Posted on: 9/24/2012
Connie Ditto, Hermes Sargent Bates
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The Patient Protection and Affordable Care Act (Pub. L. 111-148), along with the Health Care Education Reconciliation Act of 2010 (Pub. L. 111-148), known collectively as the "Affordable Care Act," requires health care providers who participate in Medicare to "report and return" an overpayment within 60 days of the identification of the overpayment or the date any corresponding cost report is due, whichever is later. Social Security Act, 42 U.S.C. Section 1128J(d). Under the Affordable Care Act, the retention of an overpayment after the 60-day deadline is a false claim, and subjects the provider to severe penalties, including qui tam actions, civil monetary penalties, and exclusion from Medicare. 31 U.S.C. Section 3729(a)(1)(G), 31 U.S.C. Section 3720 et seq. This new requirement left many questions unanswered, as key terms such as "identify" were not defined, and providers were uncertain how to comply with the law.
On February 16, 2012, the Centers for Medicare and Medicaid Services (CMS) published the proposed rules on Reporting and Returning of Overpayments. Medicare Program: Reporting and Returning of Overpayments, 77 Fed, Reg. 32, 9179 (to be codified at 42 C.F.R. parts 401 and 405). The proposed rule states that "[t]he requirements are meant to ensure compliance with applicable statutes, promote the furnishing of high quality care, and to protect the Medicare Trust Funds against fraud and improper payments." Id. at 9180. While the proposed rule did clarify many of the unanswered questions (it set forth a definition of "identify," adopted the Antikickback statute's definition of "knowing," and established a 10 year lookback period); potential issues arise for litigation defense counsel due to the example provided of an action that constitutes an "overpayment." Id. at 9181.
The rule proposes that "overpayment means any funds that person has received or retained under title XVIII of the Act to which the person, after applicable reconciliation, is not entitled under such title." Id. at 9187. In other words, if payment was not properly made under the Medicare guidelines, an overpayment has occurred. The proposed rule gives an example of an overpayment under this proposed definition as including "[r]eceipt of Medicare payment when another payer had the primary responsibility for the payment." Although the proposed rule carves out special (and narrow) exceptions of overpayments that occur in the intersection of this rule and certain potential Stark, certain potential False Claims Act violations, and certain potential Antikickback relationships; it does not mention the interplay between this proposed rule and the obligations of parties to lawsuits to report and return funds to Medicare pursuant to the Medicare Secondary Payer laws.
Due to the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), which requires insurance carriers, self-insureds, and workers' compensation plans (for the sake of convenience, "insurance companies") to collect and report certain information to CMS' Coordination of Benefits Contractor regarding any settlement, award, judgment, or other payment made to a Medicare beneficiary; litigation defense attorneys are familiar with the "primary payer" language. 42 U.S.C. § 1395y(b)(8). Under the regulations implementing the MSP, a "primary payer" is defined in part as the "entity that is or was required or responsible to make payment." 42 C.F.R. Section 411.21. In practice, once a settlement in lawsuit is reached, the insurance company either pays directly to the Medicare Secondary Payment Recovery Contractor (MSPRC) (or negotiates a reduced amount, pursuant to the provisions set forth in 42 C.F.R. Section 411.37), or the plaintiff re-pays the amount (or a negotiated amount) identified by as a "conditional payment" and requested to be re-paid in a Conditional Payment Letter.
Under the MSP, conditional payments are properly made to defendant and non-defendant providers even during litigation, as the resolution of a lawsuit identifies the "primary payer," and procedures are set forth that require the repayment of any conditional funds following the resolution of the lawsuit. See 42 C.F.R. Section 411.52. The Agency's proposed definition of overpayment, in the proposed rule, however; appears to require even non-party providers who have received a payment from a plaintiff to report and return that payment at the resolution of the case. This creates financial uncertainty for provider clients involved in litigation as well as those not a party to the action.
For example, Patient P undergoes surgery at Hospital H by Doctor D. P, unhappy with the results of this surgery, undergoes an additional surgery at Hospital H2 by Doctor D2. Two years later, P. sues H and D, but not H2 and D2. A jury trial is held. The jury finds that H is not negligent, and D is 100% at fault. P's Conditional Payment Letter identifies $2,000 in conditional payments to H, $1,000 to D, $500 to H2 and $100 to D2. Because D is now the "primary payer," under the example provided in the proposed rule; H, H2, and D2 are now in possession of an overpayment. Notably, the proposed rule contains no minimum threshold for an overpayment, and therefore any amount constitutes an overpayment and potentially subjects the provider to severe penalties.
The proposed rule recognizes that providers may sometimes not be aware of circumstances that constitute the retention of an "overpayment" under the broad proposed definition. The proposed rule provides a narrow exception for providers who are not a party to a kickback arrangement, but have nonetheless submitted a claim that is subject to a kickback, are not aware of the payment and have therefore not "identified" it. The example provided posits that "a hospital may be unaware that a device manufacturer has paid a kickback to a physician on the hospital's medical staff to induce the physician to implant the manufacturer's device in procedures performed at the hospital." 77 Fed, Reg. 32, 9179, 9183 (to be codified at 42 C.F.R. parts 401 and 405). The Agency explains that providers may not be aware of arrangements between third parties, and even if the provider becomes aware of a potentially unlawful arrangement, may not be in a position to determine whether the requisite intent was present to constitute a violation of law. Id. Therefore, it recognizes the difficulties reconciling the provider's seeming conflicting duties under the multitude of laws applicable to health care providers.
The proposed rule then goes on, however, to note that if a provider not a party to a kickback arrangement nonetheless has "sufficient knowledge of the arrangement to have identified the resulting overpayment," the provider must report and return the overpayment. Id. What constitutes "sufficient knowledge" is not defined, but this example seems to indicate that in the hypothetical above, defendants H, D2 and H2 would have a responsibility to report and return the payments received. Pursuant to the MSP, however, the beneficiary or D would also have a duty to return conditional payments, resulting in a windfall to the Medicare Trust Fund.
Indeed, the proposed rule appears to create the possibility that the resolution of every lawsuit involving medical expenses will create overpayments in possession of all providers who gave care related to the underlying injury. Further troubling is the proposed rule's indication that even providers not parties in the hypothetical above (and therefore not with actual knowledge of the underlying litigation) may be in possession of an overpayment at the resolution of the case. The proposed rule notes "[i]n some cases, a provider or supplier may receive information concerning a potential overpayment that creates an obligation to make a reasonable inquiry to determine whether an overpayment exists." 77 Fed, Reg. 32, 9179, 9182 (to be codified at 42 C.F.R. parts 401 and 405). Reasonable inquiry is not defined. For example, has the radiology group that performed the chest x-rays during the surgery and received and responded to the plaintiff's request for medical records due to litigation received information concerning a potential overpayment such that it has to undertake a reasonable inquiry? Does this change if the radiologist is requested to testify as a treating provider? What if the radiologist who testifies is not merely an employee of the group, but is its President?
In sum, although the proposed rule provided helpful information regarding the Agency's commitment to increasing its "efforts to reduce fraud, waste, and abuse in the Medicare program," its overzealous efforts may have the untoward result of creating uncertainty in health care providers and their counsel as to how to comply with the law.
Connie S. Ditto
Hermes Sargent Bates LLP
Dallas, Texas
connie.ditto@hsblaw.com