New Final Rule on Medicare Overpayments

Friday, March 18, 2016

By Adrienne Dresevic, Esq., Jessica Gustafson, Esq., and Leslie Rojas, Esq., of The Health Law Partners, P.C. Imaging providers should be aware of the requirement to promptly return any overpayments received from Medicare. Failure to report and return an identified overpayment could be actionable under the False Claims Act (FCA), and there are a number of proactive steps providers should take to determine if they have received an overpayment (eg, internal billing audits). What Is An Overpayment? CMS defines an “overpayment” as any funds that a person has received or retained from Medicare to which the person, after applicable reconciliation, is not entitled. A familiar type of overpayment is when there is payment twice for the same service. However, overpayments can occur in a variety of situations. For example, an overpayment may arise from unlawful practices such as billing for a service not performed, billing for a service that was the result of an illegal referral under the Stark Law, or unbundling (ie, billing multiple codes when one code would suffice, resulting in higher reimbursement). Additionally, overpayments can result from incorrect place-of-service (POS) coding on physician claims. See, for example, our June 2015 Link article regarding incorrect POS coding issues for services provided from January 2010-September 2012 resulting in $33.4 million in Medicare overpayments. In our article, we noted that providers would receive more guidance on Medicare’s overpayment policies by February 2016. As expected, last month, CMS published its Final Rule related to Medicare Part A and Part B providers’ and suppliers’ obligations to report and return overpayments (the Final Rule). The Medicare Overpayment Rule: Background and Final Rule By way of brief background, in 2010, the Patient Protection and Affordable Care Act (PPACA) established a requirement that any person who receives an overpayment must report and return the overpayment by the later of: (i) 60 days after the date on which the overpayment was identified; or (ii) the date any corresponding cost report is due, if applicable (the Medicare Overpayment Rule). See, 42 U.S.C. § 1320a-7k(d). Until the Final Rule was published, one of the challenges in complying with the Medicare Overpayment Rule was how to determine when an overpayment was “identified” (ie, when the 60 days begins to run). Fortunately, the Final Rule provides clarity on this issue and other helpful guidance. The Final Rule’s major clarifications to and revisions of the Medicare Overpayment Rule include:

Meaning of “Identified”: A person has “identified” an overpayment when the person has, or should have through the exercise of reasonable diligence: (i) determined that they have received an overpayment; and (ii) quantified the amount of the overpayment. Reasonable diligence should include both proactive compliance activities to discover potential overpayments (eg, routine internal billing/coding audits) and reactive investigative activities undertaken in response to credible information of a potential overpayment (eg, employee tip that there may have been a billing/coding error). Even an unexpected increase in revenue may require an investigation into a potential overpayment.

Overpayment Investigations: Investigations of potential overpayments must be performed with reasonable diligence, which CMS indicate should typically not exceed six months from the receipt of the credible information. If an overpayment is confirmed, the provider then has 60 days to report and return the overpayment.

Quantifying Overpayment: To “quantify” the amount of the overpayment, CMS allows the use of statistical extrapolation in order to determine the overpayment amount. Once a single overpayment is found, it may be appropriate to look to similar claims that may have resulted in similar overpayments by, for example, using a “probe sample.” The “probe sample” can then be extrapolated into a larger “full sample” to quantify the full extrapolated overpayment amount.

Meaning of Overpayments: Even overpayments that were not caused by or were outside of the control of the provider/supplier meet the definition of overpayments. Additionally, only those overpayments identified within six years of the date the overpayment was received must be reported and returned.

Cost Reports: For providers who submit cost reports each year (eg, hospitals), an overpayment must be returned at the time the cost report is filed with two exceptions: (i) Supplemental Security Income (SSI) ratios used in the calculation of disproportionate share hospital (DSH) payment adjustment; and (ii) outlier reconciliation, which is performed at the time the cost report is settled.

Report/Return of Overpayments: Overpayments may be reported and returned by any of the following methods: an applicable claims adjustment, credit balance, self-reported refund, or other reporting process set forth by the applicable Medicare contractor to report an overpayment, as well as through a disclosure under the OIG’s Self-Disclosure Protocol or the CMS Voluntary Self-Referral Disclosure Protocol.

Conclusion In the absence of good-faith compliance efforts to monitor the accuracy and appropriateness of claims submitted to Medicare, providers expose themselves to a violation of the Medicare Overpayment Rule for failure to exercise reasonable diligence to identify overpayments. Implementation of an active compliance program is the first step towards good-faith compliance activities (see our November 2015 Link article). In fact, compliance programs for all providers will soon become a requirement of participation in Medicare (once final regulations are published). Additionally, as with all compliance issues, documentation is extremely important. Providers should document each step taken during the overpayment investigation process. Lastly, it is best to involve healthcare legal counsel as soon as possible during an overpayment investigation and to conduct the investigation under the attorney-client privilege.

Adrienne Dresevic, Esq. is a Founding Shareholder of The Health Law Partners, P.C., a nationally recognized healthcare law firm with offices in Michigan and New York.Practicing in all areas of healthcare law, she devotes a substantial portion of her practiceto providing clients with counsel and analysis regarding compliance, Stark Law, Anti-Kickback Statute, and compliance related issues. Ms. Dresevic serves on the American Bar Association Health Law Section’s Council, which serves as the voice of the national health law bar within the ABA. Ms. Dresevic also serves as the ABA Health Law Section’s Co-Chair of the Physicians Legal Issues Conference Committee, Vice Chair of the Programs Committee (Executive Leadership), and Vice Chair of the Sponsorship Committee. She is licensed to practice law in Michigan and New York, and can be contacted at adresevic@thehlp.com. Jessica L. Gustafson, Esq. graduated from Wayne State University Law School. Practicing healthcare law, she concentrates on representing providers in the Medicare, Medicaid and third party payor audit appeals processes, compliance with federal and state healthcare regulations, and reimbursement matters. Leslie A. Rojas, Esq., is an associate with The Health Law Partners, P.C., a nationally recognized healthcare law firm with offices in Michigan and New York. Ms. Rojas’ healthcare practice focuses on compliance with federal and state healthcare regulations; fraud and abuse issues, including the Stark Law and the Anti-Kickback Statute; HIPAA and health information privacy issues; and transactional and corporate aspects of healthcare. Ms. Rojas is licensed to practice law in Michigan and Illinois, and can be contacted at lrojas@thehlp.com. The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.

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Tags: Regulatory Review