This installment of Hall Render's Health Law Broadcast series on health care reform is designed to provide you with the insight, analysis and practical suggestions with respect to the various reform initiatives that will affect your organization.

HEALTH REFORM ADDS NEW STATUTORY OBLIGATION TO REPORT AND RETURN OVERPAYMENTS

Section 6402 of the new Patient Protection and Affordable Care Act ("PPACA") amends the Social Security Act to require a person who receives an overpayment to report and return the overpayment and provide a written notification explaining the reason for the overpayment.  Failure to meet the deadline for returning an overpayment exposes that person to civil monetary penalties under the False Claims Act.

Upon verifying the existence of an overpayment, the person must report and return the overpayment to the Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate.  In addition, the person must submit a written notification providing the reason for the overpayment.  The overpayment must be reported and returned within 60 days "after the date on which the overpayment was identified or the date any corresponding cost report is due, if applicable."

These new obligations apply to any provider, supplier, Medicaid managed care organization, Medicare Advantage organization, or Prescription Drug Plan sponsor ("Entity") who receives or retains funds under Medicare or Medicaid to which the person is not entitled.  Funds received or retained are not classified as an "overpayment" until "applicable reconciliation" occurs.  The term "applicable reconciliation" is not defined, but the section implies that applicable reconciliation ends once the person has actual knowledge, or acts in deliberate ignorance or in reckless disregard of the truth or falsity, that the person has received or retained funds to which the person is not entitled.  In short, once the person knows or should know that funds received are an overpayment, the obligation to report and refund is triggered.

If an overpayment is retained after this deadline for reporting and returning, that overpayment is considered an "obligation" under the False Claims Act.  This designation subjects the person to liability under the False Claims Act and civil monetary penalties up to $10,000 per overpaid claim plus treble damages.

The critical question in the analysis is "what is the date on which the overpayment was identified?"  One view is that overpayments are identified when the payment issue is first discovered, which would mean that the Entity must investigate, report, and refund, all within the applicable deadline (i.e., within 60 days).   However, another possible interpretation is that the identification date is the date on which the amount of the overpayment was verified.  In other words, the overpayment cannot be completely identified until after the affected claims are reviewed and the overpayment amount is actually calculated.  Once this calculation is completed, the overpayment is "identified" and the 60 day "clock" to report and refund the overpayment starts running. 

Until further guidance or regulations are issued, it is important for all Medicare billing entities to continue to work diligently to perform a review once they discover that some claims may have been billed in error, and to return the overpayment as soon as possible (but in no event, more than 60 days) after the amount of the overpayment is calculated.  CMS could take a more conservative approach or interpretation of these new statutory reporting obligations, but until further guidance is issued, this seems to be a practical approach for compliance with the new statute.

If you have any questions regarding the new reporting and refund obligations under the PPACA, please contact Scott W. Taebel (staebel@hallrender.com), Lori A. Wink (lwink@hallrender.com), Regan E. Tankersley (rtankersley@hallrender.com) or your regular Hall Render attorney.

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