Is the Government Overreaching with its use of the False Claims Act? The AHA Sure Seems to Think So.

September 11, 2010 by  
Filed under False Claims Act, Featured

(September 11, 2010): Earlier this week, the American Hospital Association (AHA), a primary industry association for hospitals around the country, wrote to DOJ Attorney General Eric Holder and HHS Secretary Kathleen Sebelius, to express the hospitals’ concern that the government may be overreaching in its use of the False Claims Act (FCA). As you will recall, the FCA is the primary civil enforcement tool used by DOJ in pursuing civil health care fraud violations. The FCA’s reach is long (under certain circumstances it can cover claims up to ten years old) and its impact can be devastating on providers. Violations of the FCA can result in penalties of between $5,500 and $11,000 per false claim, plus treble damages.

As set out in the association’s letter dated September 7, 2010, the AHA is concerned that DOJ may be aggressively asserting alleged violations of the Act despite the fact that the problem was the result of “a mistake or overutilization.” As the association further expressed, this can lead to a “negotiated” settlement of the allegations.

Citing a “kyphoplasty” initiative current being pursued by at least one U.S. Attorney’s Office, the AHA stated:

“. . . notwithstanding the fact that kyphoplasty claims have long been subject to changing and ambiguous regulations and guidelines, the kyphoplasty initiative appears to observers to rely on data mining to establish a presumption that hospitals are liable for “knowing” violations of the civil FCA and subject to treble damages and penalties. Targets of the initiative have received letters disconcertingly similar to letters written prior to the issuance of the original “Holder Memo” in 1998 (Guidance on the Use of False Claims Act in Civil Health Care Matters).”

As the association suggests in its letter, the mere allegation that a hospital may be under investigation for violations of the FCA are sufficiently serious to require the hospital to retain experienced legal counsel to respond to represent its interests. This can be quite costly for the hospital. As a result, some hospitals elect to settle the allegations rather than litigate the issues.

As reflected that the current cases being brought, DOJ, HHS-OIG and CMS contractors (such as ZPICs, PSCs and RACs) are increasingly relying on data mining when identifying possible targets for criminal, civil and administrative action. Our concern is that an over-reliance on data mining in the identification of potential wrongdoers may lead to a presumption of guilt before any examination of the medical records and associated documentation has occurred.

Robert W. Liles, a Managing Partner at Liles Parker was instrumental in the drafting and implementation of the “Holder Memo” and has worked on many False Claims Act case over the years, both as a Federal Prosecutor and as defense counsel representing a provider’s interests.

Should your practice or clinic face False Claims Act allegations, give us a call at 1 (800) 475-1906 for a free consultation.

“Finders Keepers” Doesn’t Apply to Medicare Overpayments for Partial Hospitalization Services

July 15, 2010 by  
Filed under False Claims Act, Featured

(July 15, 2010):  Since the May 2009 passage of the Fraud Enforcement and Recovery Act (FERA) and subsequent enactment of the PPACA, we’ve heard a lot about how the government looks at Medicare overpayments for partial hospitalization services and how Community Mental Health Clinics (CMHCs) should handle them.  Two major misconceptions seem to underlie the public response to provisions clarifying that failure to timely refund Medicare overpayments can result in False Claims Act (FCA) liability.

I.          Historical Overview of the “Overpayment” Issue

Prior to the clarification and statutory reinforcement of the “overpayment” issue provided by PPACA, a number of CMHCs have mistakenly believed that in the absence of a direct demand for repayment, an identified overpayment for partial hospitalization services would belong to the CMHC.  Notably, this issue is not new.  In fact, the recent enacted provisions have merely reinforced the government’s long-standing position that a CMHC has a responsibility to voluntarily refund Medicare overpayments for partial hospitalization services without an overpayment determination being made by the government.

As you will recall, the agreement to return any overpayments for partial hospitalization services is fundamental to a CMHC’s eligibility to participate in the Medicare program.  Section 1866(a)(1)(C) of the Social Security Act (42 U.S.C. § 1395cc) requires participating CMHCs to furnish information about payments made to them and to refund any monies incorrectly paid.  Implemented in 2006, the Medicare Credit Balance Report (CMS-838) is designed to ensure timely compliance with this obligation.

