would otherwise be owed.  Again, CMS provides no guarantees, or even guidelines, for how it will determine appropriate resolutions.  The factors CMS will consider include

  • The nature and extent of the illegal or improper practice;
  • The timeliness of the self-disclosure;
  • The cooperation of the disclosing party in providing additional information;
  • The litigation risk associated with the disclosure; and
  • The financial position of the disclosing party.

Despite the request of various industry groups, CMS has made no explicit statements about how it will consider or treat disclosures of technical violations (e.g., missing signature, expired agreements, etc.).  Ultimately, CMS states that it has “no obligation to reduce any amounts due and owing,” and that it will make determinations on an individual, facts and circumstances basis for each disclosure.

Having this avenue to attempt to resolve Stark law violations is indeed an improvement that has been needed for a long time.  However, providers cannot take much comfort from CMS’s statement that it has no obligation under the SRDP to compromise amounts due.  Only time and experience will tell how CMS treats these disclosures.  Ultimately, if a disclosing party does not believe that it is receiving appropriate treatment, it appears that the party can remove itself from the SRDP;  however, that is cold comfort after it has brought the matter to CMS’s attention and now has the obligation under the ACA to return overpayments.

For more information on the SRDP or the Stark law in general, please contact Don Black, Dave Schoolcraft or any one of OMW’s Healthcare Team members.  

Health Reform includes Changes in the Stark Self-Referral Act

Earlier this week the Congress passed the Patient Protection and Affordable Healthcare Act, otherwise known as Health Reform.  Included in the Act were instructions to CMS to make changes to the regulations implementing the Stark Self-Referral Act (the “Stark Law”).  These changes will have a direct effect on the financial relationships between physicians and DHS entities such as hospitals. 

 General Overview of the Stark Law

Unless an exception applies, the Stark Law, 42 U.S.C. § 1395nn, prohibits a physician from making a referral to an entity for the furnishing of designated health services (“DHS”) that would otherwise be covered by Medicare if the physician (or an immediate family member) has a financial relationship with the entity.  Further, entities may not submit a claim or bill any payor for DHS furnished pursuant to a prohibited referral.  State Medicaid programs may not receive federal funds for DHS rendered pursuant to referrals that would be prohibited if the services had been covered by Medicare. 

The exceptions are organized into three categories: (i) exceptions for certain services (known as the general exceptions); (ii) exceptions for certain ownership and investment interests; and (iii) exceptions for certain compensation arrangements.  The exceptions typically require contracts between the parties which set out, among other provisions, that any compensation paid between the parties does not take into account the volume or value of referrals or any other business generated between the parties, is based on fair market value, is set in advance, is in writing, and is for at least a one-year term.

New Changes

Section 6409 – Medicare Self-Referral Disclosure Protocol

This section requires that HHS implement a disclosure protocol for actual and potential Stark law violations. This protocol, termed the self-referral disclosure protocol (“SRDP”) must be developed within six months and the instructions must be posted on the CMS website.  The SRDP instructions shall include the name of the specific person or office to whom the disclosures should be made and the implication of the SRDP on any corporate integrity agreements and corporate compliance agreements. 

Importantly, HHS is authorized to reduce the amount due for any violations under the Stark Law.  In evaluating whether to reduce the amounts owed, HHS may consider the following factors:

1)      Nature and extent of the improper or illegal practice;

2)      Timeliness of self-disclosure;

3)      The cooperation in providing additional information; and

4)      Such other factors as HHS deems appropriate. 

HHS is also required to submit a report to Congress on the implementation of the SRDP which shall include the number of providers making disclosures, the amounts collected, the types of violations reported, and such other necessary information to evaluate the impact of the SRDP. 

Section 6001 – Limitation on Medicare Exception to the Prohibition on Certain Physician Referrals for Hospitals

Section 6001 modifies the Stark Law exception that allows physicians to hold an ownership interest in hospitals.  This detailed section limits the expansion of physician owned hospitals, increases disclosure requirements related to physician ownership and provider agreements (including the names of the physicians and the extent of the ownership interest) to patients, on the hospital website, hospital advertising, and in annual statements to HHS, and expands requirements regarding physician ownership in the hospitals. 

Section 6003 – Disclosure Requirements for In-Office Ancillary Services Exception to the Prohibition on Physician Self-Referral for Certain Imaging Services

This section amends the in-office ancillary services exception by requiring a physician making a referral for MRI, CT or PET services (or other services designated by HHS) to inform the patient in writing, at the time of the referral, that these services may be obtained from a person or entity other than the referring physician, a physician within the group practice, or an individual directly supervised by that physician or a physician in the group practice.  In addition, the physician must provide the patient with a list of providers who furnish these services in the area in which the patient resides.  The effective date of the amendment if for services furnished on or after January 1, 2010 (unclear how this applies retroactively).

For more information about Stark or if you have questions please contact Don Black.