Rules of the Road in Investigating and Disclosing Overpayments. Jesse A. Witten Drinker Biddle & Reath LLP

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1 Rules of the Road in Investigating and Disclosing Overpayments Jesse A. Witten Drinker Biddle & Reath LLP I. Legal Authorities Regarding Disclosure of Overpayments A. 60-Day Rule : 1. Affordable Care Act states that [I]f a person has received an overpayment, the person shall report and return the overpayment to the Secretary, the State, and intermediary, a carrier, or a contractor, as appropriate and notify the Secretary, State, intermediary, carrier, or contractor of the reason for the overpayment. 42 U.S.C. 1320a-7k(d)(1). 2. An overpayment must be reported and returned by the later of (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable. 42 U.S.C. 1320a- 7k(d)(2). 3. Failure to return and refund an overpayment within 60 days can serve as the basis for False Claims Act liability. See 42 U.S.C. 1320a-7k(d)(3) & 31 U.S.C. 3729(a)(1)(G). It can also serve as the basis for imposition of civil money penalties by the OIG or exclusion from Medicare, Medicaid and federal health programs. See 42 U.S.C. 1320a-7(a)(7) & 1320a-7a(a)(10). overpayment. 4. The statute does not define what it means to identify an 5. Overpayment means any funds that a person receives or retains under subchapter XVIII or XIX [Medicare or Medicaid] to which the person, after applicable reconciliation, is not entitled under such subchapter. 42 U.S.C. 1320a- 7k(d)(4). 6. Due to definition of overpayment, the 60-day rule applies only to Medicare and Medicaid, and not Tricare or other health programs. However, since 2009, the False Claims Act has imposed liability on one who knowingly retains an overpayment (although the FCA is not artfully worded on this point). See 31 U.S.C. 3729(a)(1)(G) & (b)(3). B. Proposed CMS Rule Implementing 60-Day Rule (77 Fed. Reg (Feb. 16, 2012)). 1. Applies only to Medicare Part A/Part B

2 2. Person identifies an overpayment if the person has actual knowledge of the existence of an overpayment or acts in reckless disregard or deliberate ignorance of the overpayment. But 60-day clock does not begin to run while a person is in the process of a diligent investigation of facts and overpayment amount determination; a provider does not identify until after it has had a chance to conduct a reasonable inquiry. 3. Does not elaborate on what triggers a provider s duty to make a reasonable inquiry. 4. Would adopt a ten-year lookback period, based on False Claims Act statute of limitations. 5. The 60-day rule is suspended if the provider submits a selfdisclosure to the OIG under its Self-Disclosure Protocol or to CMS under its Stark Law Self-Disclosure Protocol. 6. CMS provided examples of when an overpayment has been identified, triggering a duty of reasonable inquiry, e.g., if a provider or supplier: a. Reviews billing or payment records and learns that it incorrectly coded certain services. b. Learns that a patient death occurred prior to the service date on a claim that has been submitted for payment. c. Learns that services were provided by an unlicensed or excluded individual on its behalf. exist. d. Performs an internal audit and discovers that overpayments e. Is informed by a government agency of an audit that discovered a potential overpayment, and the provider or supplier fails to make a reasonable inquiry. C. First Government Enforcement of 60-DayRule. 1 In United States and New York ex rel. Kane v. Healthfirst, Inc., No (S.D.N.Y.), the United States and New York intervened in a qui tam action alleging violation of the 60-day rule (New York adopted a similar rule). The Government alleges that three hospitals that were formerly part of a network of hospitals ( Continuum ) failed to return and report Medicaid 1 This paragraph summarizes the Government s and the relator s allegations

