September 1, 2010
The Game Has Changed: Medicare and Medicaid Overpayments
The federal government is gearing up to recover any and all overpayments made to health care providers and other entities with which it does business. Through the Patient Protection and Affordable Care Act of 2010 (PPACA), Congress recently gave more money and power to the Department of Justice (DOJ) and the Department of Health and Human Services (HHS) to bolster federal health care fraud enforcement efforts.1 Meanwhile, the DOJ and HHS have been collaborating on fraud-fighting initiatives by launching Medicare Fraud Strike Force Teams in 2007 and establishing the Health Care Fraud Prevention and Enforcement Action Team in May 2009. HHS has also been restructuring and expanding its contractor programs focused on the review of Medicare and Medicaid claims.
Health care providers, plans, and others should brace for the inevitable onslaught of unwelcome attention from the government and its contractors. This advisory analyzes the new overpayment laws, one of the many things providers, plans, and others doing business with the federal government should understand in the post-PPACA era.
Liability for the receipt of government overpayments is not a new concept; what has changed is the fact that such overpayments must now be returned by a specific deadline. For this reason, health care providers, plans, and others now have more reason than ever before to be diligent with respect to identifying and returning overpayments received from the federal government.
Specifically, PPACA requires providers, suppliers, Medicaid managed care organizations (MCOs), Medicare Advantage (MA) organizations, and prescription drug plan (PDP) sponsors to report and return overpayments in a timely manner.2 PPACA´s overpayment provisions were effective upon enactment (March 23, 2010), but are not retroactive. They require the reporting and return of overpayments to the Centers for Medicare & Medicaid Services (CMS), a state, an intermediary, a carrier, or a contractor within 60 days after the date the overpayment was identified or the date any corresponding cost report is due, if applicable. Along with the overpayment, the reporting entity must provide notification of the reason for the overpayment. Sanctions for failure to comply include civil monetary penalties and potential liability under the False Claims Act.
PPACA imposes burdensome obligations and steep penalties for noncompliance. It also leaves many important questions unanswered. For instance, PPACA expressly states that a person who receives an overpayment must provide written notification of the reason for the overpayment but provides no further details regarding the content of the disclosure. This and other issues may be addressed in future regulations or CMS guidance, but, in the meantime, providers, plans, and others should carefully consider all reasonable potential interpretations.
The reporting and repayment deadlines also are unclear. Reporting and return of the overpayment must occur within 60 days of identification of the overpayment, but the term “identified” is not defined in PPACA. However, use of the same or similar terms in other contexts may provide some insight. For instance, identification of overpayments triggers recoupment actions and provider appeal rights in other Medicare and Medicaid contexts.3 The amount of the overpayment must be determined before a recoupment or appeal can occur so PPACA's use of “identification” may indicate some level of finality. Additionally, in 2002, CMS issued a proposed rule that required reporting of Medicare overpayments and contained language similar to PPACA´s provisions — with a notable exception:4 the proposed rule would have required the return and explanation of the overpayment to be sent to the appropriate contractor or agency within 60 days of identifying or learning of it.5 One could argue that the deletion of “learning of” from the PPACA language means that Congress intended the PPACA provision to apply to situations where a person has substantial certainty of the scope and existence of the overpayment.
Although PPACA´s definition of “overpayment” triggers new questions, it also provides some insight into the timing of the reporting and refund deadline. PPACA defines “overpayment” to mean “any funds that a person receives or retains under [Medicare or Medicaid] to which the person, after applicable reconciliation, is not entitled under such [program].”6 Providers and others may question whether the obligations include funds received as a result of technical violations, but may obtain some comfort based on the law´s allowance for “applicable reconciliation.” Similar to the implications of the overpayment rules discussed directly above, PPACA's definition of overpayment suggests that the 60-day window begins only after the provider or other entity confirms the existence and scope of the overpayment. Barring regulatory guidance to the contrary, providers and others may argue that such reconciliation allows for time to complete a fact-intensive investigation into both potential underpayments and overpayments prior to reporting and return.
Fraud Enforcement and Recovery Act of 2009
Another recently enacted federal law also addresses retention of government overpayments. Last year, Congress passed the Fraud Enforcement and Recovery Act of 2009 (FERA),7 which made health care entities and others liable under the “reverse false claims” provision of the False Claims Act (FCA) if they knowingly and improperly avoid or decrease an obligation to pay money to the government.8 Liability under this provision also can result from knowing concealment of an obligation to pay money to the government.9 Before FERA, liability under this provision required the defendant to make or use a false record or statement to conceal, avoid, or decrease the obligation.10
FERA´s reverse false claims provision now expressly applies to overpayments. Under FERA, “obligation” means “an established duty, whether or not fixed, arising from … retention of any overpayment.”11 and PPACA specifically states that the failure to timely report and return Medicare or Medicaid overpayments constitutes an “obligation” under the FCA.12 Providers, plans, and others may therefore be liable under the FCA for knowingly and improperly avoiding a duty to timely return and report an overpayment to the government.13
Providers, plans, and others may question what it means to be “improperly” failing to or delaying any refund of an overpayment. The FCA does not define “improperly,” but the legislative history suggests it may refer only to “inherently wrongful” conduct.14 In addition, a provider or other entity would probably not be acting improperly if it retained payments that were subject to a later reconciliation process.15
Even before PPACA, overpayments and fraud gave rise to many settlements and court cases. An interesting recent overpayment case involved certain New York City ambulance companies. After each received notice of a Medicare overpayment from a government contractor, the companies appealed the determination using allegedly false documents to support their original claims for payment. The companies settled the FCA case for $2.85 million in June 2010.
