60-Day Deadline for Reporting and Returning Overpayments
The Centers for Medicare and Medicaid Services (CMS) recently delayed publication of a final rule addressing the 60-day overpayment refund requirements. Additionally, two cases involving issues concerning refund of overpayments are working their way through the courts now. While we await final guidance from CMS, G2 Compliance Advisor has consulted two health care attorneys for their Perspective on the issues raised by this rule. Background Section 6402(a) of the Affordable Care Act established a new Social Security Act section 1128J(d). This new section requires a person who has received an overpayment to return that overpayment, along with a written explanation of the reason the overpayment occurred, within 60 days of its identification or the overpayment becomes a “reverse false claim.” We’ll explain what constitutes a reverse false claim below but note that a reverse false claim carries the same penalties as a traditional false claim, including treble damages and a fine ranging from $5,500 to $11,000 per claim. For a laboratory processing hundreds or thousands of tests each day, the numbers associated with a simple error on one test can be staggering. The problem with the statute’s requirements is that some of the terminology needs clarification. CMS was to provide […]
The Centers for Medicare and Medicaid Services (CMS) recently delayed publication of a final rule addressing the 60-day overpayment refund requirements. Additionally, two cases involving issues concerning refund of overpayments are working their way through the courts now. While we await final guidance from CMS, G2 Compliance Advisor has consulted two health care attorneys for their Perspective on the issues raised by this rule.
Background Section 6402(a) of the Affordable Care Act established a new Social Security Act section 1128J(d). This new section requires a person who has received an overpayment to return that overpayment, along with a written explanation of the reason the overpayment occurred, within 60 days of its identification or the overpayment becomes a “reverse false claim.” We’ll explain what constitutes a reverse false claim below but note that a reverse false claim carries the same penalties as a traditional false claim, including treble damages and a fine ranging from $5,500 to $11,000 per claim. For a laboratory processing hundreds or thousands of tests each day, the numbers associated with a simple error on one test can be staggering. The problem with the statute’s requirements is that some of the terminology needs clarification. CMS was to provide that additional clarity in a final regulation and issued a proposed rule on Feb. 16, 2012, attempting to explain the approximately 270-word statute. It’s the finalization of that proposed rule that has been delayed one more year, causing frustration for laboratories and other providers doing their best to comply with the 60-day rule despite some uncertainty about the requirements. We asked attorneys Paul M. Thompson and Laura J. Capotosto from the Washington, D.C., office of the international law firm McDermott Will & Emery to answer some questions concerning the statute and its implementation. Mr. Thompson and Ms. Capotosto authored a February 26, 2015 blog post on this topic, titled FCA Enforcement Action to Watch: Government Intervened in Reverse False Claims Case; available online at McDermott’s FCA Update Blog, www.FCAUpdate.com
Q. What exactly are “reverse false claims”? What law first created them? A. Reverse false claims is a theory of liability under the False Claims Act (FCA), 31 U.S.C. §§ 3729-33. The Fraud Enforcement Recovery Act of 2009 (FERA) broadened the scope of the FCA to include retained overpayments of government funds. Put most simply, a provider knowingly or recklessly failing to return a government overpayment creates FCA liability under a reverse false claims theory. As explained by the DOJ’s own FCA primer, “Section 3729(a)(1)(G) is known as the reverse false claims section; it provides liability where one acts improperly—not to get money from the government, but to avoid having to pay money to the government.”