3 overpayments within 60 days of identification. Between 2009 and 2010, the hospitals submitted claims to a certain Medicaid managed care organization (Healthfirst). As a result of erroneous coding contained in electronic remittances issued by Healthfirst, the Continuum hospitals wound up automatically billing certain payors (including traditional Medicaid) as a secondary payor. The Healthfirst electronic remittances erroneously indicated that the hospitals could seek reimbursement from secondary payors. As a result, the electronic billing programs of numerous providers automatically generated bills to secondary payors, in particular Medicaid. In September 2010, the New York Office of the State Comptroller identified a small number of claims submitted by Continuum on behalf of some of its hospitals, and notified Continuum that Medicaid had been wrongly billed as a secondary payor. In December 2010, a software patch was installed to fix the problem. In February 2011, Robert Kane (the relator), an employee in the Revenue Cycle Operations Department became aware of the extent of the problem and found over 900 specific claims that were wrongly billed to Medicaid as a secondary payor, totaling over $1 million in Medicaid reimbursement. On February 4, 2011, Kane ed certain executives a spreadsheet of the 900+ claims. Continuum terminated Kane seven days later and allegedly did nothing further with Kane s analysis or the claims identified therein. From March 2011 to February 2012, the NY Comptroller brought additional affected claims to Continuum s attention, and Continuum reimbursed NY Medicaid in 30 batches between April 2011 and March It only repaid the final 300 claims after the Department of Justice served a Civil Investigative Demand in June Kane filed his qui tam action on April 5, 2011, exactly 60 days after he sent his with the spreadsheet of 900 claims. The Government did not intervene against Healthfirst or dozens of other hospitals named in the relator s complaint. Kane has voluntarily dismissed his claims against those defendants. The defendants have advised the Court that they intend to move to dismiss on grounds that the Complaints fail to allege that the hospitals had identified overpayments, given the incompleteness of Kane s work. D. Criminal Statute. Whoever having knowledge of the occurrence of any event affecting (A) his initial or continued right to any such benefit or payment, or (B) the initial or continued right to any such benefit or payment of any other individual in whose behalf he has applied for or is receiving such benefit or payment, conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized shall... be guilty of a felony U.S.C. 1320a-7b(a)(3) 1. No enforcement history. 2. Ambiguities: - 3 -

4 a. Does this apply only to individuals/beneficiaries or also to institutions/providers? b. Does this statute require active concealment or mere nonconcealment? 3. Government interpretation: the statute makes it a felony to fail to disclose overpayments from a federal health program. a. DOJ letter to OMB, Office of Federal Procurement Policy, May 23, 2007 (commenting on proposed amendments to the Federal Acquisition Regulations and proposing that the FAR be amended to require disclosure of overpayments, as is required of health care providers, citing 42 U.S.C. 1320a-7b(a)(3)). (Jan. 25, 2002) b. CMS (in proposed overpayment rule), 67 Fed. Reg. 3,662 c. Civil False Claims Act complaints (including complaint versus Columbia/HCA). d. OIG in industry Compliance Guidance documents. 4. Note the statute imposes a duty to disclose, not necessarily to repay. (Otherwise, one who lacks the money to repay a discovered overpayment could never avoid committing a felony.) E. Stark Law. 1. Billing Prohibition. The statute and implementing regulation prohibit an entity from submitting a claim to Medicare where a referral for a designated health service was made by a physician who has a financial relationship with the entity (or the physician s family member has a financial relationship), unless an exception applies. See 42 U.S.C. 1395nn(a)(1)(B); 42 C.F.R (b). 2. Refund Obligation. a. Statutory Duty to Refund Copayments and Deductibles. If a person collects any amounts that were billed in violation of [the Stark Law], the person shall be liable to the individual for, and shall refund on a timely basis to the individual, any amounts so collected. 42 U.S.C. 1395nn(g)(2) (emphasis added). b. Regulatory Duty to Refund All Collected Amounts. An entity that collects payment for a designated health service that was performed under a prohibited referral must refund all collected amounts on a timely basis [within 60 days]. 42 C.F.R (d)

