Overpayment disclosures still pose risk for hospitals

When it’s published, the Centers for Medicare & Medicaid Services’ (CMS) final regulation on overpayments likely will be the most significant development yet regarding the controversial practice of disclosing Medicare overpayments. But compliance professionals and health care attorneys should bear in mind that not every question about overpayments is included in the proposed regulation and that the government has not yet decided how an overpayment will be defined, says Greg Luce, a partner with Jones Day in Washington, DC. In addition, it’s not certain when CMS might publish a final overpayment regulation.

Luce says the bottom line is that the government is committed to voluntary disclosure, and providers have learned a lot about that process. "A voluntary disclosure is one of the most important defensive measures that you can take," he says. But he warns that it does not prevent any subsequent claim by the government under the False Claims Act or other criminal or civil penalty statutes.

Luce says the key is to make sure the disclosure is done in a way that does not result in a course of action that leads to fines, interest, or other consequences.

He points out that if and when CMS’ proposed regulation takes effect, it will not be the first self-disclosure regulation. In addition, many questions, such as when the overpayment took place and whether there is a pending adjustment such as an open cost report, are not addressed by those regulations.

When providers are considering a voluntary disclosure, the starting point is the legal obligations imposed, rather than the latest pronouncement from a carrier or a retrospective review in the form of a fraud alert by the Health and Human Services Office of Inspector General (OIG), Luce asserts.

"What is needed is a disciplined and studied determination of whether the law requires the repayment," Luce explains. "That kind of disciplined study is not found in the latest CMS regulation."

For example, the proposed regulation requires repayment within 60 days but does not say when the determination was made, he says. It also fails to address waiver of liability issues if a reasonable mistake took place that could not have been avoided by a reasonable interpretation or application of the regulations.

Rick Ward, of the law firm Ropes and Gray in Boston, says the problem is that the fundamental distinction between inadvertent errors, negligence, and reckless disregard often are blurred. "Those distinctions determine a number of potential problems for anyone who deals with the Medicare program," he says.

According to Ward, health care attorneys and hospitals must determine if an overpayment is simply an error and whether it even rises to the level of a civil false claim much less a criminal false claim. He points out that while federal statute requires disclosure of any overpayment, failing to disclose is not a crime.

"If you can honestly conclude that it does not obligate you to disclose, that does not mean you are not going to disclose," he asserts.

Ward argues that CMS would not be proposing a regulation requiring repayment if it believed that obligation already existed. That said, Luce and Ward say the risks are too great not to return the overpayment. "There are too many opportunities for people to file qui tam cases," Ward says. In addition, the government probably will stumble across the overpayment anyway.

According to Ward, the rules for reimbursement, overpayment, and recoupment often are overlooked by government agencies attempting to ferret out fraud.

"They have blurred the distinction between clear cases of fraud and second guessing what the actual Medicare rules mean," he says. "It is only when you know that you have an overpayment that you should think about disclosing, but it is not required by law."

"The simple reality is you do have money that does not belong to you, and the right thing to do is to give it back, even if there is not a criminal statute that requires you to do so," Ward points out.

The OIG’s guidance regarding overpayment can be helpful, Luce says. But it is only guidance, he cautions, not a mandate. Moreover, the OIG’s protocol does not apply in all repayment and disclosure circumstances. Hospitals often will have to deal with the Department of Justice and possibly a state Medicaid Fraud Control Unit.

"The key here is to make sure that everything you say is absolutely truthful," Luce says. "By that, I mean each sentence in your letter would on its own stand alone as a truthful statement." Some of the criminal investigations Luce has confronted actually have addressed not the conduct disclosed but the nature of the disclosure, he reports.

Finally, paying back the absolute minimum that might be due usually is not a good idea, Luce says. If providers give a range that includes a high and a low and pay the midrange, that is probably the safest route, he says.