HEALTH INDUSTRY ONLINE - MEDICARE OVERPAYMENTS

In January of 2007, East Tennessee Heart Consultants ("ETCH") entered into an agreement with prosecutors in which ETCH paid 2.9 million dollars in civil and criminal penalties. These substantial penalties were levied against ETCH for failing to disclose known Medicare overpayments, a practice that in recent years has become closely scrutinized and investigated by the government.

Providers and suppliers of Medicare covered services and supplies under Parts A and B often receive Medicare overpayments (funds received in excess of amounts due and payable). These overpayments can be caused by either provider, supplier or carrier errors, such as clerical mistakes in the billing office of the provider or supplier, incorrect eligibility determinations, payment to the incorrect payee or payment for excluded or medically unnecessary services by the carrier.

Statutory and common law mechanisms enable the government to reclaim Medicare overpayments. The Medicare Act authorizes the government to (i) recoup overpayments by reducing present or future Medicare overpayments; (ii) suspend payment of an approved Medicare payment amount or (iii) re-open a final determination which, though enabling the government to receive monies for overpayments, may not allow a provider or supplier to regain monies owed for Medicare underpayments.¹ The Federal Claims Collection Act, the government's basic authority for debt management practices, enables agency heads to collect claims in any amount and settle the claims for $100,000 or less.² The Debt Collection Improvement Act of 1996 mandates referral of debts delinquent for more than 180 days to the Department of Treasury for payment offset.³ Common law causes of action for overpayment recovery include unjust enrichment, payment by mistake, common law fraud and unfair business practices.

Self-reporting is another vehicle through which the government regains Medicare overpayments. Small dollar overpayments may be reported to local Medicare carriers; however, substantial overpayments may need to be reported to the OIG. The OIG's Self-Disclosure Protocol encourages the voluntary reporting of known overpayments and provides a process through which overpayments can be disclosed.⁴ There are definite advantages to reporting known overpayments. Concealment of known overpayments can be prosecuted as either a misdemeanor (punishable by up to a $10,000 fine and/or one year in prison) or a felony (punishable by up to a $25,000 fine and/or up to 5 years in prison).⁵ By self-reporting overpayments, the provider or supplier may avoid criminal penalties for failure to disclose and damages may be mitigated. For example, under the False Claims Act, for self-reports within thirty days of discovery of the overpayment, a court may cap liability at double damages instead of imposing a penalty of triple damages.⁶ Self-reporting, however, does not immunize the provider or supplier from suspension or exclusion from the Medicare program nor does it guarantee mitigation of criminal or monetary penalties. Furthermore, even if the reported overpayment is of small monetary value, the provider or supplier could be subject to audits by either the fiscal intermediary or the carrier. If the fiscal intermediary or the carrier suspects fraud or illegality, an OIG investigation could be launched. OIG investigations are often lengthy, expensive and disruptive of business.

Whistleblowers, such as the former employees of ETCH, have been responsible for the repayment of millions of dollars in Medicare overpayments. The False Claims Act provides a monetary incentive to individuals, otherwise known as "whistleblowers" to institute false claims actions against providers for submission of false claims. Under the statute, the whistleblower receives 15-30 percent of the recovery.⁷ The January 2007 settlement of 2.9 million dollars by ETCH was initiated by a lawsuit brought by two former employees of ETCH who alleged that ETCH was knowingly keeping overpayments. A 1998 law suit brought by a whistleblower led to payment of 51.7 million dollars to the government. A former employee alleged that his former employer helped its hospital clients conceal Medicare and Medicaid overpayments and submitted inflated cost reports to Medicare. To date, this lawsuit has resulted in the following 6 settlements: Lovelace Health Systems in New Mexico, 24.5 million dollars; St. Joesph's in Houston, TX; HealthSouth Corp., $736,000; Eisenhower Medical Center in CA, 8 million dollars; St. Elizabeth in Lincoln, NE 4 million dollars, and most recently, Jackson Memorial in Miami, Florida, 14.2 million dollars.

¹ See 42 C.F.R. §§ 405.370 et seq.and 42 U.S.C. § 1395ff(b)(1)(G).
² 31 U.S.C. § 3711.
³ 31 U.S.C. § 3720C.
⁴ See 63 Fed. Reg. 58399 (1998).
⁵ See 42 U.S.C. § 1320a-7b.
⁶ 31 U.S.C. 3729.
⁷31 U.S.C. 3730.