Q. Is there a dollar amount, time limit or other factor a laboratory should be aware of when making decisions about starting their 60day clock in today’s environment? A. The Affordable Care Act (ACA) modified the FCA’s reverse false claims provision, so that a laboratory has 60 days from “identifying” an overpayment to report and return the overpayment to the government. See 42 U.S.C. § 1320a−7k(d). Five years after the passage of the ACA, however, it remains unclear what it means for an overpayment to be “identified,” thereby triggering the 60-day clock. CMS proposed interpretative rules in February 2012 that provide some guidance concerning when identification occurs. The proposed rule defines “identified” as when the provider or supplier has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate indifference of the overpayment.” CMS also stated in the preamble that the 60-day clock would not start running until after the provider or supplier had an opportunity to undertake a “reasonable inquiry” into the basis of the alleged overpayment “with all deliberate speed” after receiving information concerning a potential overpayment. While there is normally a three-year deadline for finalizing proposed rules, CMS obtained a one year extension from HHS. The deadline for publishing the final rule is February 16, 2016. The decision in Continuum Health will likely provide the first judicial guidance about what the law requires. As suggested by CMS’s preamble discussion, it is important for laboratories, like all providers, to be able to show that they engaged in a reasonable process when they became aware of a potential government overpayment. For instance, the laboratory should show that:
Q. How important is the reporting aspect of the rule’s requirements as things stand today? A. Important. Once an actual overpayment is identified, a provider has an obligation to report and refund it within 60 days to avoid reverse false claims liability. Since 2010, there is no debate that a provider has to refund overpayments.
Q. One of the cases that you wrote about and reference in your answer above, U.S. ex rel. Kane v. Continuum Health Partners, Inc., concerns overpayments to the Medicaid program. I believe that some providers may think the 60-day rule applies to Medicare only. Is there any question that the 60-day rule applies to Medicaid as well as Medicare? A. In Continuum Health, the government takes the position that the 60-day rule applies to Medicaid.
Q. Also, if it applies to Medicaid, does it also apply to Tricare and Railroad Medicare, or any other government funded programs? A. The government has taken the position that the reverse false claims theory of the FCA applies to all programs involving reimbursements from a federal payor, including Tricare, Railroad Medicare, and the Veterans Administration.
Q. Another case that may have implications for the 60-day rule is Keltner v. Lakeshore Medical, which broaches the subject of deliberate ignorance or reckless disregard of the truth. In that context, if a laboratory is conducting routine auditing and finds one case of a wrong CPT code that caused an overpayment and the code is for a test that is performed on average 10 times per day, should the laboratory do a more expanded audit and investigation? When would the 60-day clock start in that case? A. Depending on the facts, the government may take the position that the lab had sufficient information to suggest that it may have received an overpayment on other, similar claims, and as discussed in the CMS proposed rule, should undertake a reasonable inquiry.
Q. Are there any cases where it would be okay not to conduct a broader audit when an error that causes an overpayment is discovered through an audit process or other routine compliance process? A. The answer to this question depends on the facts of a particular situation. When determining how to proceed, a provider should consider the error rate and the size of the sample. That said, we can expect that the government would expect providers to take appropriate steps when obtaining information that suggests a potential overpayment may exist.
Q. Are you aware of other cases that address reverse false claims or obligations to repay in the context of Medicare and Medicaid? A. Yes. There are a growing number of such cases. The significance of Continuum Health is that it is the first reverse false claims case where the United States intervened, and its only allegation involves a failure to timely report and refund overpayments to the government.
Q. Does the rule apply differently in cases where the rule has been violated because of simple administrative oversight or some other innocent cause that delayed the return of owed money? A. The law requires knowingly and recklessly failing to return an overpayment. In every case, that will be a key question. Once a provider becomes aware of a potential issue, it should investigate the issue and, if the provider determines that a refund is needed, it should repay it within 60 days.
Q.What, if any, is the role of attorney client privilege in 60-day rule cases? A.The attorney-client privilege operates in these cases the same way it would in any other type of case.
Editor’s Note: The issue of attorney-client privilege was addressed in G2 Compliance Advisor’s May 2014 Compliance Perspective. Generally, the attorney client privilege protects from disclosure communications between an entity’s attorneys and employees of the entity when the information communicated is the basis for rendering legal advice. There are additional requirements that must be met for the privilege to protect communication from disclosure and laboratories with in-house counsel should take particular note that communications with in-house counsel and outside counsel are treated differently under the privilege. Please consult the May 2014 G2 Compliance Advisor for more in-depth coverage.
