April 24, 2019
In 2016, the government published regulations governing Medicare Part B, addressing the obligation of voluntary repayments. Under the Federal False Claims Act, retained overpayments are punishable by up to three times the amount of the false claim, plus between $11,181 and $22,363 per false claim, creating an effective obligation to “voluntarily” return overpayments. However, determining when and how an overpayment has occurred, and to whom the overpayment should be returned can be difficult.
What Is an Overpayment?
Overpayments are defined in the regulations as “any funds a person has received or retained under Medicare Part B to which the person is not entitled.” This includes obvious overpayments, like duplicate payments, payments exceeding the allowable amount, and payments when Medicare is the secondary insurer. They also can include payments for non-covered services and services that do not meet Medicare’s billing rules (e.g., the teaching physician, or “incident to” requirements), payments for medically unnecessary services, and Stark and anti-kickback law violations.
An overpayment must be returned within 60 days of having been identified, or the date on which it would have been identified by exercising “reasonable diligence.” Failure to return the overpayment within that time frame converts the overpayment to a false claim. Therefore, determining the date on which the overpayment was actually identified is critical. The regulations state that “reasonable diligence” includes both proactive compliance activities conducted in good faith by qualified individuals, and investigations conducted by qualified individuals in a timely manner based on “credible information” of possible overpayments. Investigations must be completed within 6 months. Significant increases in revenues without obvious explanations, unusually high profits, or a government agency determining an overpayment exists or conducting an audit which finds an overpayment can all trigger the requirement to investigate. The regulators have stated even a single overpaid claim requires investigation.
Upon discovering an overpayment, providers have two options:
(1) Review each individual claim to determine the total overpayment amount, or
(2) Extrapolate from a sample of claims.
Claim-by-claim review offers a more precise total but, depending on the nature of the problem(s) and number of claims to review, can take too long. Extrapolation is preferred for large numbers of claims. The regulations do not require any specific methodology to be used for extrapolation, nor that the methodology be statistically valid (e.g., RAT-STATS); it need only be reliable and accurate, based on a random sample of claims and extrapolated within the timeframe of that sample.
Whichever quantification approach is used, providers must look back at up to 6 years’ worth of claims (where appropriate). For example, if the problem focuses on a single employee’s coding habits, when that employee has only worked for the provider for 6 months, the scope of review would only be for those 6 months. By contrast, if an external audit looks at 3 years of billing and discovers overpayments, the practice must look back an additional three years to quantify that same problem. If a new problem is discovered, there may need to be a separate sample going back 6 years to quantify the new problem.
Once quantified, the provider must submit repayments to the Medicare Administrative Contractor (MAC). Most MACs have forms on their websites by which overpayments may be reported. Sometimes, these forms are written with only enough space to include a limited number of claims. In other cases, the forms may instruct providers to submit a spreadsheet if the total number of overpayments cannot fit on to the form. We often recommend including a narrative description of the problem, how it was discovered, what remedial steps have been taken, and when extrapolation is used, a description of the extrapolation methodology. In many cases, the forms do not account for extrapolated data, making the narrative that much more important to provide context for the MAC.
Payments themselves may be made in a single lump sum, or through credit balances or claims adjustments. A single lump sum payment is preferable, because it fully discharges the provider’s obligation to repay, and does not impact ongoing cash flow. It also relies less on the MACs to properly allocate credits or claims offsets, which reduces the potential for errors to creep into the process.
Providers can no longer ignore potential overpayments. An “ostrich defense” is no defense at all. Without a robust and active compliance program in place, providers may miss warning signs of overpayments, and risk retaining those overpayments beyond the 60 day window, exposing them to false claims liability. Compliance plans should specify the efforts the provider will take to detect overpayments, and should clearly identify those responsible for providing and coordinating oversight. Attorneys can also engage consultants to perform audits on a client’s behalf, cloaking the efforts “under the privilege.” Consultants can be essential in crafting a proper sample for review, and helping rule out those claims which are compliant, as well as detecting additional problems in the course of review. After determining the total overpayment amount, how it occurred, and the remedial efforts the provider will take, attorneys can help craft letters to MACs which ideally will result in the MAC determining no additional action is needed. These efforts all begin, however, with the provider’s own diligence.
*The views and opinions expressed by our guest bloggers are those of the authors, and do not necessarily reflect the views of KarenZupko & Associates, Inc.