CMS Rule Could Result in More Lawsuits

Updated: Jun 10, 2018

A rule released earlier this year by the Centers for Medicare & Medicaid Services (CMS) may lead to an increase in cases involving the regulation. The new CMS Medicare overpayments rule, released in February, requires providers to return excessive reimbursements within sixty days of identifying them, as mandated under the Affordable Care Act.

The rule was issued to clarify requirements for the reporting and returning of self-identified overpayments. The major provisions of the final rule include clarifications around: the meaning of overpayment identification; the required lookback period for overpayment identification; and the methods available for reporting and returning identified overpayments to CMS.

In the final rule, CMS clarified that an overpayment has not been identified under the sixty-day rule until a provider has, or should have, through “reasonable diligence,” quantified the overpayment. Additionally, the sixty-day rule only applies to overpayments identified within six years after they were received. CMS reduced the lookback period from the initial ten-year lookback period to six, to avoid imposing unreasonable burdens or costs on providers and suppliers.

Mount Sinai

The regulation recently came into play when a whistleblower alleged that a New York hospital group kept $844,000 in Medicaid overpayments past the 60-days. In late August 2016, Mount Sinai Health System agreed to pay $2.95 million to settle the “reverse false claims” allegations. The government alleged that between 2009 and 2010, Mount Sinai Beth Israel, Mount Sinai St. Luke’s, and Mount Sinai Roosevelt erroneously submitted claims to Medicaid for payment due to software error.

The New York State comptroller notified Continuum of the software glitch in 2010. In 2011, Robert Kane, the employer who filed the whistleblower suit, provided a list of the claims affected by the software error to Continuum. It took Mount Sinai nearly two years to complete its repayments for the 444 erroneously billed Medicaid claims in violation of the sixty-day rule.

In that decision, last August, U.S. District Judge Edgardo Ramos noted that an overpayment is considered identified when a healthcare provider is put on notice of a possible overpayment. According to Judge Ramos, “after Kane put defendants on notice of a set of claims likely to contain numerous overpayments, defendants had an established duty to report and return wrongly collected money.”

What Should Providers Do to Protect Themselves?

According to attorney Kenneth Marcus, in order to avoid lawsuits or investigations into overpayments, “providers clearly have a duty to establish and conduct a rigorous compliance program that enables overpayments to be identified, quantified, reported, and refunded.”

Mount Sinai fired the employee who identified the overpayment, stalled in reporting the overpayment, and did not fully disclose information regarding the overpayment. At the very least, providers should strive to do better than Mount Sinai, the new “poster child” for how providers should not conduct themselves during a possible overpayment scenario.

Marcus warned that while the sixty-day rule itself may not immediately result in more overpayment-related cases, “enforcement agencies now have a rulebook by which to play.”

For providers, it is important to properly evaluate any information regarding a potential overpayment to determine whether the information is credible. If a determination is made that the information is not credible, providers should document the work done to reach that conclusion and why it was deemed not to be credible.

On the other hand, if the information is credible or potentially credible, providers should promptly begin an inquiry and outline what reasonable diligence is needed to determine (1) whether an overpayment exists and, (2) if there is an overpayment, how to accurately and efficiently quantify it.

Providers should take great care to document the diligence performed, the scope of the inquiry, and the methodology used to quantify the overpayment,

understanding that a six-year lookback period will apply to any overpayments reported or repaid on or after March 13, 2016. It may be a good idea to seek objective counsel for guidance through this process and validation that the inquiry was sufficient and conducted in good faith. Unfortunately, in this world, we sometimes have to prepare ourselves for defending against litigation several years from now.

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