Medicare and Medicaid providers, suppliers and plans may need to make immediate changes to their procedures for handling identified overpayments or risk False Claims Act liability, including triple damages and significant fines.
Nature of Change
The recently enacted healthcare reform bill imposes new obligations on Medicare and Medicaid providers, suppliers and plans to report and return overpayments within the later of 60 days of the date the overpayment was identified or the date any corresponding cost report is due, if applicable.1 In addition, the statute requires the provider, supplier or plan to notify the entity to whom the overpayment is returned in writing of the reason for the overpayment. Under this new law, an overpayment is defined as "any funds that a person receives or retains under [the Medicare or Medicaid Act] to which the person, after applicable reconciliation, is not entitled under such title."2
In addition, the failure to report and return an overpayment within the specified deadlines becomes an "obligation." Under recent amendments contained in the Fraud Enforcement and Recovery Act,3 "knowingly and improperly avoids or decreases"4 an obligation to repay Medicare or Medicaid monies can form the basis for a claim under the False Claims Act. The False Claims Act penalties are potentially severe and include triple the amount of the "damage" to the government plus penalties of $5,500 to $11,000 per claim. In addition, under the healthcare reform bill, a failure to repay an overpayment can be grounds for exclusion from the Medicaid program for certain providers.5 This specific link to the False Claims Act and to program exclusion makes it vitally important that providers, suppliers and plans develop a system for quickly and appropriately responding to any identified overpayments.
Who Is Affected
This new law applies to hospitals, physicians and other providers and suppliers who bill Medicare, Medicaid, Medicaid Managed Care Organizations, Medicare Advantage Plans and Prescription Drug Plan Sponsors. The new law does not apply to beneficiaries.
Recommended Implementation Actions
(a) Currently identified and confirmed overpayments. Immediately (1) determine the date the overpayment was first "identified"; (2) make every effort to report and return the overpayment within 60 days of that date, or, if the date has already passed, within 60 days of the date H.R. 3590 was signed into law; (3) if a program or contractor typically insists on processing overpayments electronically and you do not have control over the timing of the refund, ask the program to verify in writing that electronic submission of the request to process the overpayment constitutes repayment for purposes of the new law; and (4) work with counsel to craft an accurate and careful description of the reason for the overpayment.
(b) Currently identified potential overpayments. Ensure that you have explored all arguments and come to a considered conclusion as to whether an overpayment has occurred, rather than immediately trying to identify every claim that might be affected so that you can quantify the amount of the potential liability. Remember, not every program error creates an overpayment. Under the new law, "identifying" a claim as an overpayment triggers the 60-day reporting and repayment requirement, even though you might, upon more careful consideration and investigation, determine that the claim was not overpaid.
(c) Providers required to file CMS-838 Credit Balance Reports. Evaluate how you might need to alter your policies and procedures to incorporate the new law. Credit Balance Reports are filed on a quarterly basis, and relying on your next filing as your "report" for purposes of the new statute creates a risk that it will contain overpayments that were "identified" more than 60 days before the report is filed. While CMS could consider this process to be an "applicable reconciliation," it is possible that CMS will feel bound by the shorter statutory period and take the position that a provider may not delay reporting until its next quarterly report. Until CMS clarifies its position, providers would be well advised to avoid potential False Claims Act liability by reporting identified overpayments within 60 days even if they would normally be reported on a Credit Balance Report at the end of the quarter. In addition, when filing Credit Balance Reports, providers should be careful that they do not sign certifications that would constitute an admission of a False Claims Act violation.
The terms and effect of this new reporting obligation remain unclear in many respects. Future agency rules and court decisions will need to clarify important issues, such as when an overpayment is "identified," whether overpayments remain eligible for an extended repayment plan, and whether the OIG will continue to allow providers who choose to follow the Provider Self-Disclosure Protocol to wait until the end of the process for a negotiated resolution before being required to repay the overpayment. Until then, affected practitioners, providers and suppliers should err on the side of reporting and repaying overpayments as quickly and thoroughly as possible.
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1Patient Protection and Affordable Care Act (H.R. 3590) § 6402(a).
2 Id.
3The Fraud Enforcement and Recovery Act (Pub. L. No. 111-21, 123 Stat. 1621) was signed into law on May 20, 2009.
4 31 U.S.C. § 3729(a)(1)(G).
5 H.R. 3590, § 6003.
6 H.R. 3590 § 6502.