When Does An Overpayment Become Fraud? How Simple Inattention Can Expose You to Penalties for Fraudulent Activities

November 7, 2016

If you are involved in any way in the health care system, it should be obvious by now that the government has committed ever increasing resources to the prosecution of fraud and abuse cases. Simply put, from a governmental standpoint, prosecuting fraud and abuse is good business. Every dollar the government puts into pursuing health care fraud and abuse brings a return of around 7 or 8 dollars.  That return on investment is likely to increase with the release of new inflation adjusted Federal penalties and a variety of mechanisms the government can now use to bring more cases under their radar.

It is worthy to note we are not just talking about pursuing individuals who are intentionally trying to commit fraud on the system.  There are certainly clear cases where unsavory individuals create schemes to defraud the government.  What is really concerning is that well intentioned providers can be swept up in the system simply because they did not use enough diligence to detect incorrect billings or a number of other infractions.  For example, a simple overpayment can become a false claim if repayment is not made within 60 days after identification.  A provider can be deemed to have identified an overpayment by not taking reasonable steps to look for problems.  Nothing affirmative necessarily needs to be done in order to turn a simple overpayment into a false claim.

There are numerous situations where unintentional activity (i.e. a billing or coding error) can result in being overpaid by the federal government under a governmental health care program. I don’t want to say this happens to everyone in the health care system, but it certainly happens to a lot of people usually as a result of some sort of neglect or misinterpretation of very complex regulations. Take for example the rules requiring physician supervision of various support personnel. These rules are extremely convoluted and it is hard to imagine that every doctor has a clear understanding of the level of supervision that is required in each situation.  Nevertheless, a billing occurs and if the proper supervision is later found to not be present and an overpayment results. The OIG might consider a false claim to have occurred if repayment is not made and the provider may be deemed to have knowledge of the supervision requirement and thus the overpayment.  This is an example of what the government considers to be “abuse.” No criminals are involved here, but an overpayment and technical abuse of the system has occurred.

The manner in which this situation is dealt with becomes critically important in determining whether there is a simple correction of the situation or whether it is escalated to higher levels of culpability.  Let’s skip forward to a time when the doctor discovers a mistake has been made in the level of supervision that was provided in the past. What happens now is very important. First, let’s imagine that the doctor comes forward and admits the error to the Federal government. There is some money owed back to the governmental health program for the billings that occurred under the improperly supervised services. If the doctor lets it go without making prompt repayment the doctor’s potential exposure has just escalated into a completely different zone of risk and potential culpability. The failure to make repayment within 60 days of the doctor discovering the problem makes the Federal False Claim Act applicable.  Instead of just having to pay back the overpayment amount, the doctor is potentially exposed to three times the original overpayment plus a minimum penalty of $11,000 per claim and a maximum of nearly $22,000 per claim.  This case has now escalated from abuse into fraud. From here it is just a matter of establishing intent to make this a criminal case.

This illustrates the need to continually identify risk areas where billing problems could occur.  Where risk is identified, audit and monitoring should occur to help identify anomalies.  Once discovered, problems should be dealt with promptly so a bad situation does not turn into something that has consequences that are completely unacceptable.  Most importantly, it is not a solution to whistle past the graveyard and hope the situation goes away.  These situations must be dealt with promptly, affirmatively, and decisively before they blossom into situations that are much more difficult to resolve.

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