The Affordable Care Act’s Next Step

The Medicare 60-day overpayment rule is now final. What does it mean for retinal physicians?

DENNIS HURSH

Medicare requires physicians and other providers to report and return any Medicare overpayments within 60 days of identifying this overpayment.¹ The government has finally issued what it considers the definitive guidance on exactly how retinal physicians are expected to comply with this requirement, which became effective on March 14, 2016.² The purpose of this article is to provide background on how we got to where we are today, as well as specific steps you should be taking now to minimize liability under the law.

HISTORY

The Centers for Medicare & Medicaid Services (CMS) have twice unsuccessfully attempted to codify the responsibility of Medicare providers to report and return Medicare overpayments. To this end, proposed rules were promulgated and subsequently withdrawn in 1998³ and again in 2002.⁴

CMS finally got the statutory authority it was looking for in 2010, with passage of the Patient Protection and Affordable Care Act (ACA).⁵ The ACA provides a 60-day reporting and refund requirement for Medicare overpayments.⁶ Specifically, the ACA provides that any Medicare provider that has received an overpayment is required to report and return this overpayment within “60 days after the date on which the overpayment was identified.”⁷

The terms of the statute created many questions for those of us who were trying to advise physicians on how to comply. For example, the statute did not contain a “look-back” period. Accordingly, there was a great deal of confusion as to how far back physicians were required to check to see if they had received any overpayments. There was also significant confusion regarding when an overpayment was considered “identified.”

Moving at light speed (in governmental terms), CMS promulgated a Proposed Rule to implement the 60-day rule just two years later, in 2012.⁸ That rule was widely condemned as draconian, and more than 200 comments were received suggesting changes.⁹ Of particular concern, the Proposed Rule provided a 10-year look-back period,¹⁰ which was widely seen as unrealistic and punitive.¹¹

The Proposed Rule also attempted to give some guidance as to when an overpayment was “identified.” Specifically, the Proposed Rule provided that “a person has identified an overpayment if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.”¹² Although this definition (and the numerous examples given in the Proposed Rule)¹³ helped somewhat, it obviously was not completely definitive.

Of particular concern, in 2015, a New York Federal District Court issued an opinion that held that “the sixty (60) day clock begins ticking when a provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained.”¹⁴

Although the court recognized that “requiring the reporting and returning of overpayments within 60 days of such notice imposes an enormous burden on providers that may often be impossible to meet,”¹⁵ the only consolation offered to physicians by the court was its admonition that “prosecutorial discretion would counsel against the institution of enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments.”¹⁶ In other words, although this may be an impossible obligation, physicians should hope for mercy on the part of governmental regulators. This court case was hardly a prescription for a good night’s sleep for those of us tasked with advising physicians!

No doubt concerned about the happiness of healthcare lawyers, the government moved at a breakneck pace to produce the final rule. A mere four years after the Proposed Rule, and only six years after passage of the legislation, CMS delivered a 71-page spellbinder containing the final rule.¹⁷

WHERE ARE WE NOW?

This is the point where you are no doubt expecting me to lay out the final, definitive, clear, and unambiguous guidance provided by CMS. Unfortunately, although the final rule clarifies many issues regarding the 60-day rule, there are still some gray areas.

Nevertheless, there are several aspects of this rule of which you should be aware. Specifically, we now have a good idea of exactly what constitutes an “overpayment.” We also have a much better idea of when this overpayment is “identified.”

With these two concepts, it is possible to develop a timeline for when an overpayment needs to be reported, and the steps a retinal physician should be taking to assure compliance with the 60-day rule.

WHAT IS AN OVERPAYMENT?

The Final Rule reiterates the definitions given by the Proposed Rule for some examples of an “overpayment.” Specifically, the following are identified¹⁸:

• Medicare payments for noncovered services.

• Medicare payments in excess of the allowable amount for an identified covered service.

• Errors and nonreimbursable expenditures in cost reports.

• Duplicate payments.

• Receipt of Medicare payment when another payor had the primary responsibility for payment.

The Final Rule also clarifies that an overpayment is not the entire amount, but only the difference between the amount that was paid and the amount that should have been paid.¹⁹ There was apparently some confusion on the part of some commentators that perhaps the entire amount that was received should be repaid.²⁰

WHEN IS AN OVERPAYMENT “IDENTIFIED”?

