EXECUTIVE SUMMARY

Report overpayments to CMS properly to avoid creating liability. Know when reporting is necessary, and report without inviting further investigations.

  • CMS requires overpayments to be reported within 60 days.
  • Failure to report can result in False Claims Act allegations.
  • Document decision-making when deciding not to report.

CMS expects hospitals and healthcare systems to report overpayments within 60 days of discovery to avoid false claims allegations, but knowing when and how to report is not always easy. Attention to the process is crucial to avoid creating additional liability or inviting investigations.

A good compliance program will include processes for discovering overpayments, says Mark Bogen, senior vice president of finance and chief financial officer at South Nassau Communities Hospital in Oceanside, NY. He notes that overpayments are not necessarily any indication of error, much less fraud, by the hospital because it is common for Medicare to pay and the hospital finds a primary insurer that should have paid. In those cases, the Medicare payment must be returned.

“We have regular audits to detect situations like that and our staff are trained to look for them and respond,” Bogen says. “We then review the credit balances report on a monthly basis to look for instances in which the amount credited was greater than the value of the account. Sometimes that is a clerical issue or an incorrect initial valuation of the account, but in most cases it’s because you received more cash than you were entitled to.”

Those overpayments can be clear-cut, obvious overpayments once identified. Other situations can be more murky, such as whether documentation of the nature of the service provided accurately supports what was billed, Bogen says. When those cases are identified, they are sent to the hospital’s compliance group for further investigation. The compliance group and the hospital’s internal auditor also proactively search for such cases.

Bogen notes that regulators often work under the impression that their extensive, detailed regulations clearly address every possible situation, when in reality there can be many gray areas. In those situations it is best to take a conservative approach and try to view the case as regulators might, he says.

But at the same time, he says, you can’t be so fearful that you return funds unnecessarily.

“The goal I have is staying within the boundaries of compliance, because as CFO I’m usually the first one they start measuring for a striped suit,” he says. “But if you get so bullied by the process and so fearful of trying to stay in compliance, you can be legitimately leaving hundreds of thousands, if not millions, of dollars on the table as a result of this battle between black and white and gray.”

Invest in Technology

For those cases that are not so clear, South Nassau sends them to the hospital’s compliance group for further investigation. If they determine that the services were not appropriately billed, the compliance counsel helps prepare a letter to the fiscal intermediary, Bogen says. The letter would include a listing of the accounts that were identified as overpaid, a dollar amount, and a check to return the funds.

An effective compliance program will require some investment in technology and administrative overhead to detect and respond to overpayments, Bogen says.

“It’s also all about the culture. This idea of prompt discovery and investigation is part of our revenue cycle culture,” Bogen says. “Regulators say that effective self-reporting is one of the best signs of a good compliance program, so we make that our goal. We have a definitive compliance culture ingrained in our institution, but I struggle sometimes to make sure that culture doesn’t overwhelm a system where we all believe there is plenty of gray left in the interpretation of hundreds of thousands of regulations.”

Regulators will look to see if you exercised reasonable diligence in determining whether a claim was overpaid, says Gejaa T. Gobena, a partner with the law firm of Hogan Lovells in Washington, DC. A particular area of risk lies in determining the scope of overpayments, he says.

“That’s an area where providers can get into trouble. They don’t do extensive enough review of related or similar claims to determine the extent of the overpayment,” Gobena says. “If you have an overpayment that could possibly be linked to others and you choose not to conduct a thorough investigation, you should at least document your reasoning carefully with memos to file. Potential whistleblowers are always lurking in the background, so you want to make sure you document your decision-making later on to show why you did what you did and shouldn’t be subject to False Claims Act liability.”

Document Decision-making

The provider’s decision whether to report must be clear and defensible, says George B. Breen, JD, an attorney with the law firm of Epstein Becker Green in New York City. It is critical to be able to demonstrate and document, through an established process, that there was a reasonable and good faith determination of whether to report an overpayment, he says.

“Providers must have a carefully thought-through process in place to investigate potential overpayments, and that process needs to be delineated before a potential overpayment is identified. The organization needs to be able to demonstrate that it is making efforts to identify any situation in which it has received money to which it is not entitled, and has implemented a process to return those funds determined not rightfully in its possession,” Breen says. “While the government may not agree with the entity’s assessment that there was not an overpayment to report, that does not mean that liability attaches merely as a result of that disagreement — and any government effort to make that contention should be resisted vigorously.”

Recent information from CMS clarifies when the 60-day clock starts running for returning overpayments, says Peter M. Hoffman, JD, a healthcare attorney with the law firm of Garfunkel Wild in Great Neck, NY. CMS expects the provider to proceed in good faith when there is credible information suggesting an overpayment, he says, but that moment is not necessarily when the 60-day timer starts running. CMS allows for a period of investigation lasting no longer than six months.

“CMS says if you are exercising reasonable diligence and moving forward in a timely manner, the 60-day timer won’t start until you have completed your investigation,” Hoffman says. “But the time you have for that period of reasonable diligence is, at most, six months from the time you receive credible information, unless there are extraordinary circumstances.”

CMS allows many methods for returning overpayments, Hoffman says, including claims adjustments, and returning funds directly to an intermediary.

Decide Who Will Receive Report

When there is an overpayment, the provider must decide to which government entity to report and the mechanism through which to do so, Breen says.

For example, is this a straightforward repayment to a contractor resulting from an error? Or is there a reason to be concerned about potential False Claims Act liability? If so, a report to a U.S. Attorney’s Office is the right venue, given that only the Department of Justice can offer a False Claims Act release, Breen says. Caution must be exercised so the report is given to the entity that can address the specific concerns the provider may express as a result of the identification of the overpayment, and for the provider to obtain the greatest potential protection from the report, Breen says.

If there is concern about potential False Claims Act liability, reporting to a contractor will not be sufficient and there is risk of further investigation, Breen says.

“It is important to recognize that reporting and acceptance of a voluntary refund in no way affects or limits the rights of the federal government or any of its agencies or agents to pursue an appropriate criminal, civil, or administrative remedy arising from or relating to the claims subject to the voluntary refund,” Breen says. “As a result, it is critical to make the right determination of the entity to which an overpayment should be reported.”

SOURCES

  • Mark Bogen, Senior Vice President of Finance and Chief Financial Officer, South Nassau Communities Hospital, Oceanside, NY. Telephone: (516) 632-3965. Email: mbogen@snch.org.
  • George B. Breen, JD, Epstein Becker Green, New York City. Telephone: (202) 861-1823. Email: gbreen@ebglaw.com.
  • Peter M. Hoffman, JD, Garfunkel Wild, Great Neck, NY. Telephone: (516) 393-2268. Email: phoffman@garfunkelwild.com.
  • Gejaa T. Gobena, Hogan Lovells, Washington, DC. Telphone: (202) 637-5513. Email: gejaa.gobena@hoganlovells.com.