How, when, and where to return an overpayment

The first problem providers confront when faced with a potential overpayment is that the Centers for Medicare & Medicaid Services (CMS) has yet to provide any definition of what precisely constitutes an overpayment. (See Compliance Hotline, July 8, 2002.) But that is only the first of several important questions that must be answered, says Greg Luce, a partner with Jones Day in Washington, DC.

Once a decision to make a repayment is made, hospitals must determine how quickly to do so, over what period of time, and how far back to go in looking for overpayments. According to Luce, there is a widespread belief among many providers that when an overpayment is discovered there is a need to repay it immediately regardless of the calculation and interpretation. That is a dangerous view, he warns.

Complicating matters is the fact that as hospitals go through the internal debate over how much to repay and when, someone might file a qui tam suit. Once that happens, the benefits of making a voluntary disclosure can be lost or reduced significantly.

In terms of where to report, providers basically have three places to go when they uncover an overpayment, says Rick Ward of the law firm Ropes and Gray in Boston. The lowest level is the intermediary, and if it is just an overpayment, that is the place to go. In most cases, overpayments can be made to the fiscal intermediary or the carrier with a check or an adjustment on the credit balance report or the cost report, he says.

If the overpayment is more complex, it may be necessary to go to the Department of Health and Human Services’ Office of Inspector General (OIG) or the Department of Justice (DOJ), Ward says. If a hospital believes the government could reasonably make a case that there was fraud, the place to go is the U.S. Attorney, he argues, because that is where decisions about the False Claims Act will be made.

Ward says the OIG protocol for overpayment disclosure is daunting because it requires providers to explain why it may have been a violation of the law. "I would rather deal with the U.S. Attorney because it is going to end up there anyway if it is truly a fraud case," he says. The OIG has generally allowed that, he adds.

On the other hand, Luce says, the OIG and DOJ typically do not want to handle disclosures to Medicare Fraud Control Units. "You are going to have to go to the state Medicaid Fraud Control Unit separately," he says. Hospitals also should determine if a repayment is due to private payers based on the same type of mistake where private payers paid on the same basis, he adds.

All intermediaries and carriers now have benefit integrity units, and providers must keep that in mind, says Ward. Those units are required in any unusual payback to make sure the provider explains how the overpayment was discovered, how long it has been there, what caused it, how the payback was calculated, and what was done to make sure that it will not happen again.

Those units can decide to turn an overpayment over to the OIG. But he says that most U.S. attorneys will not pursue cases that were paid back several years ago. "That is the only safe way to go, despite the fact that it is not risk-free," he says.

In terms of when to disclose, Luce says that sooner is better than later and that how far back and what to cover also are very important. "Be very clear about what timeframe was reviewed in the disclosure," he says.

According to Luce, hospitals should not stumble over 30- or 60-day requirements. "Premature disclosure is not necessarily the way you want to go," he warns. "Get the right information to them, and if you can’t get to it then think about a way to make some kind of notice."

Ward says the most important timeframe is the 30 days under the False Claims Act when providers believe the overpayment was more than just an honest mistake. That is because going to the U.S. Attorney within 30 days will limit damages under the False Claims Act, and providers will face double damages instead of triple damages. "All other time limits are totally arbitrary," he says.

Another question is whether to return an overpayment if you are being investigated, says Ward. "For some reason, it is counterintuitive to most [providers] that maybe you should pay it back when the investigation is taking place," he says. "If you know you owe it, I don’t see any reason why you would wait."

In terms of how far back to go, Luce says the four-year civil recoupment provision provides that, in the absence of fraud, that is the measure for determining how far back to go. There is some recent support for that position, he adds. According to Luce, the prospective payment system transfer cases have revealed a disagreement between CMS and the OIG. CMS relies on the four-year measure while the OIG wants to go back even farther.

"Don’t get cute when you are making these repayments," Ward concludes. "Be candid. Tell them exactly what you did, how you did it, how far back you went and what your rationale was."