DOJ is Criminally Prosecuting Virginia Physician Who Improperly Disclosed Patient Health Information

June 24, 2011 by  
Filed under Compliance, Featured, Medicare Audits

(June 24, 2011): Physicians and other health care providers should take care — improprerly  disclosing a patient’s protected individual health information could land you in Federal prison. Earlier this week, Virginia osteopath was indicted in the Eastern District of Virginia on charges that he illegally disclosed a former patient’s health information to the patient’s employer.

The Virginia physician was indicted by a Federal Grand Jury for the wrongful disclosure of individually identifiable health information under the Health Insurance Portability and Accountability Act (HIPAA).  The physician reportedly faces a maximum of up to five years imprisonment if convicted.

According to the indictment, the physician practiced osteopathic medicine and served as Medical Director at a Virginia psychiatric care facility. The physician is alleged to have provided inpatient mental health treatment to a patient in 2007.  As set out in a discharge summary from 2008, the physician indicated that the patient was not considered a danger to others. Nevertheless, on three separate occasions in February 2008, the physician allegedly disclosed, without any authorization, the patient’s individually identifiable health information to an agent of the patient’s employer. In these unauthorized disclosures, the physician  falsely indicated that the patient was a serious and imminent threat to the safety of the public, when he allegedly knew that the patient was not such a threat.

CommentaryAs this case shows, the Federal government is quite serious about health information privacy.  It is essential that health care providers take affirmative steps to ensure that all of their staff – including physicians – are cognizant of both applicable statutory and regulatory requirements and their associated obligations with respect to protected health information.  Effective training on HIPAA, HITECH and the restrictions governing disclosure should represent an important component of each provider’s Compliance Plan. 

Liles Parker attorneys have extensive experience representing physicians and other health care professionals in government investigations and disciplinary actions.  Our attorneys are also knowledgeable regarding HIPAA, HITECH and provider obligations under these statutes.  Need assistance?  Call us for a complimentary initial consultation.  We can be reached at:  1 (800) 475-1006. 

CMHC Compliance Officers Should Review Their Compliance Plans to Ensure that “I-9s” are Being Properly Handled and Completed by Staff. The Failure to do so Can Result in Civil and / or Criminal Penalties.

November 28, 2010 by  
Filed under Compliance, Featured, Medicare Audits

(November 28, 2010): In 2003, the Immigration and Naturalization Service (INS) was became part of the U.S. Department of Homeland Security. Despite this change, certain functions, such as responsibility for enforcing citizenship discrimination actions remained with the U.S. Department of Justice’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (DOJ-OSC).  As one large not-for–profit hospital group recently found, DOJ-OSC takes this responsibility quite seriously and is aggressively investigating allegations of “citizenship status discrimination” committed by employers (including health care providers). Most recently, DOJ-OSC has pursued violations allegedly occurring when prospective applicants were asked to show that they are eligible to work in the United States.

I.  Background

With the passage and implementation of the Immigration Reform and Control Act of 1986, employers (including health care providers) have been required to verify that applicants for jobs show that they are authorized to work in the United States.  For over 25 years, employers have been requiring that prospective applicants complete Section 1 of an “I-9 Form” (officially titled “Form I-9, Employment Eligibility Verification”).  Section 1 of the form provides various options for an applicant to show that they are eligible to work in the United States.  Employers are then required to complete Section 2 of the form within three days of the applicant starting to work.  As the government’s Employer Handbook covering the completion of the Form I-9 reflects:

“To comply with the law, you must verify the identity and employment authorization of each person you hire, complete and retain a Form I-9 for each em­ployee, and refrain from discriminating against individu­als on the basis of national origin or citizenship.”

For most prospective applicants and employers, this process has been relatively painless.  While the failure of a company to complete I-9s for its employees could subject the employer to civil and / or criminal penalties, the relative ease of completion of this form has typically been included in the pre-employment paperwork given to an applicant. 

In a recent case pursued by DOJ-OSC, the government alleged that a health care provider required that “non-U.S. citizen and naturalized U.S. citizen new hires . . . present more work authorization documents than required by Federal law, but permitted native born U.S. citizens to provide documents of their own choosing.”  Based on the fact that non-U.S. citizens and naturalized citizens were treated differently, the government investigated a complaint filed by a “charging party” against this health care provider. Ultimately, the government and the health care provider reached a settlement to the discriminatory allegations presented. 

