Duty to Investigate.
Medicare providers such as hospitals or medical groups occasionally discover that they have received payment on a mistaken claim sent to Medicare. Maybe the staff billed a medical procedure to the wrong patient account. Or perhaps someone used a billing code that was not fully supported by the medical record.
When that happens, Medicare requires the provider to proactively return the money. Specifically, under the 2010 Affordable Care Act, a Medicare provider has an obligation to return that reimbursement to Medicare within 60 days after the overpayment has been "identified." If the provider fails to meet that 60-day deadline, the provider becomes liable for substantial penalties under the False Claims Act and also risks exclusion from the Medicare program.
On February 16, the Centers for Medicare and Medicaid Services (CMS) published proposed regulations
interpreting this 60-day rule. The proposed regulations reflect CMS’s expansive views about this re-payment obligation.
How Does the 60-Day Clock Start?
The proposed regulations say that a Medicare provider or supplier (“person”) is deemed to have identified an overpayment, thereby starting the 60-day clock, if the person (i) obtains actual knowledge of the existence of the overpayment or (ii) acts in reckless disregard or deliberate ignorance of the existence of the overpayment.
A key point here is that the event that starts the clock is awareness or willful ignorance of the existence
of an overpayment, not the amount of the overpayment.
So how does this work? In the “actual knowledge” scenario, once a provider becomes aware that an overpayment exists, the provider must determine the amount of the overpayment, then return it to Medicare within the 60-day window. If that amount cannot be determined within 60 days, the provider will need to consider one of the exceptions discussed below.
What if a provider's actual knowledge is unclear? The provider may not always have actual knowledge that Medicare paid an erroneous claim. Instead, the provider may only have discovered that its staff used billing or coding patterns that might have led to an erroneous claim. Whether such a claim was actually sent, and whether Medicare paid, could be separate and unresolved questions.
In that case, CMS says that the provider must investigate with “all deliberate speed” to determine whether the provider actually sent a mistaken claim to Medicare, and whether Medicare paid such a claim.
CMS offers the following as examples of situations in which a provider has an affirmative duty to investigate and return any overpayments:
The provider receives an anonymous compliance hotline telephone complaint about a potential overpayment
A provider learns that it has previously incorrectly coded certain services
A provider learns services were provided by an unlicensed or excluded individual
A provider’s self-audit suggests that there has been an overpayment
The provider experiences a significant increase in Medicare revenue without any apparent explanation for that change
In all these or similar situations, CMS says the provider has an obligation to investigate with "all deliberate speed." The provider may not turn a blind eye to evidence suggesting an erroneous claim. If a provider has evidence of a potential problem but fails to investigate promptly, the provider risks a later finding that the provider acted in reckless disregard or deliberate ignorance, thus effectively starting the 60-day clock at the time the provider declined to investigate. This requirement might put particular pressure to investigate on a provider who has received an anonymous tip through a compliance hotline.
On the other hand, if the provider does investigate in a timely manner, the 60-day reporting period would not start until the investigation confirmed the actual existence of an overpayment.
Exceptions. Once the 60-day clock starts, the provider generally must determine the amount of the overpayment and return the entire overpayment to CMS within that time. However, the 60-day deadline will be extended if the provider sends a formal submission under either the OIG’s Self-Disclosure Protocol or CMS’s Self-Referral Disclosure Protocol. Also, if a provider is financially unable to pay back the entire amount of an overpayment within 60 days, the provider can request extended payment terms. Also, providers (like hospitals) that submit cost reports can wait to reconcile an overpayment until the applicable cost report is due for overpayments discovered during a cost-reporting period.
Penalties. Under the Affordable Care Act, if a provider fails to meet the 60-day repayment deadline and none of the exceptions above apply, the overpayment will be treated as a false claim under the False Claims Act. Among other things, the provider would therefore be at risk for: (i) treble damages liability for the amount of the overpayment, plus (ii) an $11,000 penalty per individual claim and (iii) exclusion from the Medicare program.
What Must Be Disclosed with Returned Overpayment? In addition to returning an overpayment, a provider will need to specifically identify the erroneous claim or claims. The provider must also disclose the following:
How the error was discovered
The reason for the overpayment
A description of the provider's corrective action plan to ensure that the error does not recur
The timeframe during which the situation that led to the error existed, and the total amount of the refund the provider has calculated for claims submitted during that timeframe; and
Where applicable, a description of any statistical sampling and statistical methodology used to determine the amount of the overpayment
How Far Back Must the Provider Investigate?
The proposed regulations say that a provider must investigate possible overpayments as far back as 10 years. This is a change from prior CMS guidance, which had suggested that claims would be subject to re-opening for only four years after they were submitted.
These new proposed regulations have planning and strategy implications for providers. Of course, in many cases complying with the 60-day rule should not be a problem. An occasional billing mistake will not normally be hard to rectify.
On the other hand, if erroneous Medicare claims arose out of a more complex situation, it might be difficult or impossible to meet the 60-day deadline. Suppose, for example, a hospital or medical practice learns about one erroneous claim, but also learns that one of its physicians has followed a practice pattern that created a heightened risk of other erroneous claims. It might take months to identify and retrieve all the patient records and bills potentially affected, and then to determine whether erroneous claims were actually submitted. In that case, the provider may want to plan its investigation carefully to maximize its reporting flexibility.. Alternatively, the provider may need to consider whether to start a Self-Disclosure Protocol under the OIG’s regulations as a way to stop the 60-day clock.
Providers should structure their compliance programs to control as much as possible the timing of required repayments and disclosures. Providers should consider carefully who receives first reports from employee hotlines and how those reports are handled within the organization.
If the provider does receive information sufficient to require an investigation, the provider should encourage its personnel involved in the investigation to keep daily logs showing when evidence was received, when the investigation started and what steps were taken. Those logs might be critical evidence to combat subsequent allegations that the provider recklessly or deliberately ignored evidence of an overpayment.
If you have any questions about these proposed regulations or how your organization should respond, feel free to call Richard Bouma (616-752-2159 or firstname.lastname@example.org
) or any member of the Warner Norcross & Judd Health Law team.