There is an inherent adversarial relationship between the DME supplier and CMS. On the one hand, the DME supplier markets products and services, receives the physician's order, obtains the necessary supporting documentation, delivers the product and educates the patient, and bills and collects from Medicare. On the other hand, the Medicare contractor audits the supplier's documentation. If the contractor concludes that the documentation is deficient, then the contractor will assert that Medicare should not have paid the claim and the supplier is required to repay Medicare.
Layered on top of this tension are investigations by the National Supplier Clearinghouse (NSC) and the Office of Inspector General (OIG). If the NSC/OIG concludes that a DME supplier's claims result from a kickback arrangement, a Stark violation, a violation of the beneficiary inducement statute, a violation of the telephone solicitation statute or a violation of a supplier standard, then the government's position will likely be that the claims should never have been paid and the supplier must repay the damages.
The challenge for the DME supplier is that it may justifiably disagree with the governmental agency's findings. While the auditor might believe that the documentation does not establish medical necessity, the supplier might believe otherwise. Likewise, while the NSC/OIG might believe that an anti-fraud law has been violated, the supplier might conclude otherwise. As to who is right and who is wrong, this may not be decided until an administrative law judge (ALJ) rules on the audit or until a federal judge and/or jury makes a decision regarding whether any anti-fraud laws were violated.
The bottom line is that it is often unclear when an accurate determination can be made as to whether a claim was properly paid by Medicare. While facing this uncertainty, the DME supplier must contend with the 60-day rule set forth in the Affordable Care Act.
Under the Affordable Care Act, a person or entity that has received a payment from a Medicare or Medicaid program to which the person or entity is not entitled (e.g., an overpayment), the person or entity is obligated to refund the overpayment to the government and report the reason for the overpayment. The overpayment has to be returned and refunded within 60 days of the identification of the overpayment (or the date any corresponding cost report is due, if applicable, whichever is later). Failure to comply with this report and return requirement within the specified time frame subjects the person or entity to liability under the federal False Claims Act (FCA). Under the FCA, a false claim allows the government to seek monetary damages of three times each claim's value, plus penalties of up to $10,000 per claim.
The Centers for Medicare and Medicaid Services (CMS) proposed additional regulations in 2012 regarding a number of items, including the 60-day rule, but, at this time, these regulations have not been finalized. This has left providers and suppliers in a quandary about what identifying an overpayment means. Well, now we have an idea.
On August 3, 2015, a district court in New York issued the first opinion in the country addressing this question. In Kane v. Healthfirst, Inc., et al., the court denied the hospital defendants' motion to dismiss the case after finding that the government had stated a claim against the hospitals under the FCA. The hospitals in this case are several affiliated hospitals in New York that erroneously billed New York Medicaid as a secondary payer due to a software glitch. The hospitals assigned an employee to investigate the potential software problem in 2011, and it was that employee (Kane) who later brought a qui tam suit against the hospitals alleging violations of the FCA.
Kane sent an email to hospital executives in February 2011 detailing a list of 900 claims totaling over $1 million that were potentially improperly billed. The hospitals started making some repayments of those claims after receiving Kane's email, but did not repay the majority of those claims until 2013 after being served with a Civil Investigative Demand from the U.S. Department of Justice.
At issue in this opinion was a motion to dismiss the case filed by the defendant hospitals. The hospitals argued that they had not identified the overpayments at the time of Kane's email in 2011 because the email was only a list of potentially erroneous payments, which were not classified as overpayments with any certainty. The government's argument, which the court ultimately accepted, is that overpayments are identified when, "a person is put on notice that a certain claim may have been overpaid." The court arrived at this conclusion after a long analysis of a number of items, including the plain meaning of the words at issue, legislative history, and the potential ramifications of adopting each party\'92s proposed definition. The court noted that its decision imposed a demanding standard on providers and suppliers. Ultimately, in adopting the government's position on the definition of "identified," the court determined that the defendant hospitals were not entitled to have the case dismissed and that the parties would have to proceed with litigation.
This is the first opinion addressing this issue in the country, and providers and suppliers should continue to watch developments in this case. One thing important to note is that this litigation is proceeding against hospitals that ultimately reported and refunded the overpayments. However, they may still be subject to liability under the False Claims Act because of the time frame in which those overpayments were reported and refunded. We continue to wait for CMS to finalize its proposed regulations on this issue, but, in the meantime, it is clear that the government is willing to pursue a hard line stance on overpayments while it waits on final guidance from CMS.
The takeaway for the DME supplier is the need to conduct self-audits of claims. On a periodic basis, bring in an outsider to audit claims, and have a health care attorney review the supplier's marketing practices and relationships with referral sources. Taking these steps will reduce the risk of improper claims submissions. If the supplier identifies claims that should not have been paid, then be aware of the report and repay obligations under the Affordable Care Act.
