If your medical practice or institution doesn't always have a sense of urgency in returning Medicare
overpayments, you may want to rethink that approach. The Patient Protection and Affordable Care Act
("PPACA"), which the federal government describes as a way to protect taxpayer dollars, gives Medicare
new authority to recover overpayments from providers and suppliers more quickly.
The Centers for Medicare & Medicaid Services (CMS) is requiring providers and suppliers to report and
return self-identified overpayments either within 60 days of the incorrect payment being discovered or on
the date when a corresponding cost report is due, whichever is later.
An overpayment is defined as any funds that a person receives under Medicare to which that person is not
entitled. Some of the causes of Medicare overpayments include:
- Duplicate submission of the same service or claim
- Payment to the incorrect payee
- Payment for excluded or medically unnecessary services
- Payment for non-covered services
It's no secret that mistakes occur fairly regularly. Medicare may overpay a claim, pay it twice or pay for a
service that isn't covered - and patients end up with a credit balance as a result. Before the PPACA,
providers did not face an explicit deadline for returning these overpayments.
Now, however, any failure to report and return an overpayment within the specified timeframe could be a
violation of the federal False Claims Act. Providers who fail to report and return an overpayment could be
fined or excluded from participation in federal healthcare programs.
Preventing Overpayments in the First Place
At the same time, Medicare is taking steps to help prevent overpayments from occurring. These efforts
- Letting private auditors working on behalf of Medicare catch wasteful spending before it happens, by
- expanding the use of Recovery Audit Contractors
- Testing changes to outdated hospital billing systems to help prevent overbilling
- Changing processes for approving payments for medical equipment with high error rates
Providers' responsibilities extend beyond simply returning the overpayments. They also are required to
determine the cause of the error that led to the overpayment and take steps to help prevent it from happening
again in the future.
So in connection with Medicare overpayments, the steps your practice or institution should take are the four
- Identify that an overpayment may have been received.
- Investigate to confirm that it was indeed an overpayment.
- Initiate a refund.
- Implement a plan to prevent similar errors leading to overpayments in the future.
Providers themselves can benefit from taking these steps, because routine overpayments can result in high
credit balances and can mask an accurate picture of your practice's true receivables.
The Connecticut False Claims Act
As a provider in Connecticut, you also need to consider the Connecticut False Claims Act, signed into law
by then-Governor M. Jodi Rell in 2009. Modeled after the federal False Claims Act, it requires providers to
respond to and begin an investigation as soon as they realize an overpayment error has been made. The
appropriate course of action is to set up an escrow account for these overpayments and once a year push it to
the state's unclaimed properties fund.
There are cautionary lessons in connection with the False Claims Act. In 2011, a Connecticut hospital was
required to pay nearly a half million dollars for the improper billing of a drug that had a higher
reimbursement rate for the female-related dosage than the male-related dosage. The hospital had billed the
higher-paying female-related billing code for its male patients, receiving substantially higher reimbursement
from Medicare than it should have received.
What's notable here is that the hospital apparently had discovered the coding issue on its own and had
conducted an internal audit to determine the amount it had been overpaid. However, the hospital did not
report the improper billing nor make an attempt to return the overpayments to Medicare.
The price of noncompliance can be substantial. The False Claims Act permits the government to recover
triple damages as well as civil penalties. These steep consequences serve to reinforce the importance of
refunding Medicare overpayments within the specified time period in order to avoid additional liability
under the False Claims Act.
A formal Compliance Plan is critical for every practice and it should be reviewed on an annual basis to
ensure that it is current with new laws. A good compliance plan addresses overpayments, credit balances
and other claims-related errors.