The health care provider was required to pay $257,000 in civil penalties plus an additional $1,000 which was given to the charging party to make up for back pay that was owed due to the delay in hiring the individual.  This delay was allegedly caused by the provider’s requirement that this non-U.S. citizen (or naturalized U.S. citizen) was required to provide more extensive paperwork to prove his / her authorization to work in the United States than was required from U.S. born citizens. 

II. Compliance Plan Considerations:

Importantly, I-9 compliance considerations are not limited to only non-discrimination practices.  Both Compliance Officers and Human Resources staff should review the government’s “Handbook for Employers’ and ensure that your facility is complying with each facet of the law in this regard.  As the Handbook states, each provider must:

“Ensure that the employee fully completes Section 1 of Form I-9 at the time of hire — when the employee be­gins work. Review the employee’s document(s) and fully complete Section 2 of Form I-9 within 3 business days of the first day of work.

If you hire a person for less than 3 business days, Sections 1 and 2 of Form I-9 must be fully completed when the employee begins work.”

Importantly, I-9s do not have to be completed for some individuals.  As the government’s Handbook further states:

“You DO NOT need to complete a Form I-9 for persons who are:

1. Hired before November 7, 1986, who are continu­ing in their employment and have a reasonable expectation of employment at all times;

2. Employed for casual domestic work in a private home on a sporadic, irregular, or intermittent basis;

3. Independent contractors; or

4. Providing labor to you who are employed by a con­tractor providing contract services (e.g., employee leasing or temporary agencies).

5. Not physically working on U.S. soil.”

III. Lessons Learned:

While the Compliance Plan covering your Community Mental Health Centers (CMHCs) likely already covers a wide variety of employment-related issues, Compliance Officers should check to ensure that I-9 requirements are made a part of your overall Compliance Program if these mandates are not already covered.

As this case reflects, health care Compliance Officers should periodically conduct a comprehensive risk assessment of a provider’s operations and business relationships.  While traditional compliance reviews have focused on traditional health care statutory and regulatory responsibilities, Compliance Officers cannot ignore other risk areas (such as I-9 related responsibilities).  A good place to start would be to meet with both clinical and non-clinical supervisory and managerial employees to discuss regulated aspects of their work. 

Liles Parker attorneys have extensive experience working with health care providers, including CMHCs,  to develop and implement effective Compliance Plans and Programs.  Should you have questions, call us for a complementary consultation.  We may be reached at 1-800-475-1906.

 

The Zone 7 ZPIC Has Recommended Revocation of 82% of CORFS and 79% of CMHCs in South Florida – Is Your ZPIC Next?

October 9, 2010 by  
Filed under Featured, Medicare Audits

(October 9, 2010):  In late 2008, SafeGuard Services LLC (SafeGuard) was awarded one of the first two contracts to serve as a Zone Program Integrity Contractor (ZPIC) for Zone 7, an area which includes Florida, Puerto Rico and the U.S. Virgin Islands.  The contract covered a base year plus four additional years.  SafeGuard’s appointment was one of the first actions taken to consolidate the work previously performed by Program SafeGuard Contractors (PSCs) and Medicare Drug Integrity Contractors (MEDICs). Among its consolidated duties, SafeGuard is responsible for handling medical reviews and benefit integrity functions for Medicare claims under both Part A and Part B (hospital, CMHCs, skilled nursing, home health, provider and durable medical equipment).  These claims are the focus of this article.  SafeGuard became fully operational in Zone 7 on February 1, 2009.

Working together to promote the integrity of the Medicare and Medicaid programs, in recent years Safeguard has developed close working relationships with CMS, HHS-OIG, U.S. Attorney’s Offices, the FBI and other Medicare contractors.  .

As with other ZPICs, SafeGuard employs a number of techniques, both proactive and reactive, to address fraud.  In recent years, SafeGuard appears to have been one of the leading ZPICs in terms of “data-mining.”  The primary source for Medicare claims data is CMS’ National Claims History system.  Many of the audit and investigative processes developed by SafeGuard appear to now be employed by other ZPICs

CMS’ Proposed Rule issued September 23, 2010, provides an overview of how CMS and HHS-OIG intend to implement a number of new enforcement tools authorized under the Health Care Reform bill passed last March.  In reviewing the Proposed Rule, we unexpectedly learned about several audit initiatives that the “Zone 7 ZPIC” has been pursuing.  As the Proposed Rule states:

