Only two days after the government's announcement that it recovered a record-breaking $4.1 billion from its healthcare fraud enforcement efforts in 2011, the Centers for Medicare and Medicaid Services (CMS) published a draft regulation in today's Federal Register implementing the Affordable Care Act's (ACA) 60-day overpayment report and return provision. The proposed rule, which applies only to Medicare Part A and Part B services, is an attempt to provide needed guidance on a number of issues that have left providers and healthcare attorneys in uncertain territory since the provision was passed in 2010.
Almost from the moment of its enactment, the 60-day overpayment
provision stirred debate within the healthcare community about its
reach and meaning. Providers and their counsel have struggled with
questions including when an overpayment is "identified,"
defining the appropriate look-back period, and understanding the
interplay and relationship between that provision and both
OIG's Self-Disclosure Protocol and the CMS Self-Referral
Disclosure Protocol. With the draft regulation, CMS attempts to
address many of these open questions.
What is an overpayment?
The proposed regulation incorporates the definition of
"overpayment" directly from the statute which provides
"...any funds that a person receives or retains [under the
Medicare Program] ... to which the person, after applicable
reconciliation, is not entitled...." CMS offers examples of
possible overpayments, including payments for non-covered services;
payments in excess of the allowable amount for a covered service;
errors and non-reimbursable expenditures in cost reports; duplicate
payments, and receipt of Medicare payment when another payor had
the primary responsibility for payment.
When is an overpayment identified?
The proposed rule states that a provider "has identified an
overpayment" when the provider "has actual knowledge of
the existence of the overpayment or acts in reckless disregard or
deliberate ignorance of the existence of the overpayment."
Again, CMS provides examples in its introductory comments of when
an overpayment has been identified, such as a provider discovers
billing records on which it incorrectly coded certain services,
resulting in increased reimbursement; a provider learns that a
patient death occurred prior to the service date on a claim that
has been submitted for payment or a provider learns that services
were provided by an unlicensed or excluded individual. One example,
however, is somewhat troubling. Indeed, CMS notes that an
overpayment is identified when:
[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. Nevertheless, the provider or supplier fails to make a reasonable inquiry into whether an overpayment exists. (When there is reason to suspect an overpayment, but a provider or supplier fails to make a reasonable inquiry into whether an overpayment exists, it may be found to have acted in reckless disregard or deliberate ignorance of any overpayment.)
This definition of "identification" and the attendant
liability it establishes are distressing. When is an increase is
Medicare revenue "significant" and what kind of
"inquiry" is reasonable under these circumstances? These
questions remain unanswered by the proposed rule. Moreover, this
broad definition seems to substantially stretch the 60-day
overpayment provision beyond the language of the statute itself.
While Congress clearly intended to establish "reckless
disregard liability" when a provider retains an overpayment
"knowingly," it is not clear that Congress intended to
extend the reckless disregard standard to a provider's failure
to inquire where a overpayment is merely possible or suspected.
Whatever Congress intended, rather than clarify the vague notion of
"identified," the proposed regulation establishes
provider liability not only in cases where there is a failure to
report and return an overpayment, but also when a provider fails to
affirmatively seek out information about possible overpayments if
there is "reason to suspect an overpayment."
What is the required look-back
period?
Another area the proposed regulation addresses is the required
"look-back" period when evaluating the need to return and
report an overpayment. In what is a startling development, the
regulation uses the ten-year period based upon the outer limit of
possible False Claims Act (FCA) liability, rather than the shorter
FCA statute of limitations of six years or the four-year Medicare
claim-reopening period that applies to simple overpayments where
there is no evidence of fraud. In fact, the commentary suggests
that CMS will seek to change the claims reopening period to track
the ten-year look-back period under the new regulation. If this
portion of the proposed rule goes into effect as drafted, it will
substantially increase liability for providers.
How does the 60-day overpayment provision intersect
with the OIG and CMS Disclosure Protocols?
The proposed regulation acknowledges the interplay between the
60-day overpayment provision and the OIG and CMS disclosure
protocols. In both cases, the rule provides that the 60-day period
is suspended during the period of time from the acknowledgment that
a submission has been received by either the OIG or CMS through
their respective disclosure procedures and the time that the matter
is either removed from the disclosure process or is settled. This
section of the rule clarifies what has, in most cases, been the
practice prior to this guidance.
While the draft regulation contains additional details, even this
brief overview of its highlights demonstrates that CMS has taken an
aggressive approach in seeking to implement the 60-day overpayment
provision. Whether CMS has proposed a rule that will be workable
and that deals with the myriad challenges faced by providers in the
overpayment context, however, remains to be seen. CMS has invited
public comments to the draft rule, which are due by April 16, 2012.
We expect that comments from providers and trade groups will
address practical and well-founded concerns regarding the
application of a reckless disregard standard surrounding the
identification of overpayments, the practicality and workability of
a ten-year look-back period, as well as other issues. Providers
should remember that even though the proposed rule is not in
effect, they currently must meet the 60-day statutory requirement
already in place under the ACA.
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