Tips for Voluntary Refunds
David Glasser, JD
Shareholder with Fredrikson & Byron
This auditing and compliance “Tip of the Week” was originally published by the
National Alliance for Medical Auditing Specialists (NAMAS), a division of DoctorsManagement.
Choosing your words carefully is wise in a highly regulated environment like health care. That is particularly true when you write a voluntary refund letter to the Medicare program. Before we discuss the letter itself, I want to emphasize that in nearly every situation that letter should be to the Medicare Administrative Contractor (MAC) rather than the OIG, US Attorney, or some other governmental body. Unless you believe that someone was intentionally committing wrongdoing, a refund to the contractor is likely to be the best course. One reason for this is that if you work with the Office of Inspector General (OIG) or local US Attorney Office (USAO) you are nearly certain to have to pay some sort of penalty if you wish to get a release under the False Claims Act, whereas a refund to the contractor will only involve the amount paid for the services in question. While it is true that to get a False Claims Act release you must work with the OIG or the USAO, it is not clear that there are many occasions that you will pay materially less if you approach the OIG or USAO to have the certainty of a release, rather than refunding money to the contractor and waiting to see if someone seeks to apply penalties.
So, what should the letter say? The first question is how to characterize the situation. “Refund” and “overpayment” may sound interchangeable. They’re not. When it comes to considering possible refunds, words matter. When you are voluntarily sending money back to a Medicare contractor, I strongly encourage you to describe the action as a refund, rather than reporting and returning an overpayment.
When Congress passed the 60-day rule as part of the Affordable Care Act it required anyone receiving Medicare or Medicaid funds to report and return an overpayment within 60 days of its identification. The law (Social Security Act Section 1128J(d)(1) defined an overpayment as “any funds that a person receives or retains under title XVIII or XIX to which the person, after applicable reconciliation, is not entitled under such title.” Imagine that after you have sent a check back to the Medicare contractor someone argues that your original claims to the government were false. While defending yourself, you want to be able to make every argument that might help you avoid false claims liability. If you have admitted that you weren’t entitled to the money, that makes it easier to argue that the claims were false. You are in a stronger position if you can explain that while you thought the best course was to refund the money, you were doing so voluntarily, rather than because your original claims were clearly improper. Therefore, use “refund” rather than “overpayment.”
Similarly, in order to avoid an admission of wrongdoing, I try to use phrases such as, “We believe it would have been more appropriate to bill the service as X” and, “We would feel more comfortable defending code X.” You will want to avoid any statement that can be characterized as an admission that you billed improperly.
I begin nearly every refund letter with the phrase “as part of our compliance process.” It’s an excellent way of identifying how you discovered the possible refund while also highlighting that you have a compliance process. Even if you believe your formal compliance plan would benefit from improvement, the fact that you have identified the possible refund means that you have some sort of compliance process.
It’s best to refrain from making any statements about advice you received from your lawyer in your refund letter. While it may seem wise to say, “Our lawyer told us X”, that statement may waive any attorney-client privilege that exists. When you communicate an attorney’s advice to outside parties, that will generally destroy any privilege related to that advice.
Finally, while it may seem like a great idea to end the letter by promising that you have fixed the problem, I recommend refraining from any such assurance. In my experience it’s quite common for even the most well-intentioned organization to discover that despite their best efforts, the original problem remains uncorrected, or reoccurs. If you feel compelled to make any statement about correcting the error I would list your action plan, but I focus on the educational process without guaranteeing any particular results.
Remember that everything you put in your refund letter is a representation to the government. You want each word to be accurate and carefully chosen. While I believe nearly every refund letter should come directly from the client, it’s wise to have legal counsel review the letter before it’s submitted. By choosing your words carefully you can make it less likely that your well-intentioned refund letter is used as a weapon against you.
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