Sources Medicare Program, Reporting and Returning of Overpayments; Extension of Timeline for Publication of the Final Rule, Federal Register, Vol. 80, No. 31, Feb. 17, 2015, pp. 8247-8248. U.S. ex rel. Kane v. Continuum Health Partners, Inc., No. 11-2325 (U.S. Dist. S.D.N.Y.). Keltner v. Lakeshore Medical Clinic, No. 11-cv-00892 (U.S. Dist. E.D. Wisc.).
Background Section 6402(a) of the Affordable Care Act established a new Social Security Act section 1128J(d). This new section requires a person who has received an overpayment to return that overpayment, along with a written explanation of the reason the overpayment occurred, within 60 days of its identification or the overpayment becomes a “reverse false claim.” We’ll explain what constitutes a reverse false claim below but note that a reverse false claim carries the same penalties as a traditional false claim, including treble damages and a fine ranging from $5,500 to $11,000 per claim. For a laboratory processing hundreds or thousands of tests each day, the numbers associated with a simple error on one test can be staggering. The problem with the statute’s requirements is that some of the terminology needs clarification. CMS was to provide that additional clarity in a final regulation and issued a proposed rule on Feb. 16, 2012, attempting to explain the approximately 270-word statute. It’s the finalization of that proposed rule that has been delayed one more year, causing frustration for laboratories and other providers doing their best to comply with the 60-day rule despite some uncertainty about the requirements. We asked attorneys Paul M. Thompson and Laura J. Capotosto from the Washington, D.C., office of the international law firm McDermott Will & Emery to answer some questions concerning the statute and its implementation. Mr. Thompson and Ms. Capotosto authored a February 26, 2015 blog post on this topic, titled FCA Enforcement Action to Watch: Government Intervened in Reverse False Claims Case; available online at McDermott’s FCA Update Blog, www.FCAUpdate.com
Q. What exactly are “reverse false claims”? What law first created them? A. Reverse false claims is a theory of liability under the False Claims Act (FCA), 31 U.S.C. §§ 3729-33. The Fraud Enforcement Recovery Act of 2009 (FERA) broadened the scope of the FCA to include retained overpayments of government funds. Put most simply, a provider knowingly or recklessly failing to return a government overpayment creates FCA liability under a reverse false claims theory. As explained by the DOJ’s own FCA primer, “Section 3729(a)(1)(G) is known as the reverse false claims section; it provides liability where one acts improperly—not to get money from the government, but to avoid having to pay money to the government.”
Q. Is there a dollar amount, time limit or other factor a laboratory should be aware of when making decisions about starting their 60day clock in today’s environment? A. The Affordable Care Act (ACA) modified the FCA’s reverse false claims provision, so that a laboratory has 60 days from “identifying” an overpayment to report and return the overpayment to the government. See 42 U.S.C. § 1320a−7k(d). Five years after the passage of the ACA, however, it remains unclear what it means for an overpayment to be “identified,” thereby triggering the 60-day clock. CMS proposed interpretative rules in February 2012 that provide some guidance concerning when identification occurs. The proposed rule defines “identified” as when the provider or supplier has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate indifference of the overpayment.” CMS also stated in the preamble that the 60-day clock would not start running until after the provider or supplier had an opportunity to undertake a “reasonable inquiry” into the basis of the alleged overpayment “with all deliberate speed” after receiving information concerning a potential overpayment. While there is normally a three-year deadline for finalizing proposed rules, CMS obtained a one year extension from HHS. The deadline for publishing the final rule is February 16, 2016. The decision in Continuum Health will likely provide the first judicial guidance about what the law requires. As suggested by CMS’s preamble discussion, it is important for laboratories, like all providers, to be able to show that they engaged in a reasonable process when they became aware of a potential government overpayment. For instance, the laboratory should show that:
- It took the potential overpayment seriously;
- It approached determining whether there was an actual overpayment in a reasonable way; and
- It determined whether there was an actual overpayment in a reasonable amount of time.
