The Issue of Overpayments
The Issue of Overpayments
In February 2016, the Centers for Medicare & Medicaid Services (CMS) published the much-awaited "Final Rule" to clarify the 60-Day Rule. The Final Rule clarifies that an overpayment has not been "identified" until a provider or supplier has – or should have – determined evidence of an overpayment through "reasonable diligence" and quantified the amount of the overpayment. The "should have" in this case is included in the rule's wording to prevent parties from burying their heads in the sand and failing to reasonably investigate potential overpayments.
According to CMS, "reasonable diligence" encompasses both proactive compliance activities conducted by qualified individuals to monitor potential overpayments, as well as timely investigations made in response to credible suspicions of an overpayment. It's a legal standard that requires parties to be both proactive and reactive, putting measures in place to flag potential overpayments from the start.
When quantifying an overpayment amount, the Final Rule permits the use of common methods such as statistical sampling and extrapolation as long as the quantification method is disclosed in your shared findings. Additionally, where applicable, reporting obligations can potentially be satisfied through the disclosure processes in the OIG Self-Disclosure Protocol or the CMS SRDP, but a provider or billing company should review the related rules carefully before proceeding.
A provider generally will have up to a maximum period of six months to conclude its reasonable diligence into the amount of the overpayment – a timeline that poses its own set of challenges if the problem has become unmanageable. Essentially, an overpayment is not considered "identified" until the amount of the refund has been "quantified." That means providers have potentially only as much as an eight-month window in which to address an overpayment: no more than six months for timely investigation, plus 60 days for reporting and refunding the overpayment.
Unfortunately, refunding federal overpayments isn't usually as easy as sending a check to CMS. When processing a refund, a healthcare provider must report and return the overpayment to one of the following, as applicable: the U.S. Secretary of Health and Human Services or a state fiscal intermediary, carrier or contractor, along with a written explanation for the overpayment. The Final Rule does however support the use of existing processes to return overpayments, including applicable claims adjustments, credit balances, self-reported refunds or other reporting processes established by the applicable Medicare contractor. Practically, this requires knowledge of your particular contractors and familiarity with the processes unique to each.
However, you should not skirt the Final Rule and ignore a client's overpayments. Your inaction may be interpreted by law as an intentional attempt to conceal information from the government – a potential liability that could extend to the billing company in addition to the healthcare provider.
The Legal Consequences
If allowed to go unchecked, overpayments can trigger a number of penalties and pitfalls for healthcare providers and suppliers, including: Medicare and Medicaid penalties, class action litigation, misstated revenues, wasted time and resources, as well as lost payment opportunities. For example, banks have now begun looking at a company's overpayments when reviewing loan applications, dropping applicants for falsely reflecting cash on-hand. Additionally, there is a risk clients may drag billing companies to court, suing them for negligence. In light of this, it's vital billing companies understand and stay on top of such laws and timelines associated with overpayments so those directives don't end up getting the best of you.
An overpayment not reported prior to the applicable deadline under the 60-Day Rule becomes an "obligation" to the Federal Government under the "reverse" false claim provision of the False Claims Act. See 42 U.S.C. § 1320a-7k(d)(3). In other words, under the 60-Day Rule, a healthcare provider who does not report and return an overpayment is exposed to liability for what the healthcare provider kept from the government. In such cases, the provider would be liable not only for what is withheld from the government but also an additional civil monetary penalty of no less than $10,781 and no more than $21,563 per claim – plus the potential for three times the amount of damages sustained by the government.
Take a minute to digest those numbers! Think back to that imaginary $20 bill found in your client's jeans. If that was from a federal payor and was not promptly returned under the 60-Day Rule, then your client now owes the $20 plus a minimum of $10,781. Yikes. And guess whom your client is going to blame if you failed to process it properly.
Exposure to False Claims Act liability also significantly increases the stakes for guilty parties, as it allows whistleblowers to file qui tam actions on behalf of the government and share in any recovery – thereby incentivizing whistleblowing while also increasing governmental penalties. In short, overpayment cases are a whistleblower's dream. If an employee gets fired with prior knowledge of a buildup of overpayments, they have solid ammunition to seek retribution almost immediately.
THE BILLING COMPANY
While the duty to report an overpayment generally first falls to a provider, if the provider fails to act, a billing company is not necessarily in the clear. According to the False Claims Act, "any person" who "knowingly presents or causes to be presented" a false claim can be held liable. This suggests liability can be imposed for the mere "presentment" of a claim without having to prove if the submitting party was aware the claim was false or not.
When the Fraud Enforcement and Recovery Act of 2009 (FERA) was passed, it expanded this False Claims Act liability by eliminating the requirement for intent to be established in order for a party to be held liable. Instead, FERA states under its "reverse false claims" provision that if a third-party billing company is simply aware of an overpayment, their decision to continue working with clients who fail to issue refunds could be interpreted as "knowingly concealing" or "knowingly and improperly avoiding or decreasing an obligation" to refund money to the federal government. In short, a billing company could find itself implicated if it is aware of overpayments but fails to take appropriate action if the client refuses to process refunds in accordance with applicable laws.
While it is true a billing agent doesn't have final authority to force a provider to return an overpayment, the concern is that the government or a qui tam plaintiff, in bringing an action against the provider, could also bring suit against the billing agent as a co-defendant.
In recent years, this heightened scrutiny speaks to the subtle yet noticeable shift in government expectations on who is responsible for reporting and returning overpayments, and no billing company should consider itself safe. Know your laws, put proactive compliant measures in place and make sure you don't end up liable for mishandling overpayments – even if it was just a simple $20 bill in the back pocket of your client's favorite jeans.
Mark Cunningham, JD, is a healthcare attorney and shareholder at Chambliss Law Firm in Chattanooga, Tennessee. He chairs the firm's Health Care Section and has nearly 20 years of experience serving as counsel for leading healthcare participants on a regional and national level.