5 II. What Constitutes an Overpayment? A. Overpayments Arising From False Certifications of Regulatory Compliance. Many courts have adopted the false certification theory of False Claims Act liability, a theory that effectively converts many regulatory violations into overpayments even though the regulation or statute that was violated does not on its face proscribe billing or Medicare reimbursement. Under the false certification theory, many courts have ruled that a provider has submitted a false claim if it is also expressly or impliedly certifying regulatory compliance when it submits claims to Medicare. 1. Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b). The Anti- Kickback Statute is a criminal statute that imposes criminal liability. It can also be enforced by the OIG through civil monetary penalties. See 42 U.S.C. 1320a-7a(a)(7). Although the statute does not prohibit billing, many courts have held that False Claims Act liability can be based on claims submitted pursuant to referrals that violated the Anti- Kickback Statute (or the Stark Law). See United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235 (3d Cir. 2004); United States v. Rogan, 517 F.3d 449 (7th Cir. 2008); United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 20 F. Supp. 2d 1017 (S.D.Texas 1998). 2. Examples of express certifications of regulatory compliance: a. Cost Reports. The individual signing a Medicare cost report must certify, among things, that: I further certify that I am familiar with the laws and regulations regarding the provision of the health care services, and that the services identified in this cost report were provided in compliance with such laws and regulations. 42 C.F.R (f). b. Provider/Supplier Enrollment Applications. Post-2001, the Enrollment Applications (Forms 855A, 855 B, 855I and 855S) requires applicant to certify that the applicant knows that Medicare payment is conditioned upon compliance with the Anti-Kickback Statute and Stark Law. The certification provides: I agree to abide by the Medicare laws, regulations and program instructions that apply to this provider. The Medicare laws, regulations, and program instructions are available through the Medicare contractor. I understand that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations and program instructions (including but not limited to, the Federal antikickback statute and the Stark law), and on the provider s compliance with all applicable conditions of participation in Medicare. See United States ex rel. Thomas v. Bailey, 2008 WL (E.D. Ark. Nov. 6, 2008) (relying on certification in Form 855I to find that Complaint, in part, stated a claim under the False Claims Act against a physician who allegedly violated the Anti-Kickback Statute)

6 3. Conditions of Participation. Some courts have distinguished Medicare conditions of participation from conditions of payment, and have held that a provider has not been overpaid it if was in violation of a condition of participation. See, e.g., United States ex rel. Conner v. Salina Regional Health Center, 543 F.3d 1211 (10th Cir. 2008); United States ex rel. Landers v. Baptist Memorial Healthcare Corp., 525 F. Supp. 2d 972 (W.D. Tenn. 2007); United States ex rel. Baklid-Kunz v. Halifax Hosp. Med. Ctr., 2014 U.S. Dist. LEXIS (M.D. Fla. July 1, 2014). B. Overpayments because claims lack medical necessity 1. Medicare will forego recouping overpayments for services that were not reasonable and necessary if both the provider and beneficiary reasonably did not know that the claim was not covered. See 42 U.S.C. 1395pp. 2. If the provider or beneficiary, or both, could have or should have known that claim was not covered, provider can avoid liability if beneficiary signed an ABN. See Medicare Claims Processing Manual, ch C. Common Question: Is There An Overpayment If There Is No Written Physician Order. Analysis varies depending on the type of service provided (and payor). For some services, although a physician order is required, it can be oral and the absence of a signed order by the physician may not constitute an overpayment if there is good reason to believe the service was ordered and reasonable and necessary. D. Stark Law Considerations 1. Apply correct indirect compensation analysis. Some arrangements that do not fit within an exception for a direct compensation arrangement should actually be analyzed as indirect compensation arrangements, and may not fit that definition which requires that compensation vary with or take into account the volume or value of referrals. 42 C.F.R No overpayment, if the entity did not know the identity of the referring physician, and did not recklessly disregard or remain deliberately ignorant of the physician s identity. 42 C.F.R (e). 3. Stark Law period of disallowance. Period begins when the financial relationship fails to satisfy a Stark exception and ends: (1) for noncompliance unrelated to compensation, when all elements of the exception are again satisfied; and (2) where noncompliance is due to excessive/insufficient compensation, when all excess compensation is returned or required amount of compensation is paid, and all elements of an exception are again satisfied. 42 C.F.R (c). 4. Exception for temporary noncompliance if: (1) financial relationship satisfied a Stark Law exception for at least 180 days before it came out of - 6 -

