Idea of proactive compliance plagues 60-day report and refund rule

The final rule implementing the 60-day report and refund statute was a “mixed bag” for providers because it provided guidance to mitigate risk but perpetuated uncertainty by relying on vague terms, said Robert L. Roth, managing partner at Hooper Lundy & Bookman, PC, and James S. Hinkle, vice-president and chief compliance officer at Ardent Health Services, at the American Health Lawyers Association’s Institute on Medicare and Medicaid Payment Issues. Roth and Hinkle emphasized that the buck stops with providers, even if they did not cause the overpayment.

Overpayments

Section 6402(a) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) added Soc. Sec. Act Sec. 1128J(d) to provide that a person that receives an overpayment must report and return the overpayment within 60 days of when the overpayment was identified or when the corresponding cost report was due. CMS issued a final rule (81 FR 7564) February 12, 2016, effective March 4, 2016, implementing section 6402(a). Examples of overpayments include: (1) Medicare payments for noncovered services; (2) Medicare payments in excess of the allowable amount for an identified covered service; (3) errors and nonreimbursable expenditures in cost reports; (4) duplicate payments; (5) lack of medical necessity; and (6) insufficient documentation.

Proactive compliance

The final rule provides that an overpayment is “identified” if the person fails to act with reasonable diligence and the person in fact received an overpayment. CMS stated that “reasonable diligence” includes both proactive and reactive compliance. Roth and Hinkle concluded that the proactive compliance standard “raises the stakes”–the preamble does not explain the legal basis for proactive compliance, and the standard is “unreasonably vague” in light of possible civil money penalties, exclusion, and False Claims Act liability. They asked if a provider did not but arguably could have identified an overpayment by being proactive, has the provider identified an overpayment and, if so, when does the 60-day deadline start?

Quantification

An overpayment has not been “identified” until it is quantified or should have been quantified with reasonable diligence. However, CMS declined to adopt a minimum materiality threshold.

Highlight on Minnesota: Health plans’ red ink worst in a decade

Nonprofit insurers in Minnesota reported an operating loss of $687 million on nearly $25.9 billion in revenue for 2016, according to a trade group for insurers, the Minnesota Council of Health Plans. The financial results were the worst in a decade, with losses in both the state public health insurance programs and the marketplace where individuals purchase coverage for themselves.

Overall, revenue from premiums increased 4 percent over the prior year, while expenses increased 6 percent to $26.6 billion. State public programs accounted for more than half of the overall losses, followed by continued losses in the individual market. According to the report, on average, health insurers paid $763 per second for care. To pay those bills, insurers withdrew nearly $560 million from state-mandated medical reserves. The bulk of the financial losses reported did not result from the employer group and Medicare markets, which remained steady, and where most Minnesotans get health insurance.

In the individual market, Blue Cross and Blue Shield of Minnesota said it lost $142 million for 2016, compared to a $265 million deficit the previous year. The decline mirrored the drop in enrollment, the insurer noted, rather than an improvement in the business. Over the last 10 years, health insurers returned a profit in seven. The numbers reported by the trade group focused solely on revenue and income from the health insurance business, as investment returns made by insurers were not counted in the numbers. Some saw hope in the overall numbers, however, noting that the market was not in a “death spiral,” as some health law critics have argued, because many insurers in 2016 saw slight improvements from the previous year.

States adopting ACA’s health care provisions provide more access to care

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) “has significantly affected health insurance coverage and access among U.S. adults. However, the law gives states flexibility in implementing certain provisions, leading to wide variations between states in consumers’ experience,” according to a report issued on March 22, 2017, by the Commonwealth Fund. The Commonwealth Fund analyzed the Commonwealth Fund Biennial Health Insurance Survey, 2016, which was conducted by Princeton Survey Research Associates International, to compare the differences in insurance coverage, access to care, costs of care, and medical bill and debt problems in California, Florida, New York, and Texas, the nation’s four largest states.

Findings

The uninsured rate has fallen in all four states since 2012. The report noted the following variations for 2016:

  • The uninsured rates among adults age 19 to 64 varied from 7 percent in New York and 10 percent in California to 16 percent in Florida and 25 percent in Texas.
  • The proportions of residents reporting problems getting needed care because of cost was significantly lower in California and New York than in Florida and Texas.
  • Lower percentages of Californians and New Yorkers reported having a medical bill problem in the past 12 months or have accrued medical debt compared to Floridians and Texans.
  • The uninsured rates for young adults were 8 percent in California, 10 percent in New York, 23 percent in Florida, and 30 percent in Texas.
  • The uninsured rates for adults with incomes below the federal poverty level were 9 percent in California, 15 percent in New York, 22 percent in Florida, and 39 percent in Texas.
  • Adults in small firms are more likely to be uninsured in Florida (24 percent) and Texas (37 percent) than in California (14 percent) or New York (12 percent).
  • Cost-related access problems impacted 28 percent of Californians, 29 percent of New Yorkers, 41 percent of Floridians, and 45 percent of Texans.
  • Medical debt impacted 29 percent of Californians and New Yorkers, while 41 percent of Floridians and 44 percent of Texans were impacted by medical debt.

Factors influencing variations

Factors that might explain the variations include (1) whether the state expanded Medicaid eligibility, (2) whether it ran its own health insurance marketplace, (3) what the uninsured rate was prior to the ACA, (4) differences in the cost protections provided by private health plans; and (5) demographic differences.

