By John H. Fisher II
May 30, 2019
The Affordable Care Act requires any person who has received an overpayment from certain defined government health programs to report and return the overpayment within 60 days after the overpayment is identified. If an overpayment is not repaid, or if a self-disclosure is not made before the expiration of the 60-day period, the overpayment amount becomes subject to penalties under the federal False Claims Act (FCA). The FCA imposes damages based on 3 times the actual overpayment, plus a per claim amount of between approximately $11,000 and $22,000.
The damage provisions of the FCA create a very strong incentive for providers to self-disclose and/or repay identified overpayments. The FCA also creates a strong incentive for providers to operate effective compliance programs in order to avoid the imputation of liability based on a “should know” standard. The “should know” standard assumes that a provider operates an effective compliance program including proactive efforts to identify and audit potential risk areas.
In order to avoid imposition of FCA penalties, repayment must be made within 60 days after the overpayment is identified or a corresponding cost report is due. Relatively new regulations provide some assistance for defining when a provider is deemed to have “identified” an overpayment and when the 60-day clock begins to tick.
The statute and corresponding repayment obligation have very broad application. The repayment rules apply to Part A of Medicare, Part B of Medicare, Medicare Advantage, Medicaid Fee-for-Service, and Medicaid Managed Care. Of note for purposes of this article is that the 60-day repayment statute clearly extends to the Medicaid program. The problem is that clarifying regulations have been adopted that are limited in scope to Medicare program overpayments. But no clarifying regulations have been enacted to guide compliance details as they relate to Medicaid overpayments. The same statutory requirement pertains to Medicaid requiring repayment within 60 days of discovery.
On February 12, 2016, the Centers for Medicare & Medicaid Services published the Medicare Parts A and B Final Rule. These rules provide some needed clarifications. Perhaps most important is the regulatory interpretation identifying when a provider is deemed to have discovered an overpayment and how long of a “look-back” period applies when an overpayment is discovered. These are critical areas where clarification is required, but regulations enacted specifically state that they do not apply to Medicaid overpayments.
The 2016 regulations indicate that Medicaid specific rules would be released, but as of the present date, there has been no clarification on how to apply the 60-day repayment obligation to Medicaid overpayments. Overpayments are normally identified by providers when a specific employee, department or service area has systematically made a mistake in billing or documenting a service. Identified errors often span across payor types and normally include both Medicare and Medicaid. At present time, we have regulatory clarification that applies to the Medicare part of the identified overpayment. But we do not have clarification about how to apply the details of the obligation to the Medicaid part of the identified area.
Probably the most critical areas of ambiguity involve the “look-back” period and determination of when an overpayment is deemed to be “identified.” The look-back period relates to how far back a provider has to go to identify overpayments once it has reason to believe that an infraction may have occurred that could result in an overpayment. The statute is silent on the look-back period, but obviously a provider cannot put its head in the sand once a problem has been identified. The early Medicare regulations contained a 10-year look-back period, but the 2016 regulations identified a 6-year look-back period for Medicare overpayments. As of the present time we have no guidance as to what look-back period applies to Medicaid. Can we rely on the regulatory 6-year period contained in the Medicare regulations, or should we go the full 10 years that were identified in the early regulations? Or, is there another shorter or longer period that should be considered for Medicaid? If so, what justification exists for handling Medicaid overpayments differently than Medicare Overpayments?
Similar issues relate as to when the 60-day clock starts to run. The 2016 regulations identify some flexibility as long as a provider takes reasonable steps toward identification within six months after the potential issue is brought to its attention (or should have come to its attention). It is not clear whether a similar identification period is permitted for Medicaid overpayments. If the identification period for Medicaid is a shorter period of time, what is the justification? Do state law overpayment timelines continue to control? The problem is that we just do not have the answers because regulations applicable to Medicaid repayments have not been released.
In the meantime, how do providers who are faced with both Medicare and Medicaid overpayments address and fulfill their statutory obligations? Should they just follow the Medicare rules regardless of reimbursement source? If following the regulations is not appropriate, who will be the test case? The test case would involve a FCA case covering Medicaid-only repayment obligations where Medicare regulations were met. It seems unlikely that a case would be brought under Medicaid only in circumstances in which the provider follows the Medicare regulations. Yet, I have seen stranger things. Until Medicaid regulations are released, we will just have to live with an element of uncertainty on how to handle Medicaid overpayments.
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