Q. How important is the reporting aspect of the rule’s requirements as things stand today? A. Important. Once an actual overpayment is identified, a provider has an obligation to report and refund it within 60 days to avoid reverse false claims liability. Since 2010, there is no debate that a provider has to refund overpayments.
Q. One of the cases that you wrote about and reference in your answer above, U.S. ex rel. Kane v. Continuum Health Partners, Inc., concerns overpayments to the Medicaid program. I believe that some providers may think the 60-day rule applies to Medicare only. Is there any question that the 60-day rule applies to Medicaid as well as Medicare? A. In Continuum Health, the government takes the position that the 60-day rule applies to Medicaid.
Q. Also, if it applies to Medicaid, does it also apply to Tricare and Railroad Medicare, or any other government funded programs? A. The government has taken the position that the reverse false claims theory of the FCA applies to all programs involving reimbursements from a federal payor, including Tricare, Railroad Medicare, and the Veterans Administration.
Q. Another case that may have implications for the 60-day rule is Keltner v. Lakeshore Medical, which broaches the subject of deliberate ignorance or reckless disregard of the truth. In that context, if a laboratory is conducting routine auditing and finds one case of a wrong CPT code that caused an overpayment and the code is for a test that is performed on average 10 times per day, should the laboratory do a more expanded audit and investigation? When would the 60-day clock start in that case? A. Depending on the facts, the government may take the position that the lab had sufficient information to suggest that it may have received an overpayment on other, similar claims, and as discussed in the CMS proposed rule, should undertake a reasonable inquiry.
Q. Are there any cases where it would be okay not to conduct a broader audit when an error that causes an overpayment is discovered through an audit process or other routine compliance process? A. The answer to this question depends on the facts of a particular situation. When determining how to proceed, a provider should consider the error rate and the size of the sample. That said, we can expect that the government would expect providers to take appropriate steps when obtaining information that suggests a potential overpayment may exist.
Q. Are you aware of other cases that address reverse false claims or obligations to repay in the context of Medicare and Medicaid? A. Yes. There are a growing number of such cases. The significance of Continuum Health is that it is the first reverse false claims case where the United States intervened, and its only allegation involves a failure to timely report and refund overpayments to the government.
Q. Does the rule apply differently in cases where the rule has been violated because of simple administrative oversight or some other innocent cause that delayed the return of owed money? A. The law requires knowingly and recklessly failing to return an overpayment. In every case, that will be a key question. Once a provider becomes aware of a potential issue, it should investigate the issue and, if the provider determines that a refund is needed, it should repay it within 60 days.
Q.What, if any, is the role of attorney client privilege in 60-day rule cases? A.The attorney-client privilege operates in these cases the same way it would in any other type of case.
Editor’s Note: The issue of attorney-client privilege was addressed in G2 Compliance Advisor’s May 2014 Compliance Perspective. Generally, the attorney client privilege protects from disclosure communications between an entity’s attorneys and employees of the entity when the information communicated is the basis for rendering legal advice. There are additional requirements that must be met for the privilege to protect communication from disclosure and laboratories with in-house counsel should take particular note that communications with in-house counsel and outside counsel are treated differently under the privilege. Please consult the May 2014 G2 Compliance Advisor for more in-depth coverage.
Sources Medicare Program, Reporting and Returning of Overpayments; Extension of Timeline for Publication of the Final Rule, Federal Register, Vol. 80, No. 31, Feb. 17, 2015, pp. 8247-8248. U.S. ex rel. Kane v. Continuum Health Partners, Inc., No. 11-2325 (U.S. Dist. S.D.N.Y.). Keltner v. Lakeshore Medical Clinic, No. 11-cv-00892 (U.S. Dist. E.D. Wisc.).
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