California and New York both operate their own health insurance marketplaces and have expanded eligibility for Medicaid to adults with incomes at or below the federal poverty level. Florida and Texas use the federal marketplace to enroll residents in health plans and did not expand Medicaid eligibility. In addition, the report noted that the higher rate of insurance coverage and lower deductibles in California and New York likely played a role in the two states’ lower rates of cost-related access problems.

Although Florida and Texas experienced enrollments in private plans through the health insurance marketplace, they have made less progress covering uninsured residents. Of the four states included in the report, Texas had the highest uninsured rate in every age group for 2016. A contributing factor for Texas’ higher uninsured rate is the number of undocumented immigrants residing in Texas. The ACA does not provide access to any new coverage options for undocumented immigrants.

Identifying ‘60-day rule’ overpayments during routine auditing

The need to identify, report, and return Medicare and Medicaid overpayments to CMS under the “60-day rule” and the ability to understand and prepare for the risks posed by routine auditing are essential for all medical providers. At a recent Health Care Compliance Association (HCCA) webinar, Jean Acevedo, LHRM, CPC, CHC, CENTC, Senior Consultant, Acevedo Consulting, Inc., and Lester J. Perling, Esq., CHC, partner, Broad and Cassel LLP, discussed these topics and offered their recommendations.

The 60-day rule

Section 6402(a) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) established new section 1128J of the Social Security Act, which requires providers and suppliers who submit claims to Medicare and Medicaid to report and return “identified” overpayments to CMS within 60-days or face potential liability under the federal False Claims Act. These requirements were implemented by CMS in a February 12, 2016 Final rule (81 FR 7653) (see CMS finally codifies the 60-day Parts A and B overpayment return rule, February 12, 2016; and Comments, questions, concerns? Weighing in on the 60-day overpayment Final rule, March 2, 2016).

According to Perling, the Final rule sets forth the following parameters for understanding the 60-day overpayment requirement:

  • Definition of an “identified” overpayment. Providers are responsible for overpayments that they “know or should have known”about through the exercise of “reasonable diligence.” Providers that deliberately choose not to investigate when they are made aware of the existence of potential overpayments, would be held liable under the FCA.
  • Exercising “reasonable diligence”. Reasonable diligence requires that providers (1) implement proactive compliance activities to monitor for the receipt of overpayments; and (2) undertake investigations “in a timely manner” in response to obtaining “credible information” of a potential overpayment.
  • “Timely” defined. CMS considers a “timely” investigation to be at the most six months from receipt of the credible information, except in extraordinary circumstances.
  • When does the 60-day period begin? The 60-day period does not begin to run until the provider has had a chance to undertake follow-up activities and quantify the amount of the overpayment.
  • Lookback period. The 60-day rule applies to overpayments identified within six years after they were received.
  • Repayment options. Providers may use claims adjustment, credit balance, the HHS Office of Inspector General’s (OIG) Self-Disclosure Protocol, or other appropriate processes to report or return overpayments. Regardless of the process used, the refund should include an explanation or the statistical sampling methodology used if the overpayment was extrapolated.

Routine baseline audit

Acevedo next discussed the annual baseline audit performed as part of the organization’s compliance program. She recommended that it be done under the attorney/client and work/product privileges in order to help insulate the organization from exposure.

Physical therapy case study

Acevedo next presented an audit case study of a physical therapy department. She stressed the need for the auditor (whether in-house or an outside contractor) to examine the three critical physical therapy documents: (1) the initial evaluation and plan of treatment; (2) the treatment notes; and (3) the clinician’s progress report.

In preforming the audit, she recommended that the auditor take note of the fact that health care professionals are creatures of habit and that, for example, they will either include all necessary elements in the plan of treatment, the treatment notes, and the progress report, or not (i.e., they are usually consistently good, or consistently bad at recordkeeping). She also cautioned that while this document audit may be time consuming, and it is important that the auditor be thorough and not just review the most recent treatment notes and progress reports.

If the auditor finds that therapy documents are deficient or erroneous, Acevedo suggested that the auditor STOP and do two things: (1) consider the possibility that an overpayment situation exists and the timeline that may kick in under the 60-day rule; and (2) alert the attorney and the owner of the practice. She cautioned, however, about jumping to conclusions and leaving a paper trail of written concerns that may amount to “breadcrumbs” for a government investigator or a whistleblower to follow.

Prospective v. retrospective audits

Perling stressed that whether the audit is prospective (i.e., occurs prior to submission of a claim) or retrospective (post claim submission) it does not matter as the finding of negative result or high error rate in either would potentially activate the 60-day rule requirements.

Issues to consider when auditing

Perling suggested taking the necessary steps prior to audit to create an attorney/client privilege that will be recognized and respected by any government investigator.

Perling also discussed whether the standards the auditor is relying on are authoritative or merely guidance. Perling believes that statutes and regulations are clearly authoritative, but that “not everything CMS publishes is authoritative.” For example, while CMS Manuals and Local Coverage Determinations are binding on the Medicare contractor, they are not binding on an administrative law judge. The real question, according to Perling, is “whether the Department of Justice or a whistleblower will think a standard is authoritative.”

Final thoughts

In closing, Perling and Acevedo offered three reminders: (1) educate before auditing; (2) the routine annual audit should review current compliance with standards, not past deficiencies; and (3) audits are still required for effective compliance programs. The danger, according to Acevedo, “is putting your head in the sand.”