When Should You Voluntarily Refund an Overpayment?

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Original story posted on: September 12, 2018

This question can help you evaluate lawyers

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

It can be difficult to know if you’re getting good advice from your lawyer, but here is a good test to evaluate how well your lawyer understands the law, and whether he or she is willing and able to give you the information you need to make informed decisions.

Ask your lawyer how far back you are required to go when refunding a Medicare overpayment. The answer isn’t clear or easy to reach. And that is exactly why this question is such an effective tool.

A good healthcare lawyer will walk you through the following explanation. A bad one will give a short answer without any explanation, perhaps saying “six years,” or worse yet, “10 years.”

I am not suggesting that a good lawyer must give a long, rambling answer. But delivering the answer to this question involves describing how the different regulatory schemes contradict each other, and offering an opinion about how the hierarchy works.

Almost every lawyer will mention the 60-day rule. That rule was created by a statute that is part of the Patient Protection and Affordable Care Act (PPACA) , but it offers very little specific detail. The key operational instruction appears in a regulation, 42 CFR 401.301-305. This regulation asserts that the “lookback” period for a overpayment refund is six years from the date you identify the overpayment.

The first opportunity for error is that this six years does not run from the date you first learn of the possible overpayment. Instead, the six years extends from the date that you “identify” the overpayment. Identification of the overpayment includes quantifying the amount due. This means that under this six-year test, you would go back six years from the date you determine the amount of the overpayment.

But the analysis of this question should not be limited to the 60-day regulation, because there is a very real question as to whether the Centers for Medicare & Medicaid Services (CMS) has the authority to enforce it. There is a statutory provision that addresses Medicare overpayments, Social Security Act Section 1870. That law created a presumption that providers and suppliers are without fault five years after the year in which payment was made.

Under the regulatory hierarchy, a statute is superior to a regulation. The statue suggests that in most cases, an overpayment must be waived five years after the year in which payment was made.

When the 60-day rule was proposed, I wrote a comment to CMS explaining why it would violate Section 1870. CMS apparently opted to ignore that comment. However, the preamble to the final rule does address a similar comment about Section 1879 of the Act. That provision requires the government to waive an overpayment based on medical necessity if the provider or supplier does not have a reason to know that the service in question was unnecessary. CMS asserted that when issuing a voluntary refund, a provider or supplier is not allowed to rely on the provision.

“We believe it is inappropriate for providers or suppliers to make determinations regarding their own knowledge of non-coverage or whether they were the cause of an over period,” the relevant language reads, located at 81 FR 7654, 7666. Under the statute, the government doesn’t have the authority to recover an overpayment when the hospital or physician is without fault. I fail to understand how CMS thinks it can simply disregard a federal law. A good lawyer will ensure you are aware of tenuousness of CMS’s position.

Finally, your healthcare lawyer should mention a federal regulation, 42 C.F.R. § 405.980, which limits the government’s ability to reopen a claim after four years unless there is “fraud or similar fault.” Under the 60-day rule, you are only required to refund an “overpayment,” and under the regulation, an overpayment is defined as “funds that a person has received or retained under title XVIII of the Act (the Medicare statute) to which the person, after applicable reconciliation, is not entitled under such title.”

In other words, if the Medicare statute allows you to keep money, the money is not an “overpayment.” Since the government is not able to reopen a claim after 48 months, absent fraud or similar fault, it seems logical to conclude that you are not obligated to refund money more than 48 months after a payment determination is made.

This means that a good healthcare lawyer will explain to you that unless there is fraud or similar fault, there is a compelling argument that you only need to go back 48 months, and there is a statutory argument that you only need to go back five years after the year in which payment was made. The lawyer should, of course, also warn you that CMS is likely to disagree, and claim that you must go back six years.

Whether it makes the most sense for you to choose 48 months, five years after the year in which payment was made, or six years from when you identify the amount of the overpayment is a complicated question. Good lawyers may disagree over which course makes the most sense. I wouldn’t recommend choosing a lawyer based on that decision.

But every good lawyer should understand the differences between the provisions and explain the nuances to you. If your lawyer is not doing so, either he or she doesn’t understand the issues well or doesn’t recognize the importance of giving you the right to choose what approach you wish to take. The bottom line: if your lawyer isn’t walking you cogently through these options, I recommend you choose a new lawyer.

 

Program Note:

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

 

Comment on this article

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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