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A Primer on Medicare Overpayments

Regulatory

All providers whether it be a hospital, physician, nurse practitioner, physical therapist, or another healthcare professional always have an obligation to refund any overpayments received from Federal healthcare programs. Overpayments in general can occur in various ways. For example, a provider could have provided professional services when their license lapsed. Or, another example could be that incorrect coding occurred resulting in overpayments to the provider or the facility. In any event, those payments need to be refunded. In this post we will discuss some of the common issues and questions that arise related to overpayments.

What is an Overpayment?

“The term “overpayment” means any funds that a person receives or retains under subchapter XVIII or XIX to which the person, after applicable reconciliation, is not entitled under such subchapter.” In short, if a person receives any funds from a Federal healthcare program that it, he, or she was not entitled to then an overpayment has occurred. Please keep in mind that a “person” includes a provider of services, supplier, medicaid managed care organization, Medicare Advantage organization, or a PDP sponsor.

As stated earlier, an overpayment can occur in many different circumstances. For example, a physician group could have a physician in which their license lapsed. This could be problematic because as a condition of payment a physician is required to be licensed in the state in which services are performed. If on a local level, a lapsed license equates to the person truly being unlicensed, then the services provided by that practitioner during that period could equate to overpayments which would need to be refunded. It is important to remember that there is a difference between the Medicare conditions of payment and the Medicare conditions of participation. Above all, organizations need to carefully analyze whether they were actually entitled to the payment received.

How Long Do I Have to Return a Medicare Overpayment?

Legally a person is required to report and return the overpayment to the appropriate part and notify the party to whom the overpayment was returned in writing of the reason for the overpayment. However, the deadline is 60 days after the date on which the overpayment was identified or the date any corresponding cost report is due, whichever is later. In most cases, organizations focus on the 60 day requirement. In short, if an overpayment has been identified then the organization in most cases has 60 days to return such overpayment.

What Happens if We Exceed the 60 Day Requirement?

The Federal government is increasingly focusing on organizations that either ignore overpayments or simply do not utilize the time limits identified. In fact, the government is so focused on these issues that if such deadline for reporting and returning the overpayment is not met, the overpayment becomes and obligation. When Medicare overpayments become an obligation, the False Claims Act is implicated which allows for civil penalties up to $11,000 plus three times the amount of the government’s damages if the person knowingly conceals or avoids an obligation to pay. Knowingly includes a person with actual knowledge of the overpayment, a person who acts in reckless disregard, or a person that is acting deliberately with ignorance.

The biggest issue here is that Medicare overpayments kept beyond the allowed period should raise significant red flags within any organization due to the risks under the False Claims Act. Many organizations facing such a situation need to absolutely ensure they have a process in place to deal with those issues. Because of the potential damages, any compliance program should ensure procedures are in place to deal with any possibility of exceeding this timeline.

When Does the 60 Day Requirement Begin?

As stated previously, the law states that such period begins when the overpayment has been identified. The primary concern with this is that many organizations spend countless hours attempting to identify and quantify any overpayments. Because of this, common questions arise related to when day 1 actually begins. In proposed regulations the government explained that if an organization believes an overpayment may have occurred, there is an obligation to make an inquiry. If after that inquiry an overpayment has been determined to exist, the 60 days starts. However, these regulations have not been finalized as of August 2015. An even more concerning area is whether the overpayment has to be quantified for the clock to start.

By way of example, assume a hospital believes that certain billing codes may have been used accidentally that inflated payments. The hospital is required to have two separate processes in place. First, as part of a compliance program, the hospital should ensure that there are mechanisms in place to receive comments, questions, or to seek out possible overpayments. Second, if such a mechanism is in place and an overpayment is believed to have occurred, the hospital must have an additional mechanism in place to investigate such issues. If upon investigation it is found that incorrect billing codes were used, does the clock start on that date? Some would argue that it does not because the hospital has not yet had the opportunity to fully understand the actual quantification of the overpayment. In the end, the quantification question becomes a gray area that is highly dependent on the facts of the actual issue. However, you can see the dilemma.

At least one court has interpreted this provision to mean that the clock does not necessarily start when overpayments are quantified, but upon the date in which an overpayment has been discovered. See U.S. ex rel Kane v. Healthfirst, Inc., et al., No. 1:11-cv-02325-ER (S.D.N.Y) (Aug. 3, 2015).

A Culture of Compliance

Medicare overpayments can occur in many situations which is why this issue alone presents significant liability for all organizations. To limit such risks, organizations should focus on having a compliance program that seeks out these issues. As stated earlier, the knowingly requirement creates risk for organizations that simply disregard the fact that a Medicare overpayment has occurred. Therefore, organizations should focus on having an investigative team that focuses on areas such as these. For more information related to the risks of Medicare overpayments, review the settlement with the Carondolet Health System in Arizona.