Healthcare Prosecutions for Failures to Return Overpayments

Sometimes the deck is stacked against you.  No matter what you do and how hard you try, you will lose. 

In the healthcare area, hospitals, doctors and other service providers have to feel the frustration when it comes to the False Claims Act and potential liability for federal overpayments which they hold (or fail to return) for longer than 60 days.  Even when exercising good faith, trying their hardest to identify and return those payments, service providers are “liable” under the False Claims Act after the 60 day period expires.  Is that really fair?

As part of the Affordable Care Act, government prosecutors secured their list of long-desired “revisions” to help them prosecute violators.  Section 6402(a) of the ACA requires any person who has received an overpayment to report in writing and return the overpayment to HHS, or the State for Medicaid: (1) 60 days after the date on which the overpayment was identified or (2) the date any corresponding cost report is due.

Any overpayment retained after the deadline is defined as an “obligation” that gives rise to liability under the False Claims Act, 31 U.S.C. § 3729(b)(3).

Adding to risks of False Claims Act prosecutions is the ability of federal prosecutors’ ability to use the criminal “false statements” provision relating to federal healthcare payments.  42 USC Section 1320a-7(b)(a)(3).  With the addition of a clear requirement to report and return any overpayment past 60 days, the specter of criminal prosecutions for failing to meet that deadline is real.  

Earlier this year, the Centers for Medicare and Medicaid Services (CMS) released its long-awaited Proposed Rule to implement Section 6402(a) of the Affordable Care Act (ACA), which requires certain Medicare and Medicaid providers to report and return identified overpayments.  The proposed rule only applies to Medicare Part A and Part B providers and suppliers. 

CMS proposed to define “identifying” an overpayment as having actual knowledge of its existence or acting in reckless disregard or deliberate ignorance of its existence. 

An “overpyament” can include Medicare payments for noncovered services or excess payments; duplicate payments for services; and errors or nonreimbursable costs.  CMS expects service providers to exercise reasonable diligence through self-audits, compliance and other monitoring programs to identify potential overpayments. 

A provider has a reporting obligation requiring the provider to supply detailed information about the reimbursement, including how the error was discovered, a description of the corrective action taken to prevent the error from recurring, the reason for the refund, and whether the provider has a Corporate Integrity Agreement, a Medicare claim control number, Medicare National Provider Identification number, a refund in the amount of overpayment, and a description of a statistical method, if used, to identify the overpayment.

Providers are directed to use prescribed forms supplied by Medicare Part A and B administrative contractors or durable medical equipment Medicare administrative contractors to report overpayments. 

One of the more controversial proposals in CMS’ proposed rules is to impose liability for overpayments “looking back” for ten years, consistent with the ten year statute of limitations in the False Claims Act. 

CMS proposed rules have a number of issues where ambiguity remains, including the identification of potential overpayments, the 10-year lookback period, and interaction of the overpayment reporting system with existing Stark Act and Anti-Kickback Self-Dislcosure protocols.    

The potential for civil and criminal liability raises real serious issues concerning criminalization of regulatory requirements.  In the desire to reduce healthcare costs and eliminate fraud, haste may lead to fundamental unfairness.

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