Credit Balances and the False Claims Act - DoctorsManagement Credit Balances and the False Claims Act - DoctorsManagement

Credit Balances and the False Claims Act

“Complying With the 60 Day Rule”

by Sean Weiss, Partner & VP of Compliance

Dating back as far as I can remember to when I first began working in health care, the debate regarding voluntary refunds of overpayments has been in place. Back in the late 80s and into the mid-90s, practitioners always wanted to hold on to the money even though they were not entitled to it because they felt “Payors owed them” since they were slow or poor at paying claims. Practice Managers/Administrators would always say “We will keep it on the patients account as a “Credit Balance” and if the payor requests the refund, we will make it.” So, what is the definition of a credit balance? “An improper or excess payment made to a provider as the result of patient-billing or claims-processing errors by providers or payers.” A few examples of credit balances under Medicare include:

  • Being paid twice for the same service either by Medicare or by Medicare and another insurer
  • Being paid for services planned but not performed or for noncovered services
  • Overpayment due to errors made in calculating beneficiary deductible and/or coinsurance amounts

(**As I typically do when I write posts regarding refunds, make sure this is handled by a health care centric attorney to ensure privilege and to preserve the work-product doctrine to the extent law allows.)

Under the ACA 60-day Rule, failure to refund within the 60-day timespan constitutes a violation of the False Claims Act (FCA). “There is no twilight zone of honesty in business – a thing is right or it’s wrong – it’s black or it’s white,” John F. Dodge. The government uses the “Reverse” False Claims Prohibition – “Knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the government. Remember, an overpayment has not been identified under the rule until a provider has or should have, through reasonable diligence, quantified the overpayment.” As with all my Blog Posts, I like to provide some history behind the issues I write about so here is the Rule/Centers for Medicare and Medicaid Services – Reporting and Returning of Overpayments – FR Document 2016-02789 – Cited at 81 FR 7653 and can be found on the following 32-pages (7653-7684) “This final rule requires providers and suppliers receiving funds under the Medicare program to report and return overpayments by the later of the date that is 60 days after the date on which the overpayment was identified; or the date any corresponding cost report is due, if applicable. The requirements in this rule are meant to ensure compliance with applicable statutes, promote the furnishing of high-quality care, and to protect the Medicare Trust Funds against fraud and improper payments. This rule provides needed clarity and consistency in the reporting and returning of self-identified overpayments.”

Section 6402(a) of the Affordable Care Act established a new section 1128J(d) of the Social Security Act (the Act). Section 1128J(d)(1) of the Act requires a person who has received an overpayment to report and return the overpayment to the Secretary, the state, an intermediary, a carrier, or a contractor, as appropriate, at the correct address, and to notify the Secretary, state, intermediary, carrier or contractor to whom the overpayment was returned in writing of the reason for the overpayment. Section 1128J(d)(2) of the Act requires that an overpayment be reported and returned by the later of— (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable. Section 1128J(d)(3) of the Act specifies that any overpayment retained by a person after the deadline for reporting and returning an overpayment is an obligation (as defined in 31 U.S.C. 3729(b)(3)) for purposes of 31 U.S.C. 3729. Pay close attention to this next statement issued by CMS in the Rule, “Providers and suppliers are subject to the statutory requirements found in section 1128J(d) of the Act and could face potential False Claims Act (FCA) liability, Civil Monetary Penalties Law (CMPL) liability, and exclusion from federal health care programs for failure to report and return an overpayment. Additionally, providers and suppliers continue to be required to comply with our current procedures when we, or our contractors, determine an overpayment and issue a demand letter.”

Here are a few snapshots of the 60-day Rule:

  • “[A] person has identified an overpayment when the person has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.”
  • “Reasonable diligence” includes both

(1) proactive compliance activities and

(2) reactive investigations conducted in a timely manner in response to credible information of a potential overpayment

– “Minimal” compliance activities to monitor the appropriateness and accuracy of claims would be a failure to exercise reasonable diligence

– Identification of a single overpaid claim requires further investigation

  • “Part of identification is quantifying the amount, which requires a reasonably diligent investigation.”
  • The 60-day time period for reporting/returning begins when either:
    • The reasonable diligence is completed; or
    • On the day the provider received credible information of a potential overpayment (if the provider fails to conduct reasonable diligence)
  • For an investigation to be conducted in a “timely” manner, providers typically must complete the investigation within 6 months from receipt of credible information indicating there may be an overpayment
    • 6-month timeframe may potentially be extended under “extraordinary circumstances”
    • 8 months generally the maximum total time to return overpayments
  • The government recommends that providers maintain records documenting “reasonable diligence”
  • MAC reporting process Self-disclosure protocols
    • A submission to the OIG or CMS protocols suspends the 60-day requirement for returning overpayments until a settlement agreement is executed
    • OIG’s Self-Disclosure Protocol (SDP) – This is always done as a last resort and must be handled under Attorney/Client Privilege
    • CMS Voluntary Self-Referral Disclosure Protocol (SRDP)
    • Self-disclosures to other agencies do not suspend the repayment deadline
      • g., Department of Justice, local U.S. Attorney’s Office, Medicaid Fraud Control Unit

As with all issues that we deal with, it is also critical to define the specific terms used by CMS to ensure complete understanding of the what, when, where, why and how of things:

Identification – “Section 1128J(d) of the Act provides that an overpayment must be reported and returned by the later of—(i) the date which is 60 days after the date on which the overpayment was identified; or (ii) the date any corresponding cost report is due, if applicable.” The final rule states that “A person has identified an overpayment when the person has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. Creating this standard for identification provides needed clarity and consistency for providers and suppliers on the actions they need to take to comply with requirements for reporting and returning of self-identified overpayments.”

Lookback Period – The final rule states that “Overpayments must be reported and returned only if a person identifies the overpayment within 6 years of the date the overpayment was received. Creating this limitation for how far back a provider or supplier must look when identifying an overpayment is necessary in order to avoid imposing unreasonable additional burden or cost on providers and suppliers.”

Person – ““Person” as a provider (as defined in § 400.202) or a supplier (as defined in § 400.202). The definition does not include a beneficiary and is consistent with the definition of a “person” in section 1128J(d)(4)(C) of the Act.”

Reporting and Return of Overpayments – The final rule states that “Providers and suppliers must use an applicable claims adjustment, credit balance, self-reported refund, or another appropriate process to satisfy the obligation to report and return overpayments.” There are, as outlined earlier, multiple avenues to pursue for this and only through solid legal counsel should you proceed. Depending on the advice of counsel you will work through your issue(s) with one of the following:

  • OIG – Self-Disclosure Protocol
    • Conduct involving false billing
    • Conduct involving excluded persons
    • Conduct involving the Anti-Kickback Statute (including conduct that violates both the AKS and Stark Law)
  • CMS – Self-Referral Disclosure Protocol
    • Conduct involving only violations of the Stark Law
  • DOJ – May be appropriate when provider believes an FCA release is necessary
  • Other – The MAC – Usually best for relatively simple overpayment returns

What to do next…

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