Secondly, PPACA Section 6402 echoes the requirements of CMS’ 2002 proposed rule that CMHCs “must, within 60 days of identifying or learning of the excess payment, return the overpayment to the appropriate intermediary and carrier, at the correct address, and notify the intermediary and carrier, in writing, of the reason for the overpayment.”  (67 Fed. Reg. 3662 (January 25, 2002)).  A conservative reading of that proposed rule arguably suggested that HHS-OIG’s voluntary disclosure protocol may not be “voluntary” after all but a mandatory repayment may be required.  Thus, the government has long sought to clarify when, not if, refunds for overpayment of partial hospitalization services would be required.

Despite the publicity resulting from PPACA and its FCA implications, it is important to remember that this issue was addressed over a decade ago.  As set out in the 1998 holding in United States v. Yale University School of Medicine, Civil Action No. 3:97CV02023 (D.Conn.), the government intervened in a qui tam and obtained $1.2 million settlement based on alleged FCA  violations for failing to return credit balances.  In summary, CMHCs who fail to promptly (within 60 days of identification) return an overpayment for partial hospitalization services to the government do so at their own peril.

II.         Handling Non-Federal Overpayments for Partial Hospitalization Services

As an aside, even if the overpayment at issue is not owed to a Federal payor (such as Medicare or Medicaid), it is imperative to remember that virtually no overpayments for partial hospitalization services belong to a CMHC.  In the case of non-Federal payors (such as a private insurance company), we are aware of numerous instances where the non-Federal payor has notified the CMHC that due to the administrative burden of applying an overpayment for partial hospitalization services to a beneficiary’s account (typically due to the complexity of the payment history), the non-Federal payor has chosen to either “waive” collection of an overpayment or not to cash a check sent by the CMHC.  This also regularly occurs when the identified overpayment is under a certain amount (such as $25.00).  When faced with such a situation, a CMHC must review applicable State law to ascertain how an overpayment for partial hospitalization services must be handled.  For instance, in Texas, Title 6 of the Property Code requires businesses and other entities holding unclaimed property to turn the property over to the Texas Comptroller’s Office after the appropriate abandonment period has expired.  As in most States, violation of these escheat laws can subject a CMHC to various penalties.

III.        Conclusion

The lesson to be learned here is quite clear – regardless of who the payor is, an overpayment for partial hospitalization services can rarely, if ever, properly be retained by a CMHC, regardless of the amount in controversy.  A CMHC must carefully examine both Federal and State statutes when faced with this issue.  The best practice is to return an overpayment to the payor (Federal, State, or private patient), regardless of the amount, upon identification.  Should a CMHC be unable to identify who is owed an overpayment or cannot locate a valid address to return the overpayment (due to a variety of factors), your State’s escheat law must be considered.

This can be a complicated issue, especially when a large overpayment for partial hospitalization services has been identified and it is owed to a Federal payor.  While time is of the essence, it is strongly recommended that you contact your legal counsel as soon as it appears that a potential large or complicated Federal overpayment has been found.  Your attorney can help guide you through this complex process.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

PPACA Creates a Minefield for CMHCs Who Fail to Promptly Return an Overpayment

July 9, 2010 by  
Filed under False Claims Act, Featured

(July 9, 2010):  Does the failure of a CMHC to promptly return a Medicare overpayment warrant liability under the False Claims Act (FCA)?  Congress thinks so.  The Patient Protection and Affordable Care Act (PPACA) creates new obligations under the FCA whereby a Medicare provider (such as a CMHC) who fails to timely report and refund an overpayment may be subject to substantial damages and penalties.

Section 6402 of the PPACA requires Medicare providers, including physicians and partial hospitalization providers, among others, to a) return and report any overpayment, and b) explain, in writing, the reason for the overpayment.

This law creates a minefield for CMHCs.  First, CMHCs and other Medicare providers have only 60 days to comply with the reporting and refund requirement from the date on which the overpayment was identified or, if applicable, the date any corresponding cost report is due, whichever is later.  Of course, the PPACA does not actually explain what it means to “identify” an overpayment. 

Nonetheless, the PPACA makes this reporting and repayment requirement an “obligation” under the FCA.  Pursuant to the Fraud Enforcement and Recovery Act of 2009 (FERA) amendments to the FCA, an individual or entity may be liable if he or it “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.”  Thus, CMHCs who fail to meet their 60 day “obligation” may be subject to monetary penalities of up to $11,000 per claim, and treble damages.

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.


