Last February, the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) released a report claiming that, in fiscal year 2011, healthcare enforcement efforts recovered nearly $4.1 billion in taxpayer dollars. According to the report, approximately $2.4 billion was recovered through civil health care fraud cases brought under the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733. This included more than 760 new FCA matters filed in 2011. The recent months of presidential campaigning have brought repeated pledges by candidates to continue the crackdown on health care fraud in the coming term.

According to the DOJ, the significant increase in enforcement and recovery over the past two years has been bolstered by new tools and resources provided by the 2009 Fraud Enforcement and Recovery Act (FERA) and the Patient Protection and Affordable Care Act (Affordable Care Act). The relevant provisions of the PPACA, which is often either derisively or affectionately called “Obamacare”, was upheld by the Supreme Court on June 28, 2012. These Acts made several substantive changes to the FCA, including broadening the FCA’s “reverse false claims” provision. That change, in particular, has produced concern and confusion for health-care providers with respect to their liability for reporting and returning overpayments.

What is an overpayment? Under the Affordable Care Act § 6402(a), overpayments are “any funds that a person receives or retains under [Medicare or Medicaid] … to which the person, after applicable reconciliation, is not entitled.” Examples of overpayments include payments in excess of the allowable amount, payment for noncovered services and amounts paid by Medicare as primary where Medicare should have paid secondary to some other payment source.

The procedure for reporting and returning overpayments is set forth in the Medicare Financial Management Manual, Chapter 4 (Pub. 100-06). Providers use a form created by their assigned Medicare contractor that identifies the affected claims and includes a summary of how the error was discovered, a description of the corrective action plan for preventing future errors, the reason for the refund and the timeframe and total amount of the refund.

What is a “reverse false claim”? While liability for alleged “reverse false claims” existed before FERA and the Affordable Care Act, it was limited to deliberate or reckless action aimed at concealing an obligation to pay money owed to the government. Under current law, however, the statute broadly provides that anyone who “knowingly avoids … an obligation to pay or transmit money or property to the Government” could be subject to a whistleblower suit. 31 U.S.C. § 3729(a)(1)(G). Therefore, there is no longer any need for the government or a whistleblower to provide evidence of deceptive conduct or false statements. “Knowing and improper” failure to report and return funds alone can lead to the penalties and treble damages awards imposed by the FCA.

Can an overpayment be an “obligation” for the purposes of reverse claims act liability? Yes! The Affordable Care Act directly links retention of an overpayment under the Medicare or Medicaid programs with FCA liability. Providers and health care entities must report and return overpayments within 60 days of identifying an overpayment or 60 days from the due date of a corresponding cost report, whichever is later. As a result, reverse false claims include situations where a provider receives an overpayment from CMS, identifies the overpayment, and improperly fails to return it within 60 days. FCA liability attaches regardless of whether the overpayment originally resulted from intentional fraud or innocent mistake.

These provisions raise a series of other questions. When, exactly, has a provider “identified” an overpayment? This term is not defined in the statute. When does the 60-day report-and-refund period start running? Does it begin before or after an applicable reconciliation or appeal process has concluded? This is not entirely clear either, but the legislative history indicates that Congress intended to allow providers to complete reconciliation-type proceedings authorized by statute or regulation before the report and refund clock begins.

What can I do to avoid liability under the reverse false claims provision? Providers who have not reviewed their compliance programs over the past couple of years should do so promptly to ensure that policies and procedures are adopted, implemented and maintained to avoid liability for reverse false claims and failure to return overpayments. That said, adopting policies to comply with the 60-day deadline for reporting and returning overpayments can be challenging, due to the ambiguities in the statute identified above. At a minimum, providers should implement the following compliance initiatives:

  • Provide robust and comprehensive training programs addressing the importance of compliance and fraud prevention, as well as standards of conduct, proper documentation and CMS coding and billing standards.
  • Continually review and revise billing/coding policies to ensure they are consistent with CMS payment guidelines.
  • Establish safeguards to ensure overpayments are being tracked and returned to the appropriate payer/source in a timely fashion.
  • Establish mechanisms to document actions taken when overpayments are identified to show that the retention of possible overpayments during any evaluation, reconciliation or appeals process does not reflect an improper intent.
  • To the extent possible, contracts with government payors should identify and clearly delineate the circumstances in which overpayments would arise and the procedures for making refunds.
  • Contracts with third-party billing services should provide that the vendor will maintain and apply appropriate coding, billing and reimbursement standards and include indemnification provisions.
  • Identify a compliance officer or committee responsible for monitoring the compliance programs and the initiatives listed above.

In various pronouncements over the past year, the U.S. Department of Justice has made it clear that it will enforce the new reverse false claims provision, despite the lack of clarity regarding provider liability and the absence of any implementing regulations. If you are not certain whether something may be an overpayment or whether you have an obligation to report and return monies received from CMS, you should contact a legal advisor who is knowledgeable about the FCA and its reverse false claims provisions.