In addition to GAO and HHS OIG studies and reports, a number of Zone Program Integrity Contractors (ZPIC) and Program Safeguard Contractors (PSC), organizations used by CMS in helping to fight fraud in Medicare, have taken a number of administrative actions including payment suspensions and increased medical review, for the provider and supplier types shown above. For example, the Zone 7 ZPIC contractor in South Florida has conducted onsite reviews at 62 CORFs since January 2010 and recommended revocation for 51 CORFs, or 82 percent of the CORFS in the area. The same contractor has conducted an onsite reviews at 38 CMHCs located in Dade, Broward and Palm Beach County since January 2010, and recommended that 30 CMHCs be revoked for noncompliance (79 percent of the CMHCs in the area). In each instance where the ZPIC requested a revocation, the CMHC was also placed on prepay review. We have also conducted an analysis of IDTF licensure requirements and have found several circumstances that indicate irregularity and potential risk of fraud.” (emphasis added).

 Notably, there was no discussion of how the ZPIC expects patients with rehabilitative needs or acute psychiatric treatment needs will be cared for if SafeGuard succeeds in shutting down a vast majority of the CORFs or CMHCs in South Florida.   Is your ZPIC next to go down this path?

 Liles Parker attorneys represent providers in ZPIC related actions.  For a free consultation, please call 1 (800) 475-1906.

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.

Additional Cities will have HEAT Teams in 2011

August 27, 2010 by  
Filed under Featured, HEAT Enforcement

(August 27, 2010): Yesterday, Attorney General Eric Holder and U. S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius conducted the second of a planned series of “Regional Health Care Fraud Prevention Summits.”  The first summit was recently conducted in Miami, Florida.  This summit was held in Los Angeles, California. 

In addition to these agency heads, summit participants learned of current and additional planned initiatives from a number of Federal and State law enforcement officials. 

Describing the progress made in the last fiscal year, Attorney General Holder noted that:

“In just the last fiscal year, we’ve won or negotiated more than $1.6 billion in judgments and settlements, returned more than $2.5 billion to the Medicare Trust Fund, opened thousands of new criminal and civil health care fraud investigations, reached an all-time high in the number of health care fraud defendants charged, and stopped numerous large-scale fraud schemes in their tracks.”

Notably, Attorney General Holder also made it clear that the government’s joint Health Care Fraud Prevention and Enforcement Action Team (HEAT) program is slated for further expansion over the next year.  As he noted:

HEAT’s impact has been recognized by President Obama, whose FY 2011 budget request includes an additional $60 million to expand our network of Strike Forces to additional cities.   With these new resources, and our continued commitment to collaboration, I have no doubt we’ll be able to extend HEAT’s record of achievement.   And this record is extraordinary.” (emphasis added).

These additional funds will be to supplement, not supplant, existing health care fraud enforcement efforts currently underway around the country.  While the additional cities slated fro HEAT expansion were not announced at this event, all CMHC providers, regardless of location, should be especially vigilant in their efforts to ensure that Medicare coding and billing practices regulating partial hospitalization services must comply with applicable statutory and agency requirements.  We strongly recommend that all CMHC providers examine both basic issues such as the “core elements” required of CMHCs, as well as their operational approach, documentation, coding and billing practices.

 Should you have questions regarding a health care fraud issue, you may call Robert W. Liles or another of our attorneys.  Call 1 (800) 475-1906 for a free consultation.

“Medical Records Retention” Issues Continue to be Important for CMHCs

August 17, 2010 by  
Filed under Compliance, Featured, Medicare Audits

(August 17, 2010): The Centers for Medicare and Medicaid Services (CMS) recently issued MLM Matters SE1022, titled Medical Record Retention and Media Formats for Medical Records” which serves as a helpful reminder regarding a number of medical records retention issues faced by Community Mental Health Centers (CMHCs) around the country.  As reflected in the guidance, MLM Matters SE1022 directly applies to health care providers (such as CMHCs) submitting claims to Medicare contractors for services provided to Medicare beneficiaries.

 While medical record retention requirements are generally governed by State law and can vary from State to State, it is important to remember that under HIPAA’s administrative simplification rules,  “covered entities” such as CMHCs,  must retain required medical records for a period of “six years from the date of its creation or the date when it last was in effect, whichever is later.”  As CMHC providers can readily attest, this requirement can be quite difficult to apply when the care as issue involve partial hospitalization program services.  For example, the supporting documentation covering partial hospitalization services provided during a specific period may relate back, and be supported by, a Psychiatric Evaluation, Physician Orders, Hospital Discharge Orders and other documents that were have been created many months prior to the specific dates at issue.  As a result, strict adherance to the six year requirement (assuming that the State retention requirements are six years are less since  HIPAA requirements preempt State laws if the State laws require a shorter medical records retention period) could make it difficult to fully support partial hospitalization claims if an audit is conducted.    Having said that, there are opposing compliance reasons to properly cull outdated medical records when possible.  Finding an acceptable balance between these goals is often difficult and should involve the advise of your legal counsel.

