A central “theme” of the Patient Protection and Affordable Care Act, enacted in March 2010, and the subsequently enacted Health Care Education and Reconciliation Act of 2010 (collectively known as the “Affordable Care Act” or “ACA”) concerns national efforts to ensure compliance with applicable statutes and to protect the Medicare trust funds against fraud and improper payments. Although the ACA’s constitutionality is now before the U.S. Supreme Court, the Centers for Medicare and Medicaid Services (“CMS”) has begun the implementation of many of the Act’s provisions. With over 47 million citizens enrolled as beneficiaries in Medicare, and with Medicare as their primary health insurance payer, one of the Affordable Care Act’s goals is to enhance efforts to recover overpayments and to combat fraud, waste, and abuse in the Medicare program.
SECTION 6402(A) OF THE AFFORDABLE CARE ACT: “REPORTING AND RETURNING OF OVERPAYMENTS”
The Affordable Care Act contains one such new section designed to reduce abuse. Section 6402(a) of the ACA requires a “person,” meaning a provider or supplier under the Medicare program, who has received an overpayment to report and return the overpayment to CMS, the State, an intermediary, or a carrier and to explain the reason for the overpayment. [1]
As enacted, the law requires that an overpayment be reported and returned by the later of either (1) the date which is sixty (60) days after the date on which the overpayment was “identified,” or (2) the date any corresponding cost report is due, if applicable. The law defines an “overpayment” as “any funds that a person receives or retains under Title 18 or 19 (Medicare or Medicaid) to which the person, after applicable reconciliation, is not entitled.” The law further requires that an overpayment retained by a person after the deadline to return it becomes an “obligation” for purposes of enforcing the Federal False Claims Act. [2] As a result, failure to timely return overpayments can result in severe civil fines and penalties.
Therefore, it behooves providers and suppliers to have processes in place to identify and report overpayments. Until recently, however, health care providers did not have guidance on how to undertake the return of overpayments. With the issuance of the proposed rule, CMS now has articulated the manner in which it envisions Medicare providers will comply with Section 6402(a)’s requirements.
THE PROPOSED RULE IMPLEMENTING REQUIREMENTS UNDER THE “REPORTING AND RETURNING OF OVERPAYMENTS”
On February 16, 2012, CMS issued its proposed rule implementing Section 6402(a). [3] The proposal is a draft and is subject to revision. Nevertheless, in the preamble to its proposal, CMS has cautioned that “even without a final regulation [stakeholders] are subject to the statutory requirements found in Section [6402(a)] and could face potential False Claims Act liability, civil monetary penalties law liability, and exclusion from Federal health care programs for failure to report and return the overpayment.” These provisions allow the Office of Inspector General of the Department of Health and Human Services (“OIG”) to obtain information from providers of medical services that receive items or services payable by a Federal health care program. Of course, despite the statute’s particular deadline, until now no process has existed to report and return overpayments. [4]
EXAMPLES OF “OVERPAYMENT”
The statutory definition of “overpayment” means any funds that a person receives or retains under Title 18 or Title 19 to which the person, after applicable reconciliation, is not entitled. [5] CMS now has provided examples of overpayments, none of which is unusual. They include the following:
- Medicare payments for non-covered services
- Medicare payments in excess of the allowable amount for an identified covered service
- Errors and non-reimbursable expenditures and cost reports
- Duplicate payments
- Receipt of Medicare payment when another payer had the primary responsibility for payment
In the proposed rule, CMS has acknowledged the practice of interim payments that providers make throughout a cost-year, and the manner in which these are reconciled with covered and reimbursable costs at the time a cost report is due from the provider. [6] As a result, the proposed regulation provides that an “applicable reconciliation” occurs when a cost report is filed.
CONTENTS OF REPORT OF OVERPAYMENT
CMS has proposed that Medicare providers use its existing voluntary refund process, which CMS now has renamed the “self-reported overpayment refund process.” [7] The contents of the report must be in writing and must include:
- The person’s name and tax identification number;
- How the error was discovered;
- The reason for the overpayment;
- The health insurance claim number, as appropriate;
- The date of service;
- The Medicare claim control number;
- The Medicare national provider identification number;
- A description of the corrective action plan to ensure the error does not occur again;
- Whether the person has a corporate integrity agreement with the OIG;
- The timeframe and the total amount of refund for the period during which the problem existed that caused the refund;
- Whether a statistical sample was used to determine the overpayment amount and a description of the statistically valid methodology used to determine the overpayment; and
- A refund in the amount of the overpayment.
