While considerable attention has been paid to the Affordable Care Act (ACA) and its requirement that “identified overpayments” be promptly repaid to the government, it is important to keep in mind that this repayment obligation was already in place. In fact, the government has long maintained that providers participating in Federal and State health care programs are required to voluntarily return any overpayments they may have received. To the extent that a provider has received unearned or undeserved payments due to a mistake (whether by the government or the provider) or some other reason, the provider cannot enrich themselves at the government’s expense. Are you facing a possible overpayment situation? Give us a call. The health care lawyers at Liles Parker are available to help you work through the process. For a free consultation, please call us at: 1 (800) 475-1906.
I. Pre-ACA Obligations to Return Overpayments to the Government:
A provider’s affirmative obligation to return monies that belong to the government before the government is even aware that monies are owed is set out in the Office of Inspector General’s (OIG’s) Compliance Program for Third Party Billing Companies which states:
“Failure to repay overpayments within a reasonable period of time could be interpreted as an intentional attempt to conceal the overpayment from the government, thereby establishing an independent basis for a criminal violation.” 
This position was upheld in the case of United States v. Yale University School of Medicine, Civil Action No. 3:97CV02023 (Sept. 1998, USDC Connecticut) where the government intervened in a qui tam action based on the failure to repay money owed to the government. In the case, the government ultimately obtained a $1.2 million False Claims Act settlement based on the failure to return credit balances owed to the government.
Finally, a provider could be held criminally liable for the concealment or failure to disclose payments that were not authorized. As 42 U.S.C. §1320a-7b(a)(3) provides, it is a felony, and can result in fines of up to $100,000 and imprisonment of up to 10 years, if someone:
“having knowledge of the occurrence of any event affecting (A) his initial or continued right to any such benefit or payment, or (B) the initial or continued right to any such benefit or payment of any other individual in whose behalf he has applied for or is receiving such benefit or payment, conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized,”
II. Impact of the Fraud Enforcement and Recovery Act of 2009 (FERA) on Overpayments:
To the extent that the question remained open to some in the industry, it was fully and finally resolved with the passage of the Fraud Enforcement and Recovery Act of 2009 (FERA). FERA was passed to assist health care fraud enforcement efforts and among other things, it expanded the definition of an “obligation” that had to be repaid to the government to include overpayments and it specifically included the “retention of an overpayment” as a possible basis for claims brought under the FCA.
With the passage of FERA, it became quite clear that there was no affirmative act necessary for a provider to become liable under the False Claims Act – knowingly retaining an overpayment resulted in liability, even though the provider may not have made a “false statement” in connection with the overpayment.
III. Impact of the the Affordable Care Act (ACA) on Overpayments:
The ACA was enacted in 2010. In addition to fundamentally changing the way people are insured and making coverage accessible to previously uninsured people and containing a large number of fraud enforcement provisions, the ACA contained a provision that required health care providers to identify any overpayments they receive and to report and repay them within 60 days of identification. As 42 U.S.C. 1320a-7k(d) provides:
(d) Reporting and Returning of Overpayments
(1) In General
If a person has received an overpayment, the person shall —
(A) report and return the overpayment to the Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address; and
(B) notify the Secretary, State, intermediary, carrier, or contractor to whom the overpayment was returned in writing of the reason for the overpayment.
(2) Deadline for Reporting and Returning Overpayments. An overpayment must be reported and returned under paragraph (1) by the later of —
(A) the date which is 60 days after the date on which the overpayment was identified; or
(B) the date any corresponding cost report is due, if applicable.
(3) Enforcement. Any overpayment retained by a person after the deadline for reporting and returning the overpayment under paragraph (2) is an obligation (as defined in section 3729(b)(3) of Title 31, United States Code) for purposes of section 3729 of such Title.” (emphasis added)
IV. Issues Likely to Arise When Assessing a Possible Overpayment:
As many providers can readily attest, confirming that an overpayment exists is not always that easy, especially in complex cases where a patient has secondary insurance and/or the number of claims processed (as charges, credits and corrections) may be quite large. Additionally, due to the complexity of Medicare coverage and payment rules, two reasonable individuals may disagree as to whether an overpayment is present. This creates obvious difficulties in the context of identifying overpayments in the first place and, of course, with reporting and repaying them.
Questions for you to consider when assessing whether an overpayment exists include, but are not limited to the following:
- What is an Overpayment?
Under Sec. 6402 of the ACA / 42 U.S.C. 1320a-7k(d)(4), the term “overpayment” means any funds that a person receives or retains under subchapter XVIII or XIX [Medicare and Medicaid programs] to which the person after applicable reconciliation, is not entitled under such subchapter. (emphasis added).
- When is an Overpayment Identified?
Unfortunately, the ACA does not define or describe when an overpayment is “identified.” The views of providers and third-party billing companies could vary greatly on this issue. Nevertheless, when it appears that an overpayment may exist (even if the amount has not been determined), we recommend that providers and billers:
(1) Diligently work to identify the nature and scope of an overpayment.
