When Should You Voluntarily Refund an Overpayment?

Original story posted on: September 5, 2018

Medicare will waive any overpayment if the provider is without fault

EDITOR’S NOTE: This is the first in a two-part series as to when facilities should voluntarily refund an overpayment.

An often-overlooked provision of the Medicare statute protects providers and suppliers when they are not responsible for a mistake that results in an overpayment.

Under the statute, if you are “without fault,” the Medicare program must waive any overpayment. For example, say a cardiologist or radiologist is interpreting an electrocardiogram at the request of an emergency department physician, and a medical reviewer determines that the test or other services in question should never have been performed because they were not medically necessary. Perhaps the emergency room physicians were ordering electrocardiograms on nearly every patient regardless of the symptoms.

The cardiologists have done the work associated with the interpretation. They are completely unaware of the patient’s underlying medical condition. The scan could be from a patient who is mid-myocardial infarction, or it could be from the spouse of that patient, and the ED just opted to pluck electrodes on as part of a scheme to enhance revenue. The cardiologist only knows that they have been asked to interpret the electrocardiogram they have received. They have now heard that they are about to be getting fewer electrocardiograms, because the organization sending them was ordering too many. Must the cardiologists perform a self-review and return the money they have received for the unnecessary images? Many people will say yes, but the legal answer is a clear no.

Back when the Medicare statutes were passed, one provision of the law, Section 1870 of the Social Security Act, created protection when either a beneficiary or provider/supplier was without fault for an overpayment. This statutory provision is one of the most confusingly written I have ever encountered.

Courts have consistently interpreted the provision as saying that when either a beneficiary, provider, or supplier of services reasonably thought that a service in question was covered, and it would be contrary to equity and good conscience to recover the money, the overpayment must be waived. The statute includes a provision indicating that there is a presumption that the beneficiary or medical supplier is without fault if the recovery determination occurs more than five years after the calendar year in which the service occurred.

So when you have a situation in which you are reasonably relying on someone’s judgment that a service is necessary, this gives you a strong argument that no refund is necessary. I think that argument is a little bit weaker when medical professionals involved all belong to the same organization. The government will be able to argue that the information held by some members of the organization is imputed to other members. But if you are part of an ambulance company acting on another’s request or a radiologist reading a film, this provides a strong argument indicating that you are not liable for someone else’s medical necessity mistake.

There is another statutory provision, 1879 that provides even more support for this conclusion.   It is slightly easier to read, and says that when the beneficiary, provider or supplier could not reasonably know a service was not medically necessary, any overpayment must be waived.

One of the two aforementioned statutes, 1870 of the Social Security Act, creates what is effectively a statute of limitations limiting the recovery of overpayments. The law creates a presumption that you are without fault when an overpayment is recovered more than five years after the year in which payment was made. This temporal test operates in an incredibly odd way. The five years doesn’t run from the date of service, but rather starts when you are paid. More uniquely, it doesn’t run from the date on which you were paid, but rather the year in which you were paid. So a payment made on Jan. 1, 2012 and Dec. 31, 2012 are treated the same way.

To figure out the time limit, you count five years after the year of payment. For a 2012 payment, the five years after 2012 would include 2013, 2014, 2015, 2016, and 2017. This means that for a payment made at any point during 2012, the government can recover it through the last day of 2017. 

For a payment made Jan. 1, 2012, that is about six years. For a payment made Dec. 31, it is five years. This raises a fascinating question: how does this provision harmonize with the 60-day rule? Under the 60-day rule, you are supposed to report and return an overpayment with a lookback period of six years. Six years is not the same as five years after the year in which payment was made, and that raises a really interesting question about the validity of the 60-day rule.

My next article will address that question and offer a suggestion of how you can use this complexity to evaluate the competence of your healthcare counsel.  


Program Note:

Listen to David Glaser every Monday on Monitor Mondays, 10-10:30 a.m. EDT.


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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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