As MLM Matters SE1022 further notes:

 The Centers for Medicare & Medicaid Services (CMS) requires records of providers submitting cost reports to be retained in their original or legally reproduced form for a period of at least 5 years after the closure of the cost report. This requirement is available at 42 CFR 482.24[b][1].

 CMS requires Medicare managed care program providers to retain records for 10 years. This requirement is available at 42 CFR 422.504 [d][2][iii].

 Finally, the guidance points out that the Medicare program:

“. . . does not have requirements for the media formats for medical records. However, the medical record needs to be in its original form or in a legally reproduced form, which may be electronic, so that medical records may be reviewed and audited by authorized entities. Providers must have a medical record system that ensures that the record may be accessed and retrieved promptly.”

 The issue of “records retention” can be quite complex, especially when dealing with partial hospitalization claims.  This issue is further complicated if the CMHC is being audited or under investigation by the government or a Medicare contractor.  In such a situation, we typically advise clients to curtail all document (paper and electronic) destruction activities are until the external review is resolved.  In light of these considerations, it is strongly recommended that you work with your legal counsel to better ensure that your CMHC is meeting its document retention obligations. 

 Should you have questions regarding these issues, you may call your current counsel or you may call Liles Parker for a complimentary consultation at 1 (800) 475-1906.

CMS is Requiring that ZPICs and PSCs Strictly Adhere to “Signature Requirements” When the Contractors are Conducting Medical Reviews

August 5, 2010 by  
Filed under Featured, Medicare Audits

  • (August 4, 2010): The Centers for Medicare and Medicaid Services (CMS) has recently updated its “signature requirement” instructions to Medicare contractors, Change Request (CR) 6698, (including affiliated contractors such as CERT reviewers, ZPICs and PSCs) to be applied as they conduct Medicare claims audits and reviews.  

 As the guidance reflects, this issuance is intended to “clarify and update” Medicare’s Program Integrity Manual.  Importantly, this guidance is not intended to replace any existing specific requirements that may be contained in LCDs or other CMS manuals which may set out specific signature requirements (such as signature and timeliness requirements which must be made in connection with Treatment Plans or Plans of Care prepared by CMHCs when providing partial hospitalization program care).

 Several examples of the strict approach that CR 6698 requires include:

  • For medical review purposes, Medicare requires that services provided / ordered be authenticated by the author.  The method used shall be a hand written or an electronic signature.  Stamp signatures are not acceptable.

Our comments:  Despite the fact that “stamp signatures” have been problematic for years, we are still seeing cases where a provider has continued to use a stamp of his signature on orders and at the end of record entries. Get rid of signature stamps in your office or clinic!  Contractors that may be looking for an excuse to deny your claims will readily do so if your have used a stamp instead of documenting your signature by hand. 

  • If there are other reasons for denial, unrelated to signature requirements, the reviewer shall not proceed to signature authorization.  If the criteria in the relevant Medicare policy cannot be met but for a key piece of medical documentation which contains a missing or illegible assessment, the reviewer shall proceed to the signature assessment.   

 Our comments:  This requirement reinforces the fact that Medicare reviewers are required to assess the adequacy of medical documentation (and presumably of medical necessity), separate and apart from their review of the signature itself.  Once they determine that the medical documentation is otherwise acceptable for coverage purposes, then they will assess whether the signature meets applicable requirement

  • If the signature is missing from an order, ACs, MACs, PSCs, ZPICs and CERT shall disregard the order during the review of the claim.

Our comments:  This requirement can be extremely harsh, especially when considering the fact that many claims depend on an initial order by a referring or ordering physician.  If in the absence of such an order, the claim will be denied, it becomes readily apparent that providers must be especially diligent in their review of orders to ensure that each one is properly signed.

 These examples represent only a few of the many examples and changes highlighted in CR 6698.  We strongly recommend that you review these changes with each of the providers in your practice or clinic to ensure that everyone is aware of how CMS expects its contractors to proceed when conducting medical reviews. 

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.

