The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) provision requiring providers to report and return Medicare overpayments to CMS within 60 days of identification of the payment “places a ticking time bomb in the laps of providers,” according to Michael E. Clark, Special Counsel at Duane Morris. The newly released Final rule that further explains what constitutes identification of overpayment in this context gives that ticking time bomb a short fuse, Clark explained. Besides clarifying what it means to identify an overpayment, the long-awaited Final rule also describes the new lookback period for overpayments and explains the methods that providers may use to return identified overpayments (see CMS finally codifies the 60-day Parts A and B overpayment return rule, February 17, 2016; Final rule, 81 FR 7654, February 12, 2016).
Long before the ACA was implemented, CMS issued two proposals that would have codified how providers and suppliers were to deal with the report and return of overpayments (Proposed rule, 63 FR 14506, March 25, 1998; Proposed rule, 67 FR 3662, January 25, 2002). Despite the ACA mandate, no Final rule was issued until recently. Before the Final rule was released, there was much speculation as to how CMS would interpret the provision of the ACA and when this would occur. Now that the rule is a reality, the potential implications are just beginning to be realized. This Strategic Perspective explores these implications and provides expert opinion to help explain how this new rule will affect providers and to what extent this effect will be seen in courtrooms around the country moving forward.
The Final Rule and its Effect
Section 6402 of the ACA requires any individual who has received an overpayment to report and return it to the government within “60 days after the date on which the overpayment was identified” or “the date any corresponding cost report is due, if applicable,” whichever is later. The ACA provision was borne out of a related provision in the Fraud Enforcement Recovery Act of 2009 (FERA) (P.L. 111-21), which codified a provider’s liability for failing to identify and return obligations. FERA and the False Claims Act (FCA) (31 U.S.C. §3729 et seq.) codified these obligations and, in turn, the obligations became a providers’ duty.
Clark described the status of this law before the issuance of the Final rule this way: “While FERA imposed a duty on providers to report and repay such overpayments, the [ACA] made this general concept specific and gave it teeth by creating a statutory violation applicable to providers who fail to timely act by identifying overpayments, alerting the government about them, and repaying them.” It was clear, however, that neither of these adopted laws provided enough clarity for providers to fully understand how the return of overpayments should ideally function.
Three major takeaways. In general, the Final rule “requires providers and suppliers receiving funds under the Medicare program to report and return payments by the later of the date that is 60 days after the date on which the payment was identified, or the date that any corresponding cost report is due, if applicable,” CMS also stated that the intention behind issuing this rule was to ensure compliance with applicable statutes, promote the furnishing of quality care, and protect against fraud and abuse. Three aspects of the rule are discussed in turn below.
Identification. Most importantly, the Final rule clarifies when a provider or supplier has identified an overpayment so as to trigger the beginning of the 60-day period in which the overpayment must be reported and returned. Specifically, under the rule, a provider or supplier has identified a payment when the entity “has or should have, through the exercise of reasonable diligence, determined that the [entity] has received an overpayment and quantified the amount of the overpayment.” According to the agency, this language of the rule is necessary in order to provide clarity and consistency to providers and suppliers.
Clark explained that the use of the term “reasonable diligence” can also be thought of in this way: “CMS says that actionable knowledge that triggers a provider’s obligation under the 60-day rule… can be established by evidence of reckless disregard.” Similarly, Ritu Kaur Cooper, a shareholder in Hall Render’s health section, said this definition of identification means that providers and suppliers “need to be more deliberate with their actions. They must promptly evaluate whether they have received ‘credible evidence’ of overpayment.” Further, according to Cooper, if providers and suppliers determine that the evidence received was not credible, “it will be in their best interest to document what led [it] to that conclusion and why [it] concluded the information was not credible.” In the case that the entity finds credible evidence, Cooper advises that the next step would be to use reasonable diligence to evaluate whether the overpayment actually exists and, if so, to quantify it.
Both Clark and Cooper stressed that CMS specifically stated in the rule that it believes that investigation and quantification of potential overpayments should take at the most six months. Further, Cooper noted that this would be considered a “timely” investigation and in extraordinary circumstances, such as when overpayments were also possibly related to Stark Law violations, additional time for investigation could be expected. Clark noted that CMS estimated these types of investigations could span approximately eight months.
Lookback. In the proposed version of this rule, which was issued on February 16, 2012, CMS first put forth the idea of applying a ten-year lookback period for the reporting and returning of overpayments (Proposed rule, 77 FR 9179). In other words, under that proposal, providers and suppliers would be required to report and return overpayments within 60 days of identification if those overpayments were made within the last ten years. In the Final rule, this lookback period was shortened to six years.
Clark called the shortening of the lookback period one of the most important provisions of the Final rule and explained that the reduction was a result of the CMS’ consideration of comments during the notice and comment period after the Proposed rule was issued. Clark warned, “Given the nightmare scenario that may arise to identify and report overpayments under such a compressed timeframe, and CMS’ position that providers have a proactive duty to determine if such overpayments exist, providers should immediately begin the process of reviewing their records now to identify their possible obligations.”