Because of the detailed nature of the contents of the report, the tone of the narrative and descriptions and explanations must be carefully considered.
WHEN SHOULD AN OVERPAYMENT BE “IDENTIFIED”?
To fully understand the proposed rule, it helps to know the context in which Section 6402(a) of the ACA has been codified in statute. The requirements for reporting and returning of overpayments compose a unique portion of the “integrity provisions” of the Medicare and Medicaid program. [8] In fact, Section 6402(a) provides that certain key definitions from the False Claims Act itself apply, namely, the definitions of “knowing” and “knowingly.” The proposed rule provides additional guidance by describing that an “identification” of an overpayment occurs if (a) “the person has actual knowledge of the existence of the overpayment” or (b) “acts in reckless disregard or deliberate ignorance of the overpayment.” [9] In the preamble to the rule, CMS states that this definition of “identification” provides an incentive to providers and suppliers to engage in a “reasonable inquiry” through the “exercise [of] reasonable diligence to determine whether an over-payment exists.” [10] The problem this poses for Medicare providers and suppliers, however, is that the proposed rule fails to provide any “bright line” as to how much diligence or “reasonable inquiry” is needed to determine whether an overpayment might or indeed does exist. There will no doubt be comments from interested stakeholders to this particular provision of the proposed rule. [11]
As a means of highlighting the “reasonable inquiry” standard enunciated in the preamble to the proposed rule, CMS has provided examples of when an overpayment has been (or should be) identified. These examples include:
- A provider of services or supplier learns that a patient death occurred prior to the service date on a claim that had been submitted for payment.
- A provider of services or supplier performs an internal audit and discovers that overpayments exist.
- A provider of services or supplier learns that services were provided by an unlicensed or excluded individual on its behalf.
- A provider of services or supplier is informed by a government agency of an audit that discovered a potential overpayment, and the provider or supplier fails to make a reasonable inquiry.
- A provider of services or supplier experiences a significant increase in Medicare revenue and there is no apparent reason – such as a new partner added to a group practice or a new focus on a particular area of medicine – for the increase. In this case, CMS points out that the provider or supplier must make a reasonable inquiry at that point. If not, the provider or supplier could be deemed to have acted in reckless disregard or deliberate ignorance of any overpayment. [12]
APPLICATION OF THE ANTI-KICKBACK STATUTE
The proposed rule also addresses compliance with the Anti-Kickback Statute (AKS). CMS has taken the position that compliance with the AKS is a condition of payment. CMS recognizes that a provider or supplier may be unaware of the existence of an arrangement between other parties that causes the provider or supplier to submit claims that are the subject of a kickback. As an example, CMS notes that a hospital could be unaware that a device manufacturer had paid a kickback to a physician on a hospital’s medical staff to induce the physician to implant the manufacturer’s device in procedures performed in a hospital. As a result, CMS states that providers who are not party to a kickback arrangement will not have “identified” an overpayment that occurs because of the illegal activity. In this instance, therefore, the provider or supplier, would not have a duty to report it, or repay it. In these cases, CMS would not refer the reported overpayment to the OIG and would suspend the innocent provider or supplier’s repayment obligation until resolution of the kickback matter.
SUSPENSIONS OF OBLIGATION TO RETURN OVERPAYMENTS UPON INITIATION OF THE SELF-REFERRAL DISCLOSURE OR OIG SELFDISCLOSURE PROTOCOLS
In its discussion regarding the proposed rule, CMS describes what it terms “intersections” between, on the one hand, the obligations to report and return overpayments under Section 6402(a) and, on the other, existing procedures for providers and suppliers to self-disclose through the Medicare self-referral disclosure protocol (“SRDP”) and the Office of Inspector General self-disclosure protocol (“OIG SDP”). [13] Because these latter protocols themselves involve payments back to either CMS or the OIG, respectively, CMS has proposed that returns of overpayments be suspended after a party has received notice from CMS or the OIG of receipt of such self-disclosure. For disclosures made under the SRDP, parties still must report the overpayment under the timeline set forth in the rule – i.e., within 60 days of identification. Confirmation of receipt of an OIG SDP itself would constitute the notice of overpayment. [14]
Under the SRDP, the deadline for returning overpayments will be suspended when CMS acknowledges receipt of a submission under the SRDP until a settlement agreement is entered, or a party withdraws or has been removed from the SRDP. Under the OIG SDP, the proposed rule provides that the deadline for returning overpayments will be suspended from the date the OIG acknowledges receipt of a submission that has been provided under the OIG SDP until a settlement is entered, a person withdraws from the OIG SDP, or a person is removed from it.
