Tougher Medicare Overpayment Rules: What Must You Do Now?

Leigh Page


June 01, 2016

In This Article

New Pressure to Give the Money Back

The final regulation on Medicare overpayments to physicians and other providers increases the pressure on physicians to find overpayments and pay them back. Under the new rule, which took effect on March 14, practices are now expected to scour their books—going back as far as 6 years—and repay every overpayment they can find, even those that resulted from the payer's own mistakes.

The rule recognizes that practices are not going to be able to identify each and every overpayment made to them. Instead, it limits liability to situations when staff have "credible evidence" of a possible overpayment. When this happens, though, practices are expected to actively investigate the claim.

Many practices will have difficulty meeting this new standard, according to Mick Raich, president of Stark Medical Auditing and Consulting in Blissfield, Michigan. He says that although billing staff can be expected to occasionally fail to identify an overpayment, many practices are more careless than that. Some practices, Raich says, don't take action even when they are informed of an overpayment. When Medicare sends a "demand letter" requesting return of an overpayment, many practices simply ignore the letter and let the overpayment slide, he says.

But under the new rule,[1] practices are required not just to respond to demand letters, but also to evidence of a possible overpayment. When they are aware of such evidence, the new rule says, they must exercise "reasonable diligence" to pursue it, and this means "timely, good faith investigation of credible information."

Furthermore, the rule states that physicians must undertake "proactive compliance" to determine whether they have been receiving underpayments, but the Centers for Medicare & Medicaid Services (CMS), which wrote the rule and is enforcing it, denies that "proactive compliance" involves costly internal audits.

The penalty for violating the rule is steep. Practices and other providers could be charged with violating the False Claims Act (FCA). FCA fines range from $5500 to $11,000 per claim and a payment of up to three times the amount of damages the government sustained, according to a CMS report.[2]

The FCA penalty, often meted out against hardcore fraudsters, would get the attention of physicians who rarely crack the door to their billing department, according to Devin S. Schindler, a law professor at Western Michigan University. The high fees, multiplied by numerous violations, could be "a death sentence" to a practice, he says, adding that doctors could be removed from the Medicare program.

However, the rule would protect physicians from this stiff penalty if they look for the overpayment and return the money. Physicians have up to 6 months—or longer in "extraordinary" circumstances—to investigate the error, and then another 60 days to make the repayment, the regulation states.

Raich thinks the new rule may have the effect of forcing doctors to get more involved in their billing functions. "Often, doctors' only exposure to the problem is when their contracted billing company gives them a refund check to sign," he says.

The regulation is based on a provision in the Affordable Care Act, establishing that physicians who did not pay back Medicare or Medicaid overpayments in a timely manner would be subject to the FCA. It took CMS 6 years to complete the rule-making process on Medicare payments, and the agency still hasn't issued regulations for Medicaid overpayments. But even before the final Medicare rule was released, it was already in force. There has even been a court decision[3] against a hospital organization, based on an earlier version of the Medicare rule.


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