• The Overpayment 60-day Rule
  • August 3, 2012 | Author: Thomas R. Courage
  • Law Firm: Hinckley, Allen & Snyder LLP - Providence Office
  • Now that the Supreme Court has upheld key provisions of the Affordable Care Act, providers must focus increased attention to operative provisions of the Act. One such provision is the “60-day Rule." On February 16, HHS published a proposed rule purporting to interpret the so-called “overpayment provision” of the Act. Generally, this enactment requires that a provider that has received funds to which it is not entitled under Medicare or Medicaid must report the overpayment and return it to the appropriate source within 60 days. Failure to comply with the provision could give rise to liability under the Civil Monetary Penalty clause and the False Claims Act, and could lead to program exclusion proceedings.

    The issue of what a provider is supposed to do upon discovering that it has received excessive reimbursement from governmental programs has always involved a large amount of judgment, including consideration of such issues as the obligation to review comparable payments for some indeterminate number of prior years in order to ascertain whether additional overpayments have occurred. Many Medicare enforcement officials have taken the position that knowing retention of an innocently received overpayment can be the basis of a False Claims Act count, and the proposed regulation purports to memorialize that position, bolstered by the provisions of the new law.

    The proposed rule raises a number of legal issues that may or may not be addressed in the final publication of the rule. This Update addresses some of those issues.

    The most significant areas of uncertainty relate to: (1) whether a provider must have actual knowledge of an overpayment in order for the rule to apply; (2) when the 60-day clock begins to run; and (3) whether it is really necessary (as the proposed rule states) to return overpayments of a given type for as many as ten years after receipt.

    The basic obligation of the statute is that the provider must report an overpayment to the paying body and notify the paying entity of the reason for the repayment. The proposed rule introduces the fairly obvious concept that the obligation addressed by the rule arises from and after the time the provider identifies the overpayment. An issue that will be discussed below is the set of elements that amount to such “identification”.

    Identification: Imputed Knowledge

    The proposed rule takes the position that a provider has identified an overpayment if it has actual knowledge of such receipt, or if it should have known (even if it does not) that an overpayment has been received. An example of the latter situation suggested in the preamble to the rule would include a hotline complaint about a possible overpayment. If the rule is enacted in this form, the 60-day period would begin to run at some point fairly soon after receipt of the complaint. The position taken by the proposed rule with respect to constructive receipt goes beyond the language of the statute, which appears to contemplate liability only when a provider has actual knowledge. Comparable provisions of law make it clear that Congress knows how to articulate the notion of constructive knowledge when it wishes to do so.

    Similar issues arise as to whether states of knowledge short of actual knowledge can result in a False Claims Act claim. There is certainly a question regarding whether failure to comply with the 60-day requirement can, alone, constitute a false claim.

    When the 60-Day Period Commences

    Moreover, determining that an overpayment has in fact occurred can in fact take weeks or months as questions percolate up through coders, billing departments, supervisors, compliance departments, inside counsel, outside counsel and sometimes to requests for advice from paying agencies. The proposed rule seems to assume that complex payment questions, once identified, can be subjected to a relatively quick litmus test, which is not always the case.

    Ten Year Lookback

    The incorporation into the proposed rule of the 10-year lookback period would mark a radical departure from prior practice. Our experience is that the great preponderance of overpayments can fairly be classified as honest errors, without fraudulent intent or reckless disregard. Under such circumstances, providers have generally felt comfortable relying on the reopening rules and parallel provisions of the Social Security Act, which appear to confer finality on payments made more than four years prior. The 10-year look back appears to be inconsistent with these provisions of the Social Security Act, and thus, in excess of HHS’ authority to decree. (The rare case involving purposeful fraud is another story).

    Hopefully, HHS will respond to arguments such as the above and conform its final rule under the overpayment statute to its existing legal authority. If the rule is enacted in its proposed form, of course, a provider would indeed be acting at its peril in disregarding its provisions. Pending the final rule, however, there is at least some room for optimism that HHS will retreat from some of its somewhat extreme positions in the promulgation of the final rule.