Overpayment Refund Mandate Is Litmus Test for Hospital Compliance Programs
Reprinted from REPORT ON MEDICARE COMPLIANCE, By Nina Youngstrom, Managing Editor
The obligation to return Medicare and Medicaid overpayments as set forth in the health reform law is a game-changer, though the impact on hospitals will be diminished if they are savvy about credit-balance reporting.
CMS has always required hospitals to report and return credit balances — excess or improper Medicare payments — every 90 days on Form 838. But the health reform law requires overpayment returns only after “applicable reconciliation.” That means hospitals are bound either by health reform’s 60-day repayment deadline or the CMS 90-day quarterly credit-balance requirement — whichever is later, said New York State Medicaid Inspector General Jim Sheehan, a former longtime associate U.S. attorney with the Department of Justice. But only hospitals — not other providers or suppliers — can defer overpayment returns to the credit-balance report, and this rule applies exclusively to Medicare overpayments, Sheehan said. And hospitals will benefit only if they have an effective 838 process.
This is one of the twists in the overpayment return mandate, which is “probably the most significant change in federal law in terms of compliance activity in the past 10 years,” he said. According to Sec. 6402 of the reform law, “if a person has received an overpayment, the person shall report and return the overpayment to [HHS], the state, an intermediary, a carrier or a contractor as appropriate at the correct address” and explain in writing the reason why the overpayment occurred. The definition of “persons” includes providers, suppliers, managed care plans and enrollees.
According to 6402(d)(2), an overpayment must be reported and returned no later than 60 days after the day it was identified, not received. This includes overpayments collected after the applicable reconciliation process for interim payments to health care organizations (e.g., hospitals, nursing homes) that file cost reports.
The overpayment return mandate will be a litmus test for compliance programs. “If you are a compliance officer and your organization never made a disclosure of an overpayment, know that your compliance program is not working as effectively as it should be,” Sheehan said in an interview and in a July 14 webinar sponsored by the New York State Office of Medicaid Inspector General (OMIG).
While the health reform law created a duty to report and return overpayments, organizations that retain overpayments past the 60-day deadline invite False Claims Act liability under the Fraud Enforcement and Recovery Act (FERA) enacted last year. In other words, the synergy of both laws is required to pursue false claims lawsuits based on overpayment retention. To get to a false claims lawsuit, Sheehan said, “you need the obligation to return overpayments” created by the health reform law “plus the fact that retention is a False Claims Act violation under FERA.”
CMS Silent on Medicare Returns
The effective date of the Medicare and Medicaid repayment obligation apparently is March 23, 2010, the date President Obama signed the health reform law, according to Sheehan, who has set the New York Medicaid enforcement date for Jan. 1, 2011. Complicating matters on the Medicare side is that CMS so far has been silent in terms of procedures for returning overpayments, he said. In fact, overpayment obligations will play out differently for Medicaid versus Medicare overpayments. The process involved will depend partly on what CMS says in expected guidance on the subject. Meanwhile, Sheehan has established a process for New York, and other states may have done the same.
For Medicare, providers probably will return overpayments to fiscal intermediaries, carriers or Medicare administrative contractors (MACs). If overpayments stem from noncompliant physician relationships involving the Stark and anti-kickback statutes, providers can use the OIG self-disclosure protocol. For pure Stark noncompliance, providers can report overpayments through the CMS self-disclosure process mandated by the health reform law.
The method for returning Medicaid overpayments depends on both the amount and the circumstances, at least in New York state. If the overpayment is under $5,000 and it’s a simple billing mistake (e.g., a chargemaster error caused a claim to be submitted for the wrong lab test), providers can void the payment, he said. If it’s under $5,000 but it’s not a routine billing error or duplicate payment, providers must send a letter to the Medicaid fiscal agent explaining the problem. When overpayments cross the $5,000 threshold and something more is afoot (e.g., potential fraud), providers must use the OMIG self-disclosure process — except for overpayments stemming from Stark violations. Then OMIG will defer to the OIG and CMS self-disclosure procedures. He figures that other states with Medicaid self-disclosure programs (e.g., New Jersey, Pennsylvania) will use a similar approach.
When Do Overpayments Trigger Obligations?
Sheehan gave examples of when an “identified” Medicare or Medicaid overpayment would trigger repayment obligations:
- An overpayment is reported to the compliance office through the hotline or e-mail. Sheehan recommends compliance officers stay on top of these reports with the 60-day deadline in mind. Watch out for “ghost callers” who contact the hotline on behalf of whistleblower attorneys; they may try to stimulate a False Claims Act case by reporting an overpayment to the hotline and waiting for 60 days to pass in the hope the organization won’t comply with the 60-day deadline for reporting and returning it.
- Patients tell your organization they did not receive services billed for or reported on the explanation of benefits.
- A recovery audit contractor (RAC) advises providers of errors related to dual-eligible patients (i.e., patients who receive both Medicare and Medicaid benefits). If a RAC identifies Medicare overpayments, the Medicaid portion must be repaid to the state.
- The state notifies providers of errors. For example, OMIG has a deceased patient project under way in which providers are informed when they bill Medicaid for services provided to patients after their date of death. The same applies to unlicensed or excluded employees or physicians, because services provided or ordered by them would not be billable and therefore reimbursement must be returned to the state (or CMS).
- Whistleblower or government lawsuits or criminal charges. “Think about the [overpayment-return] implications of the information received and what you will do about it,” Sheehan said, though it’s not clear the clock starts ticking because of allegations in a lawsuit of indictment.
When an overpayment is a one-time thing, it’s a no-brainer for providers. But sometimes the overpayment opens a can of worms. “Providers have a continued duty to identify overpayments from prior time periods,” Sheehan said. The question is, how long does that continue? Suppose a hospital realizes it double-billed for infusion units. Does the hospital have to review its infusion billing for previous years as well? The health reform law doesn’t specify how far back the hospital has to go, Sheehan said. “My expectation is we will talk to trade and professional associations about how far back it should go,” he said. And CMS may shed light on this subject in future guidance.
Overpayments come in many different forms, Sheehan notes. A few examples:
- Payment that is more than the usual, reasonable or customary charge for the service.
- Duplicate payments for a service.
- Payment collected for never events.
- Inaccurate cost reports.
- Payment for noncovered, medically unnecessary services.
- Payment for services not rendered.
- Inaccurate reporting of present-on-admission indicators.
- Drugs billed for inpatients as if they were outpatients.
- Payments stemming from kickbacks or Stark violations.
Sheehan said the refund obligation applies only to overpayments actually received by providers. For example, if RACs deny claims but the money is not yet recouped, there is no repayment obligation.
To listen to the webinar and view the slides, visit www.omig.ny.gov.