On Friday, Feb. 12, the Centers for Medicare & Medicaid Services (CMS) published a final rule detailing the duty of providers to report and return overpayments within 60 days of their identification. The “report and return” requirement was adopted by Congress as part of the Patient Protection and Affordable Care Act. The final rule makes it clear that the 60-day period does not begin until you have quantified the amount of the overpayment – or when you should have quantified the overpayment, had you been acting diligently. In other words, the 60-day clock doesn’t start to run when you first discover a potential billing problem.
Most observers had expected this result. But some other elements of the final rule came as a total surprise.
The rule defines the lookback period for reporting and returning overpayments as six years. Before analyzing this requirement, it is important to note that various lawyers are offering radically different views about the lookback. It can be easy to think of lawyers as interchangeable. They are not. This new regulation will highlight how important it is to choose your lawyer wisely. There are published articles describing how the industry should be happy with the six-year lookback because it is shorter than the 10-year lookback in the proposed rule. Those articles are written by lawyers who apparently are not familiar with current laws and regulations.
There are regulations (42 CFR 405.980(b)) that forbid Medicare contractors from reopening a claim 48 months after it was paid, absent fraud or similar fault, in the preamble to the new regulation (a preamble in this context being introductory text to a regulation that explains the author’s intent when writing the regulation). The preamble can be considered by courts, but is not as persuasive as the regulatory text. CMS seems to be suggesting the bizarre position that if you are caught in wrongdoing by the government, the audit can only go back four years, but if you do a good deed and self-report the same behavior without any government involvement, you are supposed to go back six years. If the government catches you, the preamble suggests, you may have a duty to conduct your own audit separate from the government inquiry to look back six years. That isn’t just irrational, it would seem to be arbitrary and capricious, which raises the question of whether the rule is valid.
The inconsistency with the reopening regulations isn’t even the most significant problem with the regulation. There is a statute (Section 1870 of the Social Security Act) that forbids the recovery of an overpayment when the recipient is without fault and the recovery would violate equity and good conscience. The statute indicates that recovery from a provider or supplier is deemed to be against equity and good conscience five years after the year in which payment was made.
That statute is clearly relevant to any overpayment regulations. There are court cases relying on this text that bar recovery of overpayments after the time has elapsed. The preamble to the final rule doesn’t mention the statute at all. It totally ignores it. And that is incomprehensible.
My colleagues and are still analyzing the rule, but there appears to be a strong argument that after 48 months there is no “overpayment” as defined in the statute law unless you are guilty of fraud or similar fault. The duty to refund is predicated on a conclusion that there is an overpayment, so the absence of an overpayment would nullify the duty to report and return any money. Both the statute and the regulation define an overpayment as funds to which a provider or supplier “after applicable reconciliation, is not entitled” under the Medicare or Medicaid program. If the Medicare program is barred from recouping the funds, it seems quite reasonable to conclude that the person is “entitled” to keep them. The preamble to the regulation does not discuss this at all.
The new final rule takes effect 30 days after it is published. The preamble to the rule indicates that it is not being applied retroactively. If you are in the process of calculating a refund right now, try to complete the process and submit the check before March 14, when you can quite clearly cap the refund amount at 48 months. Thereafter, the lookback window is more ambiguous.
The preamble to the new final rule also asserts that providers have an affirmative duty to search for overpayments. That is a totally new concept, and not something suggested in the statute, the regulation text, or anyplace else in the program. Analysis of that CMS position will be the subject of a future article.
In closing, different lawyers are going to analyze this rule quite differently. You will want to choose a lawyer who can explain your options thoroughly. An organization might wish to take a conservative tact and follow CMS’ articulated position, refunding for the full six years in all situations. Or it may opt to dispute CMS’ decision to blatantly ignore a federal statute. That choice is always up to each organization.
But make sure you choose legal counsel that provides you with the information you need to make an intelligent choice, rather than one who makes the choice for you.
About the Author
David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and is a member of the RACmonitor editorial board.
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