Methods of returning payments. The Final rule also described how providers and suppliers “must use an applicable claims adjustment, credit balance, self-reported refund, or another appropriate process to satisfy the obligation to report and return overpayments.” While CMS recognized that this is simply a preservation of the existing process, it also noted that it is a preservation of its ability to modify the process in the future as well. Moreover, the deadline for returning overpayments is suspended when the HHS Office of Inspector General (OIG) acknowledges receipt of a submission through the OIG Self-Disclosure Protocol or if CMS acknowledges receipt through its Voluntary Self-Referral Disclosure Protocol. This suspension will remain in place until the first of these occur: (1) the OIG or CMS enters into a settlement agreement with the entity; (2) the provider or supplier withdraws from either of the disclosure protocols; or (3) the provider or supplier is removed from either of the disclosure protocols. Cooper told Wolters Kluwer that only these types of disclosures would toll the 60-day report and return period, and stressed that disclosures to other entities, such as the Department of Justice (DOJ), the local U.S. Attorney’s Office, or even the Medicaid Fraud Control Unit, would not have the same effect.
Kane v. Healthfirst. Before the Final rule was issued, the Southern District of New York interpreted section 6402 of the ACA and deemed the term “identified” in the provision ambiguous (see The 60-day repayment rule: identifying consequences from Kane v. Healthfirst, September 16, 2015). To determine the appropriate interpretation of the term “identified,” the court in Kane v. Healthfirst considered four interpretive tools: (1) legislation history; (2) avoidance of absurd results; (3) statutory purpose; and (4) agency deference. Ultimately, the court put great weight on the idea that Congress used the term “identified” instead of using the term “known” in the provision and determined that the 60-day clock is started “when a provider is put on notice of potential overpayment, rather than the moment when an overpayment is conclusively ascertained.”
Kane was the only reported decision that interpreted the 60-day rule specifically before the Final rule was issued. Clark noted that, in the decision, the judge found that the provider’s actions were an example of reckless disregard of the overpayments and, as such, embodied what was eventually to be codified in the Final rule.
In a blog post summarizing and analyzing the case and this interpretation, which was later embraced by the agency in the Final rule, Richard Kusserow, former Inspector General of HHS and current CEO of Strategic Management Services, LLC, predicted that this decision would force CMS to provide clarity of this interpretation in a Final rule. Since Kusserow was correct in this prediction, providers may heed his other warnings based on this interpretation, including that providers should: (1) work with reasonable haste and document such efforts in order to show they had met the 60-day time frame in reporting and returning overpayments; (2) ensure provider hotlines are working efficiently so employees can easily report issues; and (3) quickly assess the credibility of the source that is indicating overpayments were made.
Besides the general consensus between the experts that providers and suppliers need to tighten up procedures and processes to identify overpayments and to be more deliberate and diligent in this effort, other implications of the rule that may not be as obvious were also offered by these sources. Most importantly, both Cooper and Clark predicted that a direct result of the issuance of the Final rule would be an increase in the number of FCA allegations predicated on the violation of the 60-day repayment rule.
“Since plaintiff’s counsel and the government have been successful in convincing courts to approve theories that reduce their burden in [FCA] cases including the use of Stark Law and Anti-kickback Statute violations as predicates for [FCA] violation,” said Clark, “it seems likely they will now seek to add violations of the 60-day rule to their allegations when possible since the bar to proving these violations is relatively low.” Cooper added that qui tam actions could increase since, “it is possible that there will be an increase of internal whistleblowers who believe that the provider or supplier did not act swiftly enough to respond to the notification of a potential overpayment.”
Clark took his predictions about the litigation process that could be interrupted by this Final rule further when he began to consider situations where providers have already identified and begun to repay overpayments before learning about a qui tam suit filed under seal. Clark explained, “Often a provider first learns about a qui tam when a Civil Investigative Demand (CID) is received.” After a CID is received, according to Clark, counsel for the accused entity will likely contact the government attorneys on the CID and “persuade [them] to reveal if a qui tam has been filed;” though he also mentioned that this process takes some time and court approval. Now, in light of this rule, Clark notes that “counsel should consider going further in discussions with the [government] attorneys, explaining that the client wants to fully cooperate and return identified sums as soon as possible to avoid having these new statutory [FCA] violations to the mix.” Whether the government’s attorneys will be open to these proposals remains to be seen.
Another concern raised by Clark in relation to the new Final rule is its interplay with criminal prosecutions. Clark warned providers that this may be on the table since many providers could be criminally charged based on the same conduct that constitutes a FCA case. According to Clark, this avenue of liability was further opened up in the publication of the Yates Memorandum, in which Deputy Attorney Sally Yates told government attorneys investigating corporate wrongdoing to coordinate with their criminal counterparts to hold individuals responsible in all ways possible. Interestingly, besides simply acknowledging the possibility of criminal liability, Clark suggested that “solo providers who are compelled to identify and return overpayments could waive their Fifth Amendment protection,” in such a criminal matter should beware, since, “the act of producing such records has a testimonial component.”
Conclusion: Looking Forward
While it seems clear that the Final rule will greatly affect providers because, as Clark put it, the rule “puts the burden on them to set up compliance systems that will timely identify retained overpayments,” how providers will do this is not quite as clear. Further, while it seems likely that this will increase litigation under the name of the FCA, the extent to which this will significantly increase claims is unknown. Regardless of the extent of extended liability providers will face and the degree to which this will create an impetus to overhaul provider compliance programs, as Clark warns, this much appears to be true: providers and suppliers “will ignore this rule at their peril.”
Attorneys: Michael E. Clark (Duane Morris); Ritu Kaur Cooper (Hall Render)
Companies: Strategic Management Services, LLC
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