Since its passage on March 23, 2010, the Patient Protection and Affordable Care Act ("PPACA") has been highly controversial. Turn to any news outlet and you will hear discussions of "Obamacare" and recent polling results regarding the public's position with respect to the divisive "Healthcare law." Despite the highly-charged public discussions and election-cycle politics regarding PPACA, many provisions of the law are already in effect. And while resolution of the constitutionality of the individual mandate makes its way through the courts, other sections of PPACA have and will continue to have a far greater impact on health care providers.
Investigating and Reporting Overpayments
Specifically, Section 6402 creates an affirmative obligation for a health care provider to return an overpayment to the Centers for Medicare and Medicaid Services ("CMS") within 60 days of "identification" or the date any corresponding cost report is due, whichever is later. An "overpayment" is broadly defined as: "any funds that a person receives or retains…to which the person, after applicable reconciliation, is not entitled…."1 For more than two years, providers have speculated about what precisely is meant by the term "identified" in the context of the 60 day requirement; on February 16, 2012, CMS provided its answer in proposed rules regarding the reporting and refunding of overpayments.2 CMS's Proposed Rule provides: "[A] person has identified an overpayment if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment."3 CMS notes that providers must have an "incentive to exercise reasonable diligence" and to investigate any potential overpayments "with all deliberate speed."4
What precisely is meant by the phrase "all deliberate speed?" At a minimum, providers should: (1) document their efforts to discover potential overpayments through self-audits and compliance reviews, and (2) be able to demonstrate a reasonable timeline from the start of an inquiry to its conclusion and the corresponding report and return of any "identified" overpayment. Finally, CMS has proposed that the applicable look-back period for overpayments should be ten years, which is the outer limit of liability under the federal False Claims Act (the "FCA"). Specifically, CMS states that "[w]e also believe that the length of the lookback period is long enough to sufficiently further our interest in ensuring that overpayments are timely returned to the Medicare Trust Funds."
The federal government has increased the stakes by expanding the definitions and imposing a precise timeline, specifically the failure to timely refund an "identified" overpayment now creates an "obligation" under the FCA, potentially subjecting the provider to treble damages and additional fines.
PPACA in Combination with the FCA and FERA
For some time, the federal government has been working hard to recapture any improperly paid Medicare and Medicaid funds, but until recently the effort has been largely ineffective. The passage of PPACA, combined with the FCA and the Fraud Enforcement and Recovery Act of 2009 ("FERA"), has significantly enhanced the federal government's arsenal to recoup monies improperly paid to providers. Historically, a key distinction between fraud and abuse on the one hand and mistake on the other has been intent. However, for purposes of health care fraud involving Medicare and Medicaid, the distinction may no longer be meaningful with respect to claims submitted to the federal and state government.
This is achieved because the FCA imposes liability when the claimant acts "knowingly" with respect to an obligation. However, "knowingly" does not require that the person submitting the claim have actual knowledge that the claim is false. The definition of "knowing" or "knowingly" include a person who "(i) has actual knowledge of the information; or (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information; and (B) requires no proof of specific intent to defraud."5 In addition, FERA amended the FCA such that any person who knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government may be held liable under the FCA. In turn, "obligation" was defined as "an established duty, whether or not fixed . . . arising from the retention of an overpayment."6 Thus, failing to repay the government in a timely fashion can result in liability under the FCA.
How does PPACA play into all of this? As noted above, the reporting and refunding of an overpayment is now expressly required—thus creating an "established duty" for purposes of FCA liability. Therefore, any overpayment retained beyond the 60 days from "identification" creates an "obligation" for purposes of the FCA and may result in FCA liability, with the possibility of treble damages and fines, if the provider demonstrates a "knowing and improper" failure to return the overpayment. While the FCA penalties are mandatory, PPACA has added discretionary civil monetary penalties ("CMPs") up to $10,000 for each item or service, plus treble damages. The CMPs are triggered by the Office of Inspector General ("OIG"), but may be applied in addition to any FCA penalties. The voluntary and prompt refunding of overpayments is thus a significant obligation of providers with significant consequences for failure.
CMS's Proposed Rule acknowledges that, in instances where a provider may require additional time to make the repayment, the provider may apply for the Extended Repayment Schedule ("ERS"). The ERS requires the provider to submit extensive documentation demonstrating the financial constraints that limit the provider's ability to repay the overpayment promptly. While the ERS is an option, granting the ERS is discretionary on the part of CMS and is in no way guaranteed.
For too long, providers, compliance officers, and health care attorneys have speculated as to what the government's interpretation would be with respect to PPACA's undefined 60-day rule and the repayment of an identified overpayment. CMS has provided insight with the publication of its Proposed Rule; however, the proposal does little to offer comfort to providers. CMS's Proposed Rule is open to public comment through April 16, 2012, but regardless of what the final rule is, one thing is certain – the government expects to collect any monies owed to it and has the tools to penalize noncompliance. Providers should be prepared to identify, investigate, and, when necessary, refund overpayments to government health care programs as promptly as possible and should be diligent in maintaining records of their internal investigation.
1 PPACA § 6402(d)(4)(B).
2 See 77 FR 9179, published February 16, 2012.
3 Id. at 9182 (emphasis added).
5 31 U.S.C. § 3729(b)(1).
6 31 U.S.C. § 3729(b)(3).