May 7, 2012

The Affordable Care Act (ACA) requires providers including physicians to report and refund known overpayments within 60 days, or, for providers that submit cost reports, by the date the corresponding cost report is due.  The parameters of this mandate are unclear, but the duty to refund overpayments exists regardless.  After summarizing some of the problems with the ACA provision and with CMS’ proposed regulations implementing the statute, we will offer some practical suggestions on compliance.

The refund requirement, which has been in effect since March 23, 2010 (the date the ACA became law), is vague in several important particulars.  The lack of certainty, far from discouraging compliance, has left many providers, suppliers and affected health plans scrambling to find and refund overpayments within the 60-day window to avoid hefty penalties.  On February 16, 2012, CMS issued a proposed rule that limited its application to Medicare payments and cleared up some, but not all of the confusion—and that would also make the requirement more stringent than did the ACA.  

Physician organizations, led by the American Medical Association (AMA) and the American College of Surgeons (ACS), as well as other health care associations, filed comments on the proposed rule, which CMS is now reviewing.  We hope that there will be some changes before the rule becomes final this summer.   The penalties for failure to refund payments are potentially severe:  retaining an overpayment of which the physician knew or should have known can trigger liability under the False Claims Act or under the Civil Monetary Penalties Law.

Certain key terms are not defined in the statute:

• Identified, as in “60 days after the date on which the payment was identified.”  The payment is identified when the physician (a) has actual knowledge of the overpayment or (b) acts in reckless disregard or deliberate ignorance of the existence of an overpayment when it is revealed through reasonable inquiry.
• After applicable reconciliation and not entitled, as in “’overpayment’ means any funds that a person receives or retains … to which the person, after reconciliation, is not entitled….”

The missing definitions make compliance rather difficult.  CMS has tried, to some extent, to alleviate the difficulty in its Federal Register discussion of the proposed rule.  Thus it states that the 60-day clock does not start running (i.e., an overpayment is not identified) until after the physician has an opportunity to undertake a “reasonable inquiry” into the basis of the alleged overpayment.

A “reasonable inquiry” is a variable concept that depends on the complexity of the type of overpayment at issue.  A mere allegation or suspicion of an overpayment is not enough to require extensive research.  Sometimes, however, verification of payment amounts may entail significant work, including self-audits, documentation reviews and financial analysis that cannot be completed within 60 days.   The AMA commented on the problem and requested that CMS adopt a specific solution:

The proposed rule does not clarify whether the 60-day period begins on the first day that each single overpayment is identified, or on the first day that the inquiry has concluded and a “batch” of possible overpayments has been reviewed. To avoid the confusion that numerous, subsequent reporting days would cause, CMS should finalize a policy that the 60-day period begins on the day that an error-specific overpayment inquiry has concluded.

The AMA wrote, further, that the language used by CMS would create a “perpetual duty to identify” and urged clarification that there would be no ongoing burden on physicians to search proactively for overpayments without having received information or without otherwise having reason to believe that a specific overpayment exists.  The ACS letter urged CMS to limit the duty to investigate to “credible information,” as opposed to the information in one of the examples cited by CMS, “A provider receives an anonymous compliance hotline complaint about a potential overpayment.”  (The American Society of Anesthesiologists signed on to both letters.)

Not entitled and after reconciliation are also troublesome phrases from the statute.   Physicians do not engage in “cost report reconciliation,” which is apparently the reference.  They do use claims resubmission and appeals processes to resolve overpayments that are identified within one year.  Both letters request that CMS harmonize the proposed rule with the existing Medicare carrier, Recovery Audit Contractor and other CMS anti-fraud programs’ claims appeals processes.

Just as significant a problem is the 10 year look-back period announced in the proposed rule.  The proposed rule requires providers to report and refund overpayments received during the prior 10 years. This represents a significant change to current overpayment and refund practices. Current Medicare regulations permit reopening periods of only three or four years for situations where there is no fraud, provider integrity issue, or similar fault.  The AMA comment letter asks CMS to reduce the look-back period to three years, “consistent with other CMS overpayment initiatives,” and urges CMS to limit the reach of the refund obligation to the effective date of the ACA, March 23, 2010.    Should the 10 year look-back period go into effect, reaching back as far as 2002, this change would result in materially increased liability for anesthesiologists and other physicians.

For the time being, although the proposed rule is extremely burdensome, anesthesiologists and pain physicians should be aware that the duty to report and refund overpayments exists now.  There is no deferral until the regulations are finalized.

If the physician has good reason to believe that he or she has received an overpayment, that physician should investigate and make a timely voluntary report of any actual overpayment.  The Medicare Administrative Contractors (MACs) have all posted separate Medicare Secondary Payer (MSP) and non-MSP overpayment forms on their web sites.  In the proposed rule, CMS indicates that physicians should use their local MACs’ forms until a uniform national reporting form is published.

Noridian’s Non-MSP Refund Form is a typical example of a MAC form.  The form itself does not need to be used, but the physician must submit a “similar document containing the following information” for each claim involved (multiple claims may be reported in a list or table on a single form):

• Do you request an immediate offset for this claim(s)?  Y/N
• Did Medicare request this refund?  Y/N
• Reason for refund (for OIG reporting requirements):  This refund is a result of a
  • Corporate Integrity Program
  • OIG Self Disclosure Protocol
  • Voluntary Refund
• Internal Control Number (ICN) [claim number]
• Beneficiary name
• Medicare number (HIC)
• Date of service
• Amount to be refunded
• CPT code
• Reason code for claim adjustment
  1. Billing error
  2. Duplicate
  3. CPT Code change
  • Deny CPT code in full
  • CPT to Reduce CPT from ______to _______
  • UpCode CPT
  4. Corrected date of service
  5. Not Our Patient(s)
  6. Services not rendered
  7. Modifier Add/Remove
  8. Insufficient Documentation
  9. Patient in HMO
  10. Veterans Administration (VA) paid
  11. Medical Necessity
  12. Patient in Skilled Nursing Facility
  13. Other: Insert comment in area above

Additionally, physicians should consider creating and implementing a policy and procedure for reporting and refunding identified overpayments within the 60-day window.

ABC will ensure that all our clients are in compliance—and we will sincerely hope that CMS incorporates the points made by the medical societies in their two letters in the final regulation.

Bonus item: Readers who have not seen Dr. Atul Gawande’s Article Two Hundred Years of Surgery in the May 3rd issue of the New England Journal of Medicine (N Engl J Med 2012; 366: 1716-1723) should note this excellent review of the changes in surgery—the most dramatic improvement being anesthesiology, of course—over the last two centuries.  Anesthesia allowed surgeons to begin operating with precision and not just speed to reduce pain:

Despite the advantages of anesthesia, Liston, like many other surgeons, proceeded in his usual lightning-quick and bloody way. Spectators in the operating-theater gallery would still get out their pocket watches to time him. The butler's operation [leg amputation], for instance, took an astonishing 25 seconds from incision to wound closure. (Liston operated so fast that he once accidentally amputated an assistant's fingers along with a patient's leg, according to Hollingham. The patient and the assistant both died of sepsis, and a spectator reportedly died of shock, resulting in the only known procedure with a 300% mortality.)

With best wishes,

Tony Mira
President and CEO