New regulations emerge for reporting and returning overpayments

Jeffrey S. Baird is chairman of the Health Care Group of Brown & Fortunato, a law firm based in Amarillo, Texas. He represents HME providers, pharmacies and other health care providers throughout the United States. Here is a Q&A conversation with him about new requirements that are emerging for reporting and returning overpayments:

QUESTION: What exactly is the 60-day repayment rule?

ANSWER: The Affordable Care Act, commonly known as health care reform, adds a new section to the Social Security Act entitled “Reporting and Returning Overpayments.” This section requires a person—which includes a company—who has received an overpayment, to report and return the overpayment to the Department of Health & Human Services, state, or contractor, along with a written explanation of the reason for the overpayment. This must occur by the later of either 60 days after the overpayment is identified, or the date that any corresponding cost report is due. Failure to timely report and repay may subject the provider to potential liability under the False Claims Act, which can result in large civil monetary penalties and exclusion from doing further business with the government.

QUESTION: Has the Centers for Medicare & Medicaid Services (CMS) issued any regulations?

ANSWER: On Feb. 16, CMS issued a proposed regulation. The regulation proposes a 10-year “look back” period for overpayments. The regulation states that a provider may not “deliberately ignore” or “recklessly disregard” facts that would cause the provider to “identify” an overpayment. The preamble contains language to the effect that the provider must take “all deliberate speed” in conducting investigations. CMS will accept comments until April 16.

QUESTION: What is the significance of the 10-year look back?

ANSWER: Until now, the look back generally has been four years. The 10-year look back is a six-year increase. According to CMS, the 10-year look back is based on the outer limit of the False Claims Act statute of limitations. Conducting a 10-year look back will be a challenge for most providers. Simply speaking, many providers do not have records that go back 10 years.

QUESTION: So how is an overpayment defined and identified?

ANSWER: CMS defines an overpayment as “any funds that a person (including a company) receives or retains under the Medicare program to which the person, after applicable reconciliation, is not entitled.” Examples of overpayments are payments for non-covered services, payments in excess of allowed amounts and receipt of funds from Medicare when another party is primarily liable. CMS will consider an overpayment to be “identified” if the provider has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.

According to CMS, applying this standard will require providers and suppliers to exercise reasonable due diligence through self audits, compliance checks, and other means, to determine if an overpayment exists. For example, a provider that receives information through a compliance hotline or other source that a potential overpayment exists, but fails to make a reasonable inquiry to confirm whether that is so, could be subject to liability for knowingly retaining an overpayment. That’s because the provider acted in reckless disregard or deliberate ignorance of whether an overpayment occurred.

QUESTION: Can violation of the Medicare anti-kickback statute also result in a violation of the False Claims Act?

ANSWER: Yes. CMS states that claims submitted in violation of the anti-kickback statute fail to meet the conditions of payment under the Medicare program and will constitute a false claim. According to CMS, if the provider is unaware of the facts that point to a kickback arrangement, then no overpayment is identified and the provider has no duty to report or repay the overpayment amount. On the other hand, if the provider has “sufficient knowledge” of a kickback arrangement, then the provider will be required to report and repay the overpayment.

QUESTION: Can you shed any additional light on the reporting deadline?

ANSWER: The provider must report and repay within 60 days of identification. If the provider has actual knowledge of the overpayment, the 60 days will run from the date of such knowledge. However, when a provider receives information that it may have received a potential overpayment, the provider is under an obligation to conduct a reasonable inquiry with “all deliberate speed” after receiving the information. If the inquiry reveals an overpayment, then the provider will have 60 days to report and return the overpayment.

QUESTION: Must the report and repayment be made directly to CMS?

ANSWER: No. The proposed regulation states that overpayments will be reported through the existing voluntary refund process.

QUESTION: From a practical standpoint, what does this mean for the HME provider?

ANSWER: Simply speaking, HME providers live in a glass house. From a go forward standpoint, providers must be confident that their operations are compliant with federal statutes and regulations.

For example, providers must feel comfortable that the means by which they bring in new customers do not violate the Medicare anti-kickback statute, the Stark physician-self referral statute, the beneficiary inducement statute, and/or the telephone solicitation statute. A provider needs to adopt robust corporate compliance plans and have a functioning corporate compliance officer. HME providers must conduct regular billing self-audits and, on a periodic basis, bring in an outside consultant to conduct billing audits. On a periodic basis, providers should have an experienced health care attorney conduct a thorough legal compliance audit. From a look back standpoint, it would be wise for a provider to conduct a billing and legal compliance audit for the previous 10 years.
 

SOURCE: A portion of the information in this article comes from an E-mail Alert published by the American Health Lawyers Association on Feb. 17, 2012, entitled “Increased Burdens on Provider from Proposed Rule on Sixty-Day Repayment of Overpayments.” The authors of the E-mail Alert are William T. Mathias, Esq. and Kristin C. Carter, Esq., both of whom are with Ober/Kaler of Baltimore, Md.
 

ABOUT JEFFREY S. BAIRD, Esq.: Chairman of the Health Care Group of Brown & Fortunato, a law firm based in Amarillo, Texas, Baird represents health providers nationwide, and he is board certified in health law by the Texas Board of Legal Specialization. He can be reached at 806-345-6320 or [email protected].