7 compliance; (2) noncompliance occurred for reasons beyond entity s control, and entity promptly took steps to correct the noncompliance; and (3) No Anti-Kickback Statute violation. The exception applies for 90 days after relationship came out of compliance. 5. Stark Law violations based on absence of a signature: Temporary noncompliance exception gives the parties 90 days to fix. III. Self-Disclosure Considerations. A. Is it legally required? If not legally required, is it tactically wise? 1. Will likely lead to a payment 2. Ensures that worst-case scenario avoided, can get better outcome, avoid Corporate Integrity Agreement 3. New management often elects conservative approach 4. As part of acquisition. B. Investigate the Facts privileged 1. If in-house or outside counsel direct the review, it can be 2. Review records 3. Interviews 4. Internal or external resources to quantify 5. Learn the story and determine the amount 6. Generally, poor idea to disclose until review is completed, but there are exceptions a. To complete a transaction (e.g., Condell Health System). b. Where qui tam filing is perceived as imminent. C. If no disclosure, write memo explaining why D. What To Disclose 1. Narrative account of what happened, how it was discovered

8 2. Time period during which the events occurred. 3. Corrective actions taken. 4. Amount at issue. If refund is for period of time less than entire period where overpayments occurred, be clear and offer explanation. Is netting underpayments acceptable? The OIG says no in its self-disclosure protocol because the period to resubmit a corrected claim is shorter than the government s recoupment period. 5. Methodology used to quantify overpayment and spreadsheets. 6. Give Compliance Program credit where applicable. E. How Far Back? Logically, any refund should simulate how Medicare would recover the overpayment. There are alternative time periods for government to recover overpayments. 1. Four years, ordinarily, for Medicare recoupment. In the event of an overpayment, Medicare will first seek to recover from provider/supplier, and not from beneficiary, unless provider/supplier was without fault. 42 U.S.C. 1395gg. Medicare contractors may reopen a payment determination, for good cause, within four years, which may be extended in the event of fraud or similar fault or to correct a clerical error. 42 C.F.R (b). Medicare contractors may reopen cost report determinations within three years. 42 C.F.R The Fiscal Cliff legislation permits CMS to enlarge the recoupment period to five years, but CMS has not yet done so. See Pub. L. No , 638, 126 Stat (2013). 2. Reduced time period if provider was without fault. As noted, Medicare will not recoup from a provider if the provider is without fault. a. Without fault is presumed, absent evidence to the contrary, after the third year following the year in which overpayment occurred. 42 U.S.C. 1395gg(b); Medicare Financial Management Manual, ch EXAMPLE: On May 9, 2003, Dr. A is notified that he has been paid $ for services provided to Mr. Smith, beneficiary. On January 6, 2007, the contractor determines that Dr. A was overpaid for the services to Mr. Smith, beneficiary. The FI or carrier will not recover this overpayment as long as there is no evidence to the contrary because it was determined subsequent to the third year after notification of payment. (Any determination date later than Jan. 1, 2007 will not be recovered.) (If evidence to the contrary existed, recoupment may be initiated....) Medicare Financial Management Manual, ch b. Without fault is a narrow concept, however. A provider is without fault if: (i) it fully disclosed material facts; (ii) on the basis of information available, including Medicare instructions and regulations, it had a reasonable basis for assuming that the payment was correct; and (iii) if it had reason to question the payment, - 8 -

9 it brought the question promptly to FI or carrier s attention. Provider can be with fault even if overpayment was due to FI or carrier error. Medicare Financial Management Manual, ch False Claims Act statute of limitations: 6-10 years 4. Statute of limitations for implied or express contract claims (nonfraud claims): six years. 28 U.S.C F. To Whom To Disclose 1. Medicare contractor, for routine overpayments. Use CMS Overpayment Refund Form, and cover letter if necessary. 2. HHS Office of Inspector General. See below re OIG selfdisclosure protocol. 3. CMS. See below re Stark Law self-disclosure protocol. 4. Department of Justice (e.g., Main Justice Civil Division, U.S. Attorney s Office), for serious matters. Under False Claims Act, disclosure within 30 days can reduce FCA liability to not less than twice the damages suffered by the Government. 31 U.S.C. 3729(a)(2). 5. State Medicaid Agency. IV. Self-Disclosure Protocols. A. HHS-OIG Self-Disclosure Protocol, revised April Process to settle matters with OIG, and get an OIG release of its civil monetary penalties and exclusion authorities. Over 800 disclosures since 1998 and $280 million recovered 2. Last 12 months 65 settlements (42 involved employment of excluded individuals; 16 involved false claims; and 7 involved Anti-Kickback Statute issues), ranging from $10,000 to $1.98 million. 3. OIG holds out offer of better terms, no Corporate Integrity Agreement and/or only a Certification of Compliance Agreement. OIG states that it will settle for at least 1.5 times the overpayment or, in the case of Anti-Kickback Statute (AKS) matters, a multiple of 2-3 times the unlawful remuneration, with minimum settlement amounts of $10,000 ($50,000 for AKS matters). Single damages for excluded individuals will be calculated as the employment cost, adjusted by payor mix

