How to deal effectively with fiscal intermediaries

There is no shortage of potential pitfalls when hospitals deal with Medicare fiscal intermediaries — and no shortage of suggested methods for dealing with those problems, says health care attorney Dennis Barry, a partner with the Washington, DC-based firm Vinson & Elkins.

Barry’s initial advice to hospitals is that, when they make a disclosure, they should be less concerned with minimizing their False Claim Act exposure by reporting it within 30 days than they are with accurately assessing the situation. "What I find a lot more important than counting days is getting the facts right," he asserts. "There have been occasions when it turned out [that] there was not even an overpayment, yet some people were ready to slice their veins in the U.S. Attorney’s office."

Most of the time, the government does not penalize disclosures, adds Barry. Settlements reported in the Department of Health and Human Services’ Office of Inspector General’s (OIG) semi-annual reports arising from provider self-disclosures appear to be settled on the basis of an overpayment with interest that tends to be less than double damages, he says.

Here is a rundown of some of the most hotly contested areas between hospitals and intermediaries, and Barry’s advice for managing those situations:

- Routine supply charges. According to Barry, routine supply charges, which Medicare lumps in with routine room and board, are suddenly coming under the scrutiny of many intermediaries. "They are going into hospitals and challenging hospitals that are charging for what they call routine supplies," he reports.

He says some intermediaries have published lists of the supplies that they deem to be routine and those that should be included in the ancillary cost center medical supplies charge.

Under the intermediary’s theory, if a hospital finds that it has used routine supplies in its outpatient area, it probably has some claims that have been improperly charged. "Do you have a cost reimbursement problem?" he asks. "This is a complicated area, but often my answer is no."

If the charges for routine supplies had been applied uniformly, then removing those charges from both the Medicare and total charge statistics should leave the net cost reimbursement amount unchanged unless there is a "lower cost or charges" issue.

"Believe it or not, even though you have been charging incorrectly, you have not, when the cost report gets filed and settled, been overpaid," Barry asserts. "You probably have not even been overpaid on an interim basis because your interim rate is based upon last year’s cost report and you have the same charge structure in last year’s cost report."

- Is any overpayment too small to return? As a practical matter, Barry says there are certain overpayments that the government will conclude are not worth collecting. "They will never say that there is a de minimus threshold, I can guarantee that," he adds. But, he notes, even to appeal a case to the Provider Reimbursement Board, there is a $10,000 threshold.

- Stark violations. Barry says it is not uncommon to find possible self-referral violations where there are financial relationships between hospitals and physicians or between other entities and physicians, where physicians are making referrals for designated health services. But when hospitals discover there is a "clear violation" of the Stark law, the repercussions are too awful to imagine, he asserts.

"The consequence of that determination is that all of the services ordered by the physician with whom you have the financial relationship are not Medicare-covered," says Barry. He says the good news is that the government appears to be relaxing those interpretations before the Stark II regulations become final in May. "But at some point Stark is going to be a real problem for us," he cautions. "The government is really going to start enforcing this law."

s Medical directors. Suppose a hospital is paying a physician a fee of $400,000 a year, and that person shows up for an hour a year to collect the check. The hospital has a 10-year binding contract, but tells the physician the contract violates the law and therefore is void as a matter of public policy.

"This is a valid defense to a contract that violates the illegal remuneration statute," argues Barry. "The problem is that the government applies the same theory to illegal remuneration as it does to Stark." He says the government will maintain that if a hospital files a claim for services that had been ordered by a physician who is being paid illegal remuneration, the hospital is filing a false claim and the services are not covered.

"This is something to consider the next time you file suit against a physician because you want to break a contract that you feel violates the illegal remuneration statute," he warns. "I don’t think you are going to get hammered by the government for trying to do the right thing, but it is certainly something to put into the equation."

- Is any overpayment too old to return? Barry says that confusion often surfaces when a hospital discovers an overpayment that is more or less ancient history. "Under the Medicare reopening rules, you can only reopen a cost report within three years after the initial date of program reimbursement; but as a practical matter, that is a five-year period," says Barry, "because it usually takes two years for a cost report to be settled."

According to Barry, claims can be reopened within four years of the adjudication date for the claim. "That is when you get paid or when the hospital receives the remittance advice," he says. But the government tends to be sloppy about that, and treats some claims issues as cost report issues, he adds.

"In my view, if it is beyond that reopening period, you are entitled to the money because it is not an overpayment unless somebody in the organization knew about this within the reopening period and sat on it," he explains.

- What if the amount of the overpayment is unclear? According to Barry, another frequent problem is that an overpayment is discovered but the amount is uncertain, such as self-administered drugs billed to Medicare Part B. "You can’t pick a revenue code and pull this off the computer system because the same revenue code was used to bill for covered drugs," Barry explains. "The only way to get at this is to go into the claims."

But then the question arises over whether the hospital has an affirmative obligation to go into all those claims for either the claims reopening period or the cost report reopening period. "You are talking an incredible volume of work," warns Barry. "I am sure that some vendors would be happy to argue for using that approach, but this is a situation where you ought to use a sampling approach." He says hospitals may even want to consult the intermediary beforehand to work out a mutually acceptable approach.