One of the biggest questions concerning the 60-day rule has been exactly when an overpayment is “identified,” which starts the 60-day clock ticking. The statute does not give any guidance in this regard.²¹ The final rule attempts to answer this question as follows.

A person has identified an overpayment when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.²²

That sounds scary, doesn’t it? In fact, though, if you parse through the legalese, there are a few rays of sunshine in this pronouncement. Since the New York Federal District Court had previously held that the clock starts running as soon as you have notice of a potential overpayment,²³ this regulation actually provides significant relief. The new regulation makes it clear that you are given time to analyze a suspected overpayment, investigate the background of the overpayment, and quantify that overpayment. Only then does the 60-day clock started ticking.

Even better, CMS has given some guidance on a reasonable time frame for investigation of a suspected overpayment. Specifically, CMS has provided that “reasonable diligence” is “demonstrated through the timely, good faith investigation of creditable information, which is at most 6 months from receipt of the creditable information, except in extraordinary circumstances.”²⁴ In effect, you are given eight months to identify and report an overpayment (six months to investigate before you are deemed to have “identified” the overpayment, and 60 days to report and repay the overpayment). The “extraordinary circumstances” referenced in the Final Rule indicate instances in which you are given more time to investigate, and does not appear to be grounds to claim that the investigation took too long.²⁵

WHY SHOULD YOU CARE?

The ACA provides²⁶ that the reporting and repayment requirement codified in the 60-day rule is an “obligation” as that term is defined in the False Claims Act.²⁷ That means that failure to comply with the 60-day rule can subject you to a civil penalty of not less than $5,000 and not more than $10,000 plus three times the amount of the claim for each overpayment that you have failed to report and repay.²⁸

False claim liability can be asserted by a private person (eg, the billing person you fired for gross incompetence).²⁹ This means that you must assume that the “walls have eyes” in your practice.

Moreover, as I have previously written,³⁰ the ACA’s “Sunshine Act”³¹ has led to massive scrutiny of retinal physicians, since the amount of money you are reported as receiving from Medicare includes drug reimbursement, even though 94% of that reimbursement was paid to the drug company.³² Because of the extraordinarily expensive drugs utilized by retinal physicians, such as ranibizumab (Lucentis, Genentech, South San Francisco, CA), ophthalmology has been identified in the work plan of the Health and Human Services Office of the Inspector General since 2013.³³ The work plan lists the office’s targets for fraud investigations in the coming fiscal year, and once a specialty is on the work plan, it will probably stay on the work plan.³⁴ This means that retinal physicians are likely to stay in the crosshairs of governmental investigators for the foreseeable future.

The final rule became effective March 14, 2016.³⁵ The rule is retroactive, in the sense that after March 14, 2016, there is a six-year look-back period that should be examined for overpayments.³⁶ However, the rule is not retroactive in the sense that if you have already reported and returned overpayments, you do not now need to review the reporting and repayment to determine if that reporting and repayment complies with the new rule.³⁷

WHAT SHOULD YOU DO ABOUT IT?

An appropriate compliance plan is now more critical than ever. CMS has made it clear that you must exercise “reasonable diligence” in determining overpayments.”³⁸ Reasonable diligence includes both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments and investigations conducted in good faith and in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.”³⁹ In other words, you cannot just sit back and wait for evidence of a potential overpayment to present itself — you must have a reasonable compliance plan in place to proactively search for potential problems.

The good news, if you can call it that, is that CMS has long recognized that compliance obligations are scalable. That is, compliance activities in a smaller setting, such as a solo practitioner’s office, do not need to be as extensive as those in a larger setting, such as a multispecialty group.⁴⁰

However, no matter how small your practice may be, there are seven elements that must be contained in your compliance plan⁴¹:

• Conducting internal monitoring and auditing;

• Implementing compliance and practice standards;

• Designating a compliance officer or contact;

• Conducting appropriate training and education;

• Responding appropriately to detected offenses and developing corrective action;

• Developing open lines of communication; and

• Enforcing disciplinary standards through well-publicized guidelines.

In light of the increased exposure of retinal physicians to fraud investigations resulting from the Sunshine Act, you should carefully review your compliance plan. Although “do-it-yourself” efforts might prove costlier in the long run than retaining a competent healthcare attorney, there are resources available for you to consult.⁴²

The government has made it clear that ignorance is no excuse. It is incumbent on you to have a robust compliance program, appropriate for the size of your practice, that is capable of proactively looking for potential overpayments, and appropriately investigating and resolving any issues that are found.⁴³ RP

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