10 4. Rules for statistical sampling. Must be a sample of at least 100, and netting is not allowed. 5. Protocol used only for matters involving potential violations of law 6. Not for use if potential violation is Stark Law only, but may make consolidated AKS and Stark Law disclosures. 7. Protocol specifies information to be disclosed, including a full description of the nature of the matter being disclosed, including the type of claim, transaction or other conduct giving rise to the matter, the names of entities and individuals believed to be implicated and an explanation of their roles in the matter, and the relevant periods involved. 8. Requires certification that, to the best of person s knowledge, the submission contains truthful information and is a good-faith effort to lead to settlement. Id. 9. Defense to False Claims Act? a. Not under public disclosure bar, according to First Circuit. United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720 (1st Cir. 2007). b. Public disclosure bar is triggered under United States ex rel. Whipple v. Chattanooga-Hamilton Cty. Hosp. Auth., No. 3:11-cv (M.D. Tenn. Aug. 26, 2013). c. Evidence that party did not act knowingly. d. Could trigger defense under 31 U.S.C. 3730(e)(3), which provides: In no event may a person bring a [qui tam action] which is based upon allegations or transactions which are the subject of... an administrative civil money penalty proceeding in which the Government is already a party. A similar issue was briefed but not decided in United States ex rel. Tahlor v. Atlantic Health (D.N.J.). B. Stark Law Self-Disclosure Protocol. 1. CMS will compromise claims based on: (i) nature/extent of the improper or illegal practice; (ii) timeliness of the self-disclosure; (iii) party s cooperation in providing information related to the disclosure; (iv) litigation risk ; and (v) financial condition of disclosing party 2. Large backlog of disclosures. 3. Settlements to date appear reasonable in amount

11 4. CMS does not intend to negotiate settlements, but to unilaterally declare its compromise. C. New York Medicaid Inspector General ( OMIG ) Self-Disclosure Protocol (2009) 2 1. New York law requires all Medicaid providers to have compliance programs if provider bills or receives >$500,000 per year to/from Medicaid a. Annual certifications of compliance program b. NY compliance programs must include a system for responding to compliance issues as they are raised; for investigating potential compliance problems;... ; and refunding overpayments. 2. OMIG self-disclosure protocol is intended to be as broad as possible, but not intended for disclosure of matters better handled through administrative billing processes or matters subject to ongoing audit or investigation. a. According to OMIG, repayment of simple, more routine occurrences of overpayments should continue through typical methods of resolution, including voiding or adjusting claims. business. b. Self-Disclosure protocol not intended to alter day-to-day 3. Issues appropriate for disclosure include. a. Substantial routine errors b. Systematic errors c. Patterns of errors d. Potential violation of fraud and abuse laws 4. OMIG represents that it will seek information in way that respects attorney-client privilege and work product doctrine. 5. OMIG offers: 2 pdf

12 a. Forgiveness, reduction of interest (up to 2 years) b. Extended repayment terms c. Waiver of penalties d. Timely resolution (within six months) e. Reduce likelihood of NY Corporate Integrity Agreement f. Possible preclusion of New York state qui tam action. 6. Process. a. Initial report that explains the issue, how discovered, assessment of financial impact and corrective action. b. OMIG will then consult with provider to discuss next steps towards arriving at a Final Report and resolution. c. OMIG advises providers to expect to disclose: (i) (ii) (iii) Summary of cause of issue and corrective action; Detailed list of claims (Excel spreadsheet); Names of individuals involved in improper conduct