Daniel F. Shay
Attorney at the Law Offices of Alice G. Gosfield & Associates, P.C.
This auditing and compliance “Tip of the Week” was originally published by the National Alliance for Medical Auditing Specialists (NAMAS), a division of DoctorsManagement.
Should you volunteer to repay money from Medicare or other federal healthcare programs if you believe they were the result of errors on your end? The penalties for not doing so could be severe. Under the Federal False Claims Act, if retained overpayments can be shown to be to false claims, they are punishable by up to three times the amount of the false claim, plus between $11,181 and $22,363 per false claim. In 2016, the government published regulations, for Medicare Part-B only, that clarified that retained overpayments must be returned to Medicare within 60 days of the date on which the overpayment was identified or could have been identified through the exercise of “reasonable diligence.” These regulations and the associated penalties make the development and active use of internal compliance programs a necessity. Healthcare providers must identify, report, and refund overpayments on an ongoing basis.
What Constitutes an Overpayment
An overpayment is defined by the regulations to mean “any funds a person has received or retained under Medicare Part B to which the person, after reconciliation, is not entitled.” Reasons for an overpayment can extend well beyond the services simply not being covered. For example, they could include upcoded claims; claims are not medically necessary or rendered by excluded providers; the claims that failed to meet coverage requirements; duplicate payments; payments that violate Stark or the anti-kickback laws; and this is only a partial list.
When an Overpayment is Considered “Identified” and How to Quantify an Overpayment
Overpayments must be returned within 60 days of having been identified, or the date on which they could have been identified through the exercise of reasonable diligence. Identification includes quantifying the amount. However, determining when that 60-day window begins can be complicated. “Reasonable diligence” includes proactive compliance efforts based on credible information of potential overpayments, conducted in good faith by qualified individuals in response to such information.
“Credible information” may include complaints from tip lines; discovering that a patient has died prior to the listed date of service; learning the service was provided by an unlicensed or excluded person; or as a result of internal auditing, which can trigger a duty to investigate further on the same issue. Unusually high profits in relation to hours worked, or significant increases in revenue without a clear explanation can likewise trigger such a duty. The regulators have even said that a single overpaid claim can trigger a duty to investigate further and determine whether the problem is limited to a single claim or extends beyond it, before repaying the amount for the single claim. In addition, an external audit – such as one conducted by a MAC – can provide credible information to necessitate further investigation, but which brings a variety of its own challenges.
This investigation must be concluded within 6 months at most, beginning with the receipt of the credible information. The regulators have also made clear that accurate documentation of the reasonable diligence efforts is a best practice.
One myth which has arisen about how to quantify the overpayment is that it must be “statistically valid” (e.g., using a methodology used by federal auditors, such as the RAT-STATS statistical software package). To the contrary, the regulators have stated that the method for quantifying the overpayment need only be reliable and accurate, based on a random sample of claims, and extrapolated within the timeframe of the sample. If a probe sample is used, the provider must extrapolate from the results of the probe and pay back the full overpayment instead of merely the claims found in the probe. Providers must look up to 6 years prior to the dates of service of the sampled claims, although the actual timeframe will depend on the circumstances. For example, if a physician practice is investigating claims submitted by a specific employee, and that individual only began working for the practice 2 years prior, there is obviously no need to investigate the period before the individual was hired. On the other hand, if the practice is investigating a practice-wide billing problem based on a 3-year sample, the practice must look back an additional 3 years, and each year may require its own sample.
Managing Identified Overpayments
Once fully quantified, repayments must be made to the Medicare Administrative Contractor (MAC), most of which offer forms on their websites with instructions on how to submit voluntary repayments. The forms themselves, however, often do not address how to repay multiple claims at a time and are instead written for a single claim or a small number of claims. Nor do they address extrapolated samples which the rules permit, offering yet another, separate set of challenges. While the regulators have not specified any list of required information, they have stated that a voluntary repayment should include an explanation of how the problem was found, what steps have been taken to correct the problem, and the methodology used to quantify the overpayment amount when extrapolation is used.
Payments may be made either by submitting an actual repayment, or by using credit balances or claims adjustments. We recommend an actual repayment. It is less disruptive to ongoing cashflow and avoids any misunderstanding that could arise should the MAC’s overpayments department not communicate with its claims department.
Ongoing Compliance Efforts
Because of the regulations’ “reasonable diligence” standard in the regulations, healthcare providers must engage in proactive efforts to detect overpayments. The approach should be documented in the compliance plan, and teams that actually implement those plans on a regular basis ought to be clearly identified. Where problems are discovered, providers should consider involving attorneys immediately, under attorney-client privilege, to investigate. Attorneys can likewise engage consultants and auditors on behalf of clients to investigate potential problems, under privilege. Attorneys can also help craft submissions to MACs that lay out the scope of the problem that led to the overpayment, the remedial steps taken, and the methodology used. Ideally, a well-crafted submission will lead a MAC to determine that no further action – including further audits of the provider – is necessary to address this problem. All of these efforts, however, rely on the provider being proactive and engaged in ongoing efforts to ensure compliance.
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