Medicare providers should ensure that they institute an appropriate process to report and return over-payments. In the preamble to the rule, CMS recognizes that the reporting requirements of an obligation to return payments are relevant “because the process of reporting and returning overpayments pursuant to Section [6402(a)] of the Affordable Care Act cannot resolve any potential false claims act or OIG administrative liability associated with the overpayment (even though returning an overpayment may, among other benefits, limit any false claims act or administrative liability arising from the retention of an overpayment). [15]
IDENTIFICATION OF A SIGNIFICANT OVERPAYMENT
CMS also recognizes that there are instances in which the sheer magnitude of the overpayment may require additional resources and time. CMS thus has proposed that if a provider needs additional time due to financial constraints, the provider must use the existing “Extended Repayment Schedule” (“ERS”) process. [16] CMS has stated that the ERS process is the only means by which extended repayment of an overpayment will be permitted, and therefore has revised the definition of “hardship” in the federal rules on claims collections to allow providers and suppliers to utilize the ERS to return identified overpayments for purposes of complying with section 6402(a) of the ACA. [17]
ENFORCEMENT OF THE REPORTING OBLIGATION
As stated above, the law provides that any overpayment retained by a person after the deadline becomes an “obligation” for purposes of the Federal False Claims Act. Parties who knowingly conceal, or knowingly and improperly avoid an obligation to pay money to the Government may be found liable under the False Claims Act. In Section 401.305(f) of the proposed rule, CMS explicitly has reiterated that enforcement will mirror the False Claims Act’s provision. [18] In addition, liability can be found under the Civil Monetary Penalties law, and parties can be excluded from participation in Federal health care programs.
“LOOKBACK PERIOD”
Following the purposes of the Federal False Claims Act, CMS has proposed that overpayments must be reported and returned only if they have been identified within 10 years of the date that the overpayment was received. CMS has proposed this because it resembles the False Claims Act statute of limitations, and serves reasonable business purposes of providing certainty that allows providers and suppliers to close their books without concern about past liability. The immediate concern with this proposal is that it offers no guidance with respect to how aggressively Medicare providers should “look back” or investigate potential overpayments from past years.
THE AFFORDABLE CARE ACT ARSENAL AGAINST FRAUD AND ABUSE
Comments are due on CMS’s proposed rules by April 16, 2012. Regardless of procedural comments, the law as written contains the 60-day deadline for reporting overpayments. The ACA contains a number of new initiatives designed to combat fraud and abuse, and these latest proposed rules add responsibilities as well as definitional and procedural guidance. Providers and suppliers need to be aware of their responsibilities under the statute as it exists, and under the new rules as they are finalized.
[1] Section 6402(a) of the Affordable Care Act; 42 U.S.C. 1320a-7k(d).
[2] 31 U.S.C. §3729.
[3] 77 Federal Register (“Fed. Reg.”) 9179, Thursday, February 16, 2012
[4] 77 Fed. Reg. 9180. For now, the proposed rule only implements the laws and provisions as they relate to Medicare Part A and Part B providers and suppliers. CMS has stated that it will address Medicare Advantage organizations, Medicaid Managed Care organizations, PDPs, and Medicaid Managed Care organizations at a later date.
[5] Section 6402(a) of the Affordable Care Act, Codified at 42 U.S.C. §1128J(d).
[6] Proposed Rule, §401.305; a “cost report” is the report required from Medicare providers on an annual basis in order to make a proper determination of amounts payable under the Medicare program.
[7] This process is described in Publication 100-06, Ch. 4 of the Medicare Financial Management Manual http://www.cms.gov/manuals/downloads/fin106c04.pdf
[8] 42 U.S.C. 1320A-7k.
[9] Proposed Section 401.305(a)(2).
[10] 77 Fed. Reg. 9182.
[11] Proposed Section 401.305(a)(2).
[12] 77 Fed. Reg. 9182.
[13] 77 Fed. Reg. 9182.
[14] 77 Fed. Reg. 9183; proposed §401.305(b).
[15] 77 Fed. Reg. 9183.
[16] This is outlined in publication 100-06, Ch. 4 of the financial management manual. http://www.cms.gov/manuals/downloads/fin106c04.pdf
[17] 77 Fed. Reg. 9187; proposed amendment to §401.607.
[18] 77 Fed. Reg. 9187.