In 2007, the U.S. Attorney for the Eastern District of Tennessee brought an enforcement action against a professional corporation (a practice group of cardiology physicians) for the failure to return overpayments under statutes prohibiting health care fraud and theft/embezzlement and intervened in an FCA action against the entity.16 As a result of allegations that, among other things, the entity avoided repaying credit balances or made obtaining refunds difficult for payers and patients, the entity entered into a criminal pretrial diversion agreement, separate civil settlements with the federal and state governments, and a five-year Corporate Integrity Agreement with the HHS Office of Inspector General.
A third interesting overpayment case involved a Medicaid MCO, which, in 2006, paid $5 million to settle allegations it recovered overpayments from providers and retained them past the deadlines for remitting the amounts to the states.
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Even before suspecting any overpayment, providers, plans, and others should familiarize themselves with the relevant laws, regulations, and guidance and tailor compliance plans and activities accordingly. After learning of a suspected overpayment, depending on the circumstances, a provider, plan, or other entity may want to consider taking the following next steps:
- Develop a plan for conducting an internal investigation to determine the scope and cause of the overpayment;
- Conduct the internal investigation as swiftly as possible;
- Implement corrective action as necessary;
- Document all findings and conclusions;
- Identify any relevant parties who should receive the disclosure; and
- Draft and transmit the disclosure and repayment.
Every situation is unique and requires a careful review and analysis. When faced with a matter involving potential overpayments, an entity or individual may consider engaging outside counsel to help clarify and apply the new law, to provide advice on the appropriate steps to be taken, and to conduct the internal investigation protected by the attorney-client privilege. Providers, plans, and others have every reason to be wary of the inevitable onslaught of litigation and increased attention to their operations.
1 Pub. L. No. 111–148.
2 Pub. L. No. 111-148, § 6402(a), codified at Social Security Act § 1128J(d) (42 U.S.C. § 1320a-7k(d)).
3 See, e.g., 73 Fed. Reg. 55765, 55768 (Sept. 26, 2008) (Medicaid Integrity Program final rule).
4 67 Fed. Reg. 3662 (Jan. 25, 2002).
5 The proposed rule was never finalized.
6 Pub. L. No. 111-148, § 6402(a), codified at Social Security Act § 1128J(d) (42 U.S.C. § 1320a-7k(d)).
7 Pub. L. No. 111–21.
8 31 U.S.C. § 3729(a)(1)(G).
10 The pre-FERA “reverse false claims” provision imposed liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(7).
11 31 U.S.C. § 3729(b)(3).
12 Pub. L. No. 111-148, § 6402(a), codified at Social Security Act § 1128J(d)(3) (42 U.S.C. § 1320a-7k(d)(3)).
13 FERA may leave some room for providers, plans, and others to question whether the reverse false claims provisions apply to overpayments paid by government contractors, such as Medicare Administrative Contractors, particularly when the government itself has not lost money.
14 155 Cong. Rec. S4531, S4539 (Apr. 22, 2009) (including comments from Senator Kyle).
15 See S.Rep. No. 111-110 (2009) (stating that the Committee does not intend the law to create liability for retention of an overpayment subject to reconciliation, as long as the overpayment receipt is not based on “any willful act of a recipient to increase the payments from the Government when the recipient is not entitled to such Government money or property.”)
16 The U.S. Attorney brought the criminal charges under 18 U.S.C. § 669 (theft or embezzlement) and 18 U.S.C. § 1347 (health care fraud).
For assistance in this area please contact one of the attorneys listed below or any member of your Mintz Levin client service team.
Hope S. Foster
Chair, Health Care
Enforcement Defense Group
Karen S. Lovitch
Health Law Practice
Tracy A. Miner
Chair, White Collar
Chair, Employment, Labor
and Benefits Section
Peter A. Chavkin
Thomas S. Crane
Samuel F. Davenport
William A. Davis
Robert Delahunt, Jr.
Michael S. Gardener
Ellen L. Janos
John K. Markey
Kevin M. McGinty
Bridget M. Rohde
Garrett G. Gillespie
Kristen S. Scammon
Brian P. Dunphy
Noam B. Fischman
Helen Gerostathos Guyton
Sarah A. Kaput
Wynter N. Lavier
Jessica C. Sergi
Jennifer E. Williams