The “Fraud and Abuse” Enforcement Impact of the Health Care Reform Bill on Community Mental Health Clinics and the Partial Hospitalization Program Services They Provide

April 1, 2010 by  
Filed under False Claims Act, Featured

(April 1, 2010): On March 21, 2010, the House voted to approve legislation previously passed by the Senate – the “Patient Protection and Affordability Care Act” (PPACA).  President Obama signed the PPACA on March 23, 2010.  On March 25, 2010, both the Senate and House passed a “Reconciliation Act,” approving reconciliation changes to the PPACA. On March 30, 2010, President Obama signed the “Reconciliation Act” passed by Congress.  These two pieces of legislation, collectively referred to as the “Health Care Reform Bill,” constitute the most sweeping changes to our health care system in decades.  While the overall impact of these changes on health care providers is still being evaluated, it is readily apparent that Community Mental Health Centers (CMHCs) are among a select group of providers that have been specifically targeted by the legislation.

(April 1, 2010):  As most CMHCs owners and operators are now aware, the recent health care legislation includes a number of cryptic provisions regarding the requirement that CMHCs provide a significant share of their services (later defined during reconciliation as 40%) to non-Medicare beneficiaries.  Hopefully, these requirements will be repealed prior to their anticipated effective date.  We encourage all CMHC owners to join NABH in its efforts to have these requirements repealed or appropriately modified.

The purpose of this article is to examine several of the legislation’s other provisions which directly impact CMHCs around the country – focusing on the “fraud and abuse” provisions outlined in the Bill.  Please note, these are not the only “fraud and abuse” provisions covered by the PPACA, merely several of the more prominent features of the legislation.

Enrollment Issues:

 The PPACA’s provisions included a renewed emphasis on provider screening efforts. The legislation gave the Secretary, HHS, the authority to require fingerprinting, criminal background checks, random site visits and other provider screening mechanisms.  Moreover, the Secretary, HHS, is now authorized to issue a temporary freeze on the enrollment of new provider applications, including entire categories of providers.  Perhaps most importantly, the Secretary’s decisions in this regard are not subject to judicial review. CMHC owners desiring to expand could be delayed in doing so if the Secretary, HHS decides to limit the number of new CMHCs in the future.

Overpayments and the False Claims Act:

As you will recall, changes to the False Claims Act were passed last year under the Fraud Enforcement and Recovery Act (FERA) which made it clear that any person (including CMHCs) who knowingly concealed or knowingly and improperly avoided an “obligation to pay” would be liable under the False Claims Act’s reverse false claims provisions.  Importantly, the PPACA defined “overpayments” as “any funds that a person receives or retains” under Medicare or Medicaid, to which they are not entitled.  The PPACA further provides that all overpayments must be reported and refunded within 60 days of being identified or the any corresponding cost report is due.  Moreover, the legislation made it clear that a “repayment retained by a person after the deadline for reporting and returning the overpayment” is an “obligation” for purposes of the False Claims Act.   The bottom line is clear – should you identify an overpayment, it must be repaid within 60 days or your CHMC may be liable under the False Claims Act.  Penalties under the False Claims Act include treble damages and penalties of between $5,500 and $11,000 per false claim.

Kickbacks and the False Claims Act:

CMHCs that we work with have diligently worked to ensure that their operational and business practices fully comply with applicable provision of the Federal Anti-Kickback Statute.  Now, more than ever, CMHCs will need to ensure that these efforts to remain compliant with these provisions.  Under the PPACA, it is now crystal clear that violations of the Anti-Kickback Statute (a criminal violation) also constitute a violation of the civil False Claims Act.

As these examples reflect, it is essential that CMHCs have effective Compliance Plans in place – designed to prevent and / or detect CHMC-specific risks.

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Ever Wonder Why so Many CMHCs are Being Audited by the Government?

February 17, 2010 by  
Filed under False Claims Act, Featured, Medicare Audits

 (February 17, 2010): HHS-OIG has alleged that $1.44 billion in “savings” could be achieved by ensuring the appropriateness of Medicare payments for partial hospitalization services.

The last few years have been tough for Community Mental Health Centers (CMHCs) around the country.  Many CMHCs have found themselves the subject of Medicare post-payment audits by Program SafeGuard Contractors and / or Zone Program Integrity  Contractors (ZPICs).  Others have been placed on pre-payment review by PSCs, effectively cutting-off Medicare reimbursement until the contractors could decide if their claims for partial hospitalization program (PHP) services qualify for coverage and payment.  Some areas, such as South Florida and Louisiana have been hit especially hard.

