False claims could cost $11,000 each plus three times the amount of the claim
Medicare and Medicaid abuse by providers takes away billions of dollars of taxpayer money that is meant to provide vital medical care. But a new proposed regulation from the U.S. Department of Health and Human Services Office of Inspector General (OIG) implementing a portion of the Affordable Care Act (ACA) has caused alarm in the healthcare community because of the draconian penalties involved for failure to return alleged Medicare and Medicaid overpayments promptly.
Some estimates of Medicare fraud alone are $80 billion per year. But the new rules could have unintended consequence including putting legitimate healthcare companies out of business for unintentional errors.
“My understanding of the proposed regulation is that if an overpayment is not returned within 60 days of ‘identification’ by a provider, the overpayment is subject to false claims liability under the federal False Claims Act (FCA), which would allow recovery of up to $11,000 per claim, plus three times the amount of money received in payment of the claim,” said Lynda M. Johnson, an attorney with Friday, Eldredge & Clark LLP, Little Rock. “Certainly this is a severe penalty and could bankrupt many providers.”
Johnson said the overwhelming majority of overpayments are received not due to fraud, but because of an honest mistake. The stiff penalties seem to come with the underlying assumption that all overpayments are a deliberate attempt to defraud the government.
Johnson said the most important thing providers can do to protect themselves from potentially crippling fines is to implement effective compliance programs to focus on improving their billing practices. Most importantly, try to avoid billing mistakes, which can lead to overpayments being received.
The atmosphere of declining reimbursements while providers are expected to improve quality and service has added a great deal of strain to management of healthcare facilities. It takes attention away from focusing on patients. “Unfortunately, all resources are limited and any resources that must be devoted to additional compliance efforts may result in a decrease in resources available for patient care, a result which is not good for anyone,” Johnson said. “The providers I work with every day are trying to deliver the best patient care they possibly can with a continually shrinking stream of revenue from government payers, while, at the same time, dealing with more and more regulatory burdens.”
Providers should be aware that the Department of Justice (DOJ) is closely monitoring these issues and recently intervened in an action filed in New York, said P. Delanna Padilla, an attorney with Wright Lindsey & Jennings, Little Rock.
“The ACA has a defined 60-day period in which overpayments must be reimbursed to the government,” Padilla said. “A provider’s failure to so reimburse could lead to stiff penalty assessments and can be considered a violation of the FCA. This provision of the ACA is being taken seriously and will become of great concern to providers who repeatedly fail to reimburse the government for overpayments.”
If providers fail to comply with the repayment rules under the ACA, they face the potential penalty of being banned from billing Medicare or Medicaid. Padilla said this would have catastrophic consequences to most providers.
Additionally, the penalties themselves can stack up all too easily. While many consider the penalty amounts to be excessive, Padilla said providers should be prepared to pay those types of sums if they knowingly and willingly withhold repayment.
There is concern that the new rule is an attempt to make healthcare providers settle cases rather than risk penalties that could bankrupt their organizations.
Healthcare providers are keeping an eye on the first complaint under this proposed rule that was filed by the New York State Attorney General’s office charging Healthfirst with failure to return overpayments.
Padilla said the big issue in this case is that the hospital network, Continuum, which accepted patients covered by the Healthfirst Medicaid managed care plan, did not repay 300 overpayment claims until it received a demand concerning the overpayment. The DOJ intervened in the case and took the position that Continuum intentionally and fraudulently delayed the repayments as Continuum had undertaken an internal review and uncovered more than 900 improperly billed claims totaling more than $1 million in overpayments.
“Although Continuum had begun making repayments, the DOJ’s position was that the internal review occurred in February 2011 and repayments were not completed until March 2013,” Padilla said. “This amount of time is obviously well beyond the 60-day repayment period. The DOJ further alleged that Healthfirst, because of its billing practices, caused Continuum to submit erroneous claims to Medicaid, which were the basis for the overpayments. When the DOJ intervened in this action, the maximum penalty under the FCA was requested ($11,000 for every improper overpayment, plus treble damages). Thus, the proposed amount of the fine was almost $30 million.”
Providers need to initiate compliance programs, if they do not already have them, to ensure that the billing is performed properly and accurately.
“Although the possible penalties could be astronomical, providers need to be able to trust that their billing is being performed accurately and timely,” she said. “If they have compliance programs in place, then generally this potential headache would be avoided. Providers and their employees need to be fully aware of the potential for audit, either under ACA or HIPAA. Compliance truly is no longer discretionary; it is mandatory.”