 

With ZPICs, PSCs, and RACs Fighting Most, If Not All, Extrapolation Challenges, Experienced Counsel Is Imperative if You Hope to Have the Extrapolation Invalidated

July 20, 2010 by  
Filed under Featured, Medicare Audits

(July 20, 2010): In recent years, we have seen agents for the Centers for Medicare & Medicaid Services (CMS) increasingly rely on statistical extrapolation estimates when assessing claims overpayments. In early cases, we successfully invalidated countless extrapolations by identifying relatively basic reasons for why the calculations were inconsistent with accepted statistical principles and practices.  Now, however, providers should expect for ZPICs and PSCs (and soon, RACs) to send a team of statisticians and attorneys to vigorously oppose most (if not all) hearings challenging the validity of the extrapolation calculation.

Regardless of whether you are providing Partial Hospitalization, Evaluation and Management (E/M), Home Health, Physical Therapy, Surgical, or other services, should your practice or clinic find that it is facing an extrapolated Medicare audit, it is strongly recommended that you engage qualified, experienced counsel to represent you as early in the process as possible.  Your legal counsel can then engage an expert statistician to assess the contractor’s actions and assist with the attorney’s efforts to have the extrapolation thrown out by either the Qualified Independent Contractor (QIC) or the Administrative Law Judge hearing your case. 

Before you engage counsel, you should consider asking the following questions:

  • Has the attorney ever handled large, complex contractor audits before? Some firms will happily take your case, despite the fact that they have little or no experience in this area of health law. Don’t pay for your attorneys to learn how to handle a case. While every case is different, an experienced firm will have developed a number of arguments and defenses that may be readily used in your case without having to conduct costly, extensive legal research.
  • Can the firm provide client references who are willing to speak with you about the quality of work performed on their Medicare statistical extrapolation case?
  • Who will be working on your case? Will it be an inexperienced Associate attorney or one of the partners who has actually fought and won a multitude of Medicare overpayment claims and cases where the damages have been extrapolated by the contractors?
  • What are the credentials of the attorneys and paralegals who will be working on your case? Have they ever worked on the side of the government? One of our attorneys served as an Assistant U.S. Attorney for many years, ultimately being selected to serve as the First National Health Care Fraud Coordinator for the Department of Justice, Executive Office for U. S. Attorneys. In addition to a law degree, he also holds a Master’s in Health Care Administration. To fully appreciate the challenges faced by health care providers, you need an attorney who understands both the legal constraints and the practical business risks faced by health care providers.

In several of the cases we have handled, the alleged error rate has exceeded 90%.  With the resulting alleged damages often in the millions of dollars, few providers are in a position to merely pay such an overpayment.  Instead, they need experienced counsel to aggressively fight to have this overpayment overturned.  When defending these cases, it is essential that you challenge both the denial of claims and the extrapolation itself.

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.

 

Medicare Fraud Strike Force Operation Leads to Charges against 94 Defendants, including 4 in South Texas

July 19, 2010 by  
Filed under Featured, HEAT Enforcement

 (July 17, 2010): Yesterday, the Department of Justice (DOJ) announced charges against 94 physicians, medical assistants, and health care company owners and executives in connection with alleged false Medicare claims amounting to more than $251 million.  24 defendants from Miami account for approximately $103 million of that amount.  Four defendants were charged in Houston for their alleged roles in a $3 million scheme to submit fraudulent claims for durable medical equipment (DME).  Other arrests were made in Baton Rouge, Brooklyn, and Detroit.   The offenses charged include conspiracy to defraud the Medicare program, criminal false claims, violations of the anti-kickback statutes, and money laundering.  The charges are based on a variety of fraud schemes, including physical therapy and occupational therapy schemes, home health care schemes, HIV infusion fraud schemes and durable medical equipment (DME) schemes.

Announcing the arrests, Attorney General Eric Holder said, “With today’s arrests, we’re putting would-be criminals on notice: Health care fraud is no longer a safe bet.  It’s no longer easy money.  If you choose to engage in health care fraud, you will be found; you will be stopped; and you will be brought to justice.”

The operation was conducted by the joint DOJ-HHS Medicare Fraud Strike Force, multi-agency teams of federal, state, and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing.  Strike Force teams are operating in seven cities in the United States: the five aforementioned cities, Los Angeles, and Tampa.  AG Holder noted that the ongoing Strike Force initiative in South Florida has resulted in the indictments of 810 organizations and individuals since March 2007 and uncovered $1.85 billion in improperly billed claims.

The Strike Forces are a part of Health Care Fraud Prevention and Enforcement Action Team (HEAT), which is made up of top level law enforcement and professional staff from the DOJ and HHS and their operating divisions.  HEAT is dedicated to joint efforts across government to both prevent fraud and enforce current anti-fraud laws around the country.

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.

“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.

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