Many of our CMHC clients have asked – “Why us, all we are trying to do is take care of a population who has no where else to turn?”  One reason may be because the government appears to believe that Medicare is being improperly billed for partial hospitalization services – to the tune of $1.44 billion.

For the third straight year in a row (2007, 2008 and 2009), the Department of Health and Human Services, Office of Inspector General (HHS-OIG) has reported that it found that Medicare has improperly paid for inappropriate outpatient mental health services.  According to HHS-OIG, “[b]illing abuses involving beneficiaries who are unable to benefit from psychotherapy demonstrate a special need for enhanced program and beneficiary protections.”  Furthermore, HHS-OIG indicated that beneficiaries with mental illness sometimes do not receive all the services that they need, so both underutilization and overutilization problems exist.

HHS-OIG is pointing its finger specifically at providers of partial hospitalization services.  HHS-OIG doesn’t hesitate to allege that partial hospitalization services, which may be provided by both hospitals and community mental health centers, “have been particularly vulnerable to payment errors.” According to the HHS-OIG, “[w]e have estimated that Medicare payment error rates for partial hospitalization in community mental health centers were as high as 92 percent.” In its 2009 “Compendium of Unimplemented Office of Inspector General Recommendations,” HHS-OIG noted that in 2003, miscoded and undocumented services accounted for 26% and 19%, respectively of all Medicare mental health services.  Finally, medically unnecessary services and services that violated the “incident to” rule each accounted for 4% of all Medicare mental health services in 2003.  The “incident to” rule allows a physician to bill for mental health services performed by his or her staff if the services are rendered incident to the physician’s professional services.

Based on the foregoing, HHS-OIG recommends that the Centers for Medicare & Medicaid Services (CMS) ensure that mental health services are medically necessary and reasonable; are accurately billed and are ordered by authorized practitioner by using a comprehensive program of targeted medical reviews, provider education, improved documentation requirements, and increased surveillance.  This, according to HHS-OIG, will result in a savings of $1.44 billion.

While CMS agreed with the HHS-OIG’s findings and recommendations, HHS-OIG declared that there are still significant unallowable payments.  As HHS-OIG stated, “[w]e believe that CMS still needs to monitor partial hospitalization services provided by community mental health centers, which we consider particularly vulnerable.”  As a result, HHS-OIG indicated that it will continue to monitor CMS’s efforts to ensure that mental health services are medically necessary and reasonable and are accurately billed.

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Changes to the False Claims Act and their impact on CMHCs

January 22, 2010 by  
Filed under False Claims Act, Featured

(January 22, 2010):  The civil False Claims Act (31 U.S.C. 3729) is the primary civil enforcement tool relied upon by the U.S. Department of Justice (DOJ).  On May 20, 2009, the Act’s provisions were further strengthened as a result of amendments contained under the “Fraud Enforcement and Recovery Act of 2009.”  These amendments have significantly increased existing risks faced by Community Mental Health Centers (CMHCs) around the country.  Among the many changes, several are of particular concern for CMHCs.  These amendments:

  • Extended the whistleblower protection provisions to cover both “contractors” and “agents” in addition to employees who allege that they were subjected to retaliation when they tried to put an end to False Claims Act violations by their employer.  From a practical standpoint, CMHCs have long engaged the services of “contractors” and “agents” not merely employees in support of operations, marketing and the provision of professional services.  Prior to the recent amendments, the whistleblower provisions only typically applied to actual employees of the CMHC.  Now, both “contractors” and “agents” may avail themselves of the Act’s whistleblower protections.
  • Revised the definition of “obligation” to expressly include knowingly retaining mere overpayments despite the fact that a CMHC may have accidentally been overpaid.  CMHCs may now find themselves liable under the False Claims Act, regardless of whether the overpayment was caused as a result of a mistake caused by the provider or by a government contractor, such as a MAC.  This presents significant exposure for CMHCs who knowingly fail to promptly return the funds. Your CMHC may now find itself subject to liability under the False Claims Act, including its penalty and damages provisions even though the overpayment innocently occurred.
  • Expanded the scope of Civil Investigative Demands (CIDs) to now make it easier for DOJ to use these investigative tools.  Additionally, the changes enhanced the ability of DOJ to issue CIDs.  From a practical standpoint, this will make it much easier for DOJ prosecutors to initiate an investigation of your CMHC without first filing a case.

Now more than ever, CMHCs must affirmatively work to ensure that all applicable statutory and regulatory requirements are met.  If your CMHC has not already done so, we recommend that an effective Compliance Plan be implemented. 

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.