Health Law Blog - Healthcare Legal Issues

60 Repayment Rules, False Claims Act and Compliance Programs

Proposed 60 Day Repayment Rules Push Providers Toward More Robust Compliance Programs

Health care attorneys health lawCMS has released a long awaited proposed rule defining provider obligations to report Medicare and Medicaid over-payments within 60 days of identification.  Section 6402 of the Patient and Program Protection Act created possible False Claims Act liability and possible program exclusion for the knowing concealment or avoidance of a repayment obligation.  The new proposed rule is intended to add definition to the general obligation that was included in the initial statutory provisions.  Section 6402 of PPACA requires providers to report and return over-payments within 60 days of identification.  The original statute broadly defined the provider obligations but did not provide specifics on several topics such as when an overpayment is deemed to be “identified” or how long providers were obligated to look back when identifying potential over-payments.

The Proposed Rule created an extremely onerous look-back period of ten years.  This means that providers will be obligated to report overpayment obligations that they discover which date back as far as ten years from the date of discovery.  The actual disclosure rules are somewhat less oppressive than the self disclosure rules that were already in place with regard to the Anti-kickback Statute and the Stark Law.  Nevertheless, many aspects of the proposed regulations, and in particular the ten year look-back rule, are likely to generate comments from affected parties. The specific requirements of the self disclosure rule leave much room for debate over several issues such as the level of detail that is required to be included in the disclosure.  There will certainly be a lot of debate at upcoming conferences that begin to dissect the specifics of the proposed regulations. 

The 60 day clock once an overpayment has been identified.  The proposed rule considers an overpayment to be “identified” when (i) there is actual knowledge that an overpayment exists, (ii) there is a reckless disregard or deliberate ignorance that an overpayment exists.  There will be a lot of debate over when someone obtains “actual knowledge.”  There will likely be even more debate over when someone begins acting in “reckless disregard” that an overpayment exists.  The “reckless disregard” standard involves an imputation of knowledge to an individual and will revolve over the facts that were present or should have been observed.  This requires a objective imputation of a subject standard of “identification.”  These areas of the law always involve much debate.  The definition that CMS chose for “identification” forces providers to be overly diligent in their proactive efforts to uncover billing inaccuracies.  Virtually any error that goes uncovered and could lead to a repayment could be imputed to the provider under the “reckless disregard” standard.  The entire standard contemplates the use of a diligent system of audits being put in place in order for a provider to demonstrate that they have not acted in deliberate ignorance or reckless disregard of the existence of an overpayment.  The standard that CMS set is just a further indication that the Federal government is attempting to push past the “pay and chase” approach of the past toward a system that requires providers to actively police themselves for errors.

To put this in perspective, failure to report an “identified” overpayment within 60 days opens the provider to liability under the False Claims Act.  The False Claims Act providers for penalties of three times the actual amount of the overpayment, plus between $5,000 and $11,000 per claim.  If a provider discovered a systematic error that may have led to a significant number of claims being overpaid, the amount of financial exposure under the False Claims Act can be very substantial; substantial to the point of presenting a grave threat to financial viability in some cases.  Under the Proposed Rule, reporting and repayment would be required for all  identified within ten years of receipt.  In the case of the discovery of a systematic billing problem, this could require repayment for the past ten years of claims.  If the False Claims Act obligation is applied to the entire look back period, the amount due grows exponentially.

If the proposed rule is finalized in its current form, it should have a very significant affect on compliance activities.  In order to meet the “reckless disregard” standard, providers will need to engage in very robust auditing and monitoring programs; in most cases much more extensive than are currently being utilized.  Some compliance officers tend to rank risk by the degree of potential consequences to the organization.  Risk identification is a function of two factors; the likelihood of a matter occurring and the degree of consequences.  What the CMS overpayment disclosure rules do, in conjunction with the False Claims Act damage computation, is to greatly increase the consequences of systematic billing errors.  The only way for a provider to prevent these errors, or at least create a plausible argument that it was taking appropriate steps to flush out errors, is to implement a robust auditing program.

Keep in mind that these rules do not only apply to large health care providers.  They also apply to individual and small physician practices and other small health care companies.  The potential impact on smaller organizations can be even more severe.  The recent health care reform law made compliance programs mandatory for most providers starting with nursing homes in 2013.  Mandatory compliance programs will extend to other types of providers as regulations are put in place.  In view of the proposed repayment regulations, providers of all size should seriously look at the areas of risk that apply to their operations and implement compliance programs that include an audit plan that is tailored to the provider’s specific risk areas.

Random Posts


Tags: , , ,

Comments are closed.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

The Health Care Law Blog is made available by Ruder Ware for educational purposes and to provide a general understanding of some of the legal issues relating to the health care industry. This site does not provide specific legal advice and you should not use the information contained on this site to address your specific situation without consulting with legal counsel that is well versed in health care law and regulation. By using the Health Care Law Blog site you understand that there is no attorney client relationship between you and Ruder Ware or any individual attorney. Postings on this site do not represent the views of our clients. This site links to other information resources on the Internet; these sites are not endorsed or supported by Ruder Ware, and Ruder Ware does not vouch for the accuracy or reliability of any information provided therein. For further information regarding the articles on this blog, contact Ruder Ware through our primary website.