Legal Advisory March 14, 2012 REPORTING AND RETURNING MEDICARE OVERPAYMENTS On February 14, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule implementing a provision in the Patient Protection and Affordable Care Act (ACA) that requires a health care provider or supplier that received an overpayment from the Medicare program to report and return the overpayment by the later of 60 days after the date the overpayment was identified, or the date any corresponding cost report is due, if applicable. Failure to meet the deadline can result in liability under the False Claims Act (FCA). The proposed rule was published in the Federal Register on February 16. Comments are due April 16. BACKGROUND The overpayment provision was enacted in the ACA as a result of expansions to the FCA in the Fraud Enforcement and Recovery Act of 2009 (FERA). In FERA, Congress made “retention of an overpayment” a basis for FCA liability. It was added in response to concerns that a contractor or other recipient of federal funds would recognize an overpayment had occurred and either not return the funds or significantly delay a return to reap further unearned financial benefit. As a result, anyone who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government” is subject to FCA liability. The term obligation is defined to include a duty “arising from the retention of an overpayment.” Prior to enacting the overpayment provision in the ACA, there was no explicit statutory obligation in the Social Security Act to return overpayments from the Medicare and Medicaid programs. The purpose of this provision was to fill that gap. AT ISSUE There are three core components of the ACA overpayment provision: receipt of an overpayment, identification of an overpayment, and reporting and returning an overpayment within a 60-day deadline. The following is a summary of CMS’s proposed approach to implementing the statute for the Medicare program. Overpayment The proposed definition of overpayment is consistent with the statute: any funds that a provider or supplier receives or retains from Medicare to which they are not entitled after applicable reconciliation. Examples of an overpayment could include payments in excess of the allowable amount for a covered service, duplicate payments and payment when another payer had primary responsibility. The allowance for “reconciliation” was added in response to concerns from the AHA and others that the original bill language would interfere with the routine reconciliation processes built into government programs to determine amounts due or owing between the government and providers and prematurely start the 60-day clock. CMS’s interpretation of what is covered under reconciliation is unreasonably narrow. Instead of allowing for a netting-out of identified underpayments and overpayments while an associated cost report is still open, only items submitted for payment directly through the cost report would be treated as part of a reconciliation process. This will create unnecessary burden for hospitals and prevent maximum use of an established process for reconciling over-and underpayments. The proposed rule also would interfere with the current process for rebilling to correct a claim if done within the “timely filing” period. Identification of an Overpayment The statute does not define identified. Under the proposed rule an overpayment would be identified when a person has actual knowledge of the existence of an overpayment or acts in reckless disregard or deliberate ignorance of the overpayment. The agency’s explanation for this expansive definition is that it “gives providers and suppliers an incentive to exercise reasonable diligence to determine whether an overpayment exists. Without such a definition, some providers and suppliers might avoid performing activities to determine whether an overpayment exists, such as self-audits, compliance checks, and other additional research.” The AHA believes this is one of the most significant and problematic provisions of the proposed rule. The duty to report and return begins when an overpayment is identified and that is when the 60-day clock starts running. Instead of implementing the statute’s report and repay obligation, the agency has created a sweeping and unfounded duty to investigate, threatening FCA exposure unless a hospital can effectively guarantee that no mistake will ever be made or no mistake is ever undiscovered. That is an impossible standard – for providers and the government. Contrary to providing an incentive for reasonable proactive audit compliance activities, the proposed rule fails to acknowledge the substantial commitment of resources hospitals voluntarily make to stay current with the latest permutations of guidance, bill correctly the first time and correct mistakes that do occur. Indeed, in its September 23, 2010 program integrity rulemaking, CMS endorsed hospitals’ continued reliance on the Department of Health and Human Services’ Office of Inspector General’s (OIG) guidance for compliance program activities. The proposed rule also ignores the reality of the current landscape of government audits and reviews to which hospitals are subjected. They face a barrage of reviews and audits (e.g., Medicare Administrative Contractors, Recovery Audit Contractors), many of which result in questionable determinations that are being successfully challenged (requiring the expenditure and diversion of significant resources). Calculating the Amount of an Overpayment The proposed rule would create a 10-year “look-back” period for calculating the amount of any overpayment. And it would expand the period during which CMS may reopen a claim from the current four-year period to 10 years. The agency’s explanation for the expansion is to match the statute of limitations for the FCA. CMS does not create a similar expansion of the period during which a provider may reopen a claim to recoup an underpayment; it remains at four years. A 10-year look-back is unwarranted, impossible or impractical, and is prohibited retroactive rulemaking. Relying on the FCA is no justification for the expanded look-back and further demonstrates that the agency is trying to rewrite the statute. There is no acknowledgment of the burden that is being created or any cost/benefit analysis. It appears to assume that if a button is pushed, 10 years worth of claims are immediately available (i.e. the current software and systems have been static for 10 years, all data tapes are kept and on site) and that an automated determination can be made of whether an overpayment was received (i.e., what was the controlling guidance at every point in the 10-year period, whether an error was made, and whether, with corrected billing, an overpayment was ultimately received and, if yes, what was the amount). Reporting and Returning an Overpayment CMS proposes to use the current voluntary refund process (Pub. 100-06, Ch. 4 Medicare Financial Manual) as the mechanism for receiving overpayments and to rename it the “self-reported overpayment refund process.” CMS acknowledges that the current reporting form varies across contractors, and it plans to create a uniform form. In the interim, the form of the applicable contractor should be used. The deadline for returning an overpayment is 60 days after it is identified or an applicable reconciliation. There is no automatic extension for “hardship.” If additional time is needed due to financial constraints, the existing Extended Repayment Schedule process would apply. The proposed rule would create a carve-out for overpayments disclosed to the OIG under its Self-Disclosure Protocol (SDP). Using the OIG process would satisfy the reporting obligation under the new rule, and the 60-day deadline for repayment would be suspended until completion of the OIG process. A disclosure under the CMS Self-Referral Disclosure Process (SRDP), however, would only toll the 60-day deadline; a report would still have to be filed under the new process. A disclosure under the CMS SRDP should toll the 60-day deadline and satisfy the reporting requirement under the new rule. It should be treated the same as is a disclosure to the OIG. CMS should also move promptly to remedy the confusion it has created regarding the intersection of the proposed rule and existing processes related to the various types of government audits and reviews of providers (e.g., Medicare Administrative Contractors, Recovery Audit Contractors). The agency should confirm that this rule does not apply to any claims or issues that are the subject of any government review. Similarly, it should confirm that the rule does not affect use of the “timely filing” process. NEXT STEPS The AHA is developing a comment letter and we would welcome your input. Comments are due April 16. Watch for a model comment letter for your use a few weeks before the deadline. FURTHER QUESTIONS Contact Maureen Mudron, deputy general counsel, at (202) 626-2301 or firstname.lastname@example.org.
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