(2) Avoidance and / or refusing to research and clarify the nature and scope of an overpayment will be negatively viewed by the government and could increase the likelihood of a qui tam.
- What Types of Actions Might Constitute an Identified Overpayment?
We recommend that providers and third-party billing companies should be on the lookout for a variety of events which could signify that an overpayment is present. Examples include:
(1) A routine audit discloses full payment by a beneficiary’s primary and secondary payor for the same claim.
(2) A clinic learns that one of their employees or providers has been excluded from participation in Medicare.
(3) An anonymous employee alleges that claims are being improperly billed.
(4) A patient calls and states that she never received a certain service.
- What is a Provider Obligated to do When an Overpayment is Identified?
Pursuant to 42 U.S.C. 1320a-7k(d)(1)(A) and (B), once an overpayment is identified, a provider is obligated by law to “Report and return the overpayment to the Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address; and . . . Notify the Secretary, State, intermediary, carrier, or contractor to whom the overpayment was returned in writing of the reason for the overpayment.”
- What is a Third-Party Billing Company Obligated to do When an Overpayment is Identified?
The liability of third-party billers with respect to the knowing retention of an overpayment is not expressly covered under the Affordable Care Act. Nevertheless, they would still face liability under FERA, which provides:
“Any person who. . .knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government is liable. . .” 31 U.S.C. §3720(a)(1)(G).
The bottom line is clear – third-party billing companies must actively work with their clients to promptly repay any overpayments identified.
- When Must an Overpayment be Reported and Returned?
Once identified, providers are required to report and refund an overpayment to the government within 60 days of the date on which the overpayment was identified or the date any corresponding cost report is due, if applicable. While the statute remains unchanged, CMS subsequently clarified that it did not consider an overpayment to have been “identified” under the 60-day rule until a provider has or should have, through “reasonable diligence,” quantified the overpayment. CMS has further stated that reasonable diligence can be “demonstrated through the timely, good faith investigation of credible information, which is at most 6 months from receipt of the credible information, except in extraordinary circumstances.” In other words, if you can show that you exercised reasonable diligence in your efforts to quantify how much is owed, you could take up to 6 months, plus 60 additional days, to report and return an overpayment. 
V. Additional Issues to be Considered After an Overpayment has Been Identified:
Once an overpayment has been identified, there are a number of other issues to be considered by providers and third-party billers.
(1) Co-payments must be returned to beneficiaries. Once you have returned any monies owed to the government, any associated co-payments paid by beneficiaries must also be returned. (See 42 C.F.R. § 489.41).
(2) Was the overpayment an isolated event or merely an indication of a larger problem? Was the error or other action that caused the problem an isolated event? If not, you likely have an obligation to repay other similar errors from prior periods. The Final Rule for the reporting and returning of overpayments established a 6-year lookback period for the reporting and returning of monies that are owed to the goverment. See 42 CFR 401.305(f).
(3) What is the appropriate mechanism to return an identified overpayment? Although most overpayments are appropriately returned directly to your Medicare contractor, there are instances where you may want to handle the disclosure and return of funds differently. We recommend you engage qualified health care legal counsel to assist you in determining the appropriate mechanism to return identified overpayments. Possible options for returning an overpayment include:
- Medicare Administrative Contractor (MAC). In most cases, routine overpayments should be reported and returned to the MAC responsible for processing your Medicare claims. Each MAC has developed a form for the reporting of overpayments. All MACs will require that you provide the specific (1) claim numbers at issue, (2) the reason for the overpayment, and (3) the method of repayment (by check or recoupment).
- HHS, Office of Inspector General (OIG). The OIG has published a “Provider Self-Disclosure Protocol.” Notably, it is not intended to cover mere accidents or mistakes and is not intended to cover Stark violations.
- Centers for Medicare and Medicaid Services (CMS). CMS has now published a Stark self-disclosure protocol, referred to as the “CMS Voluntary Self-Referral Disclosure Protocol” (SRDP). Under the SRDP, providers of services and suppliers can self-disclose actual or potential violations of the physician self-referral statute.
- Department of Justice (DOJ). Under certain circumstances, you may find it beneficial to contact DOJ directly. For instance, prompt disclosures of violations of the False Claims Act can limit a provider’s potential damages.
Despite the fact that significant strides in compliance have been made by large Medicare providers (such as hospitals and nursing homes), it has been our observation that most physician practices and third-party billers still do not have a tailored Compliance Plan in place. In an effort to reduce the likelihood of an overpayment, we recommend that you draft and / or an effective Compliance Plan. Moreover, to the extent that you have not already done so, you should conduct a “GAP Analysis.”  If deficiencies are identified, correct them and repay any monies that may be owed.
 63 Fed. Reg. 70138 (Dec. 18, 1998).
 For a discussion of the GAP Analysis process, we recommend you review our article titled “How to Conduct a GAP Analysis of Your Health Care Practice.”