The Risk of Rushing to Refund

Original story posted on: August 7, 2019

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    CMS 2020 Rule Update for Care Management and Utilization Review

Refund only after careful thought.

The risk of rushing to refund: not only is it alliterative, it is real. The proper desire to be compliant can prompt a hasty decision to return money to the government. While it is both wise and necessary to return overpayments to Medicare and Medicaid, taking a thoughtful approach to refunds is important.

Here are some slightly altered facts of a client’s recent dilemma. The applicable state Medicaid program has a provision indicating that there should be a physician order in the record for a variety of services, including hospital inpatient admissions, although anyone can write it at the physician’s direction. Many patients were cared for by non-physician professionals such as nurse practitioners, physician assistants, and midwives. The state allows these professionals to operate independently. For a number of patients, a medical professional other than the physician wrote the order without explicit mention of the doctor. There is absolutely no doubt that the admissions were medically appropriate. For example, some involved women in active labor, while others had extensive surgery. The issue is widespread, with millions of dollars of reimbursement at stake. The physicians who oversee care by the non-physician professionals readily agree that the admissions were appropriate. 

Is a refund required because a non-physician professional authored the order?

Medicare has situations in which the term “physician” is defined to include non-physician professionals who are acting independently. For example, 42 CFR 410.32 says that physician assistants and nurse practitioners “may be treated the same as physicians” for the purposes of ordering diagnostic tests, even though the regulation makes use of the term “physician,” so the first argument available to the hospital is that this same logic applies here for Medicaid. This state allows non-physicians to practice independently, and when they are doing so they are functionally physicians. But this article is not intended to focus on the specific legal defenses available in this narrow situation. Instead, I want to emphasize a practical point: when there is a ministerial mistake that could be viewed as an overpayment, but everyone agrees that the care involved is valuable and medically necessary and a benefit to the patient, there are two options you should seriously consider in lieu of refunding and giving up hope of seeing compensation for the work you performed.

First, Medicare allows you to refund and then appeal. In essence, you send the money back and immediately file an appeal. But I would rarely recommend that approach. If my client felt compelled to contact the government, I would recommend that they disclose the facts without submitting a refund. By notifying the government of the circumstances, they make it nearly impossible for anyone to assert that they have committed fraud. It’s true that under the 60-day rule, simply notifying the government doesn’t fulfill your legal duty, if you have an overpayment. But here we do not believe that we have an overpayment, so the 60- day rule isn’t triggered. Moreover, from a practical standpoint, it’s very difficult for anyone to criticize transparent behavior. 

When the government concludes that an organization has not violated a particular rule, but it still has been unjustly enriched by a particular situation, the government will bring what lawyers call an “equitable claim.” In essence, the government is saying “it isn’t fair for you to keep the money.” That principle should apply both ways. When recipients of government programs get a benefit from you, you’re entitled to receive fair compensation for that work. Use counsel that will think creatively to help you keep the money to which you are entitled. Unfortunately, not all lawyers will do that. Refund only after careful thought.

While it is sometimes possible to claw back money that you have refunded, it is challenging. Far better to look before you leap, or reason before you refund.

Programming Note:

Listen to healthcare attorney David Glaser every Monday on Monitor Monday, 10-10:30 a.m. EST.

David M. Glaser, Esq.

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 a member of the RACmonitor editorial board.


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