Honigman Miller Schwartz and Cohn LLP HFMA MICHIGAN CHAPTERS 2016 SPRING CONFRENCE What You Need To Know About The Amended Cost Report and Appeals Rule and The 60 Day Report and Repay Overpayment Rule May 26, 2016 Kenneth R. Marcus, J.D. Partner Honigman Miller Schwartz and Cohn LLP

DISCLAIMER Disclaimer This session does not furnish legal advice regarding any specific situation. To discuss the topics of this presentation, feel free to contact the speaker: kmarcus@honigman.com 313 465 7470

Presentation Topics What’s New In PRRB Appeals For 2016 Alert 11 FSS Takes Over From BCBSA Final Amended Cost Report and Appeals Rules The Final 60 Day Rule

Copyright 2015 Kenneth R. Marcus WHAT’S NEW IN 2016 July 1, 2015: CMS Alert 11 Revisions To PRRB Rules 10/1/2015: Federal Specialized Services Replaces BCBSA ***11/13/2015: Amended Cost Report and Appeal Regulations Published*** “Claim or explain” Copyright 2015 Kenneth R. Marcus

WHAT’S NEW IN 2016: CMS Alert 11 Revised PRRB Rules 7/1/2015 Rule 46: Permits withdrawal of an appeal in reliance on MAC agreement to reopen Must submit evidence of MAC agreement Provides for motion to reinstate dismissed appeal Rule 48: Elaborates on procedure for withdrawal of an appeal or issue(s) in the appeal Copyright 2015 Kenneth R. Marcus

Copyright 2015 Kenneth R. Marcus WHAT’S NEW IN 2016: ALERT 11 Revised Rule 46.2: Withdrawal As Result of AR or Reopening B. Reopening [THIS IS A NEW PROCEDURE] Upon written motion, the Board will also grant reinstatement of an issue(s)/case if a Provider requested to withdraw and issue(s) from the case because the Intermediary agreed to reopen / revise the cost report for that issue(s) but failed to reopen the cost report and issue a new final determination (e.g., Revised NPR) for that issue(s) as agreed. In its motion for reinstatement, the Provider must attach a copy of the correspondence from the Intermediary where the Intermediary agreed to reopen the final determination for that issue(s). [July 1, 2015] Copyright 2015 Kenneth R. Marcus

Copyright 2015 Kenneth R. Marcus WHAT’S NEW IN 2016: ALERT 11 Revised Rule 46.3: Dismissal For Failure To Comply With Board Procedure B. Upon written motion demonstrating good cause, the Board may reinstate a case dismissed for failure to comply with Board procedures. Generally, administrative oversight, settlement negotiations or a change in representative will not be considered good cause to reinstate. If the dismissal was for failure to file with the Board a required position paper, Schedule of Providers, or other filing, the motion for reinstatement must, as a prerequisite, include the required filing before the Board will consider the motion. [July 1, 2015] Copyright 2015 Kenneth R. Marcus

Copyright 2015 Kenneth R. Marcus WHAT’S NEW IN 2016: ALERT 11 Revised Rule 46.1: Motion for Reinstatement A Provider may request reinstatement of an issue(s) or case within three years from the date of the Board’s decision to dismiss the issue(s)/case or, if no dismissal was issued, within three years of the Board’s receipt of the Provider’s withdrawal of the issue(s) (see 42 C.F.R. § 405.1885 addressing reopening of Board decisions). The request for reinstatement is a motion and must be in writing setting out the reasons for reinstatement (see Rule 44 governing motions). The Board will not reinstate an issue(s)/case if the Provider was at fault. If an issue(s)/case was remanded pursuant to a CMS ruling (e.g., CMS Ruling 1498-R), the Provider must address whether the CMS ruling permits reinstatement of such issue(s)/case. If the Board reinstates an issue(s) or case, the Provider will have the same rights (no greater and no less) that it had in its initial appeal. These requirements also apply to Rules 46.2 and 46.3 below. [July 1, 2015] Copyright 2015 Kenneth R. Marcus

Copyright 2015 Kenneth R. Marcus WHAT’S NEW IN 2016: FSS As of October 1, 2015, Federal Specialized Services (Chicago) replaced Blue Cross Blue Shield Association as the “Appeals Support Contractor” Wilson C. Leong, Esq., CPA is the Managing Member New staff (some familiar names from BCBSA or MAC’s) New attorneys (none from BCBSA) New approach E.g., Greater deference granted to MAC in preparing for appeal Copyright 2015 Kenneth R. Marcus

Copyright 2015 Kenneth R. Marcus WHAT’S NEW IN 2016: FSS FSS Contact Information: http://fedspecserv.com/FSS%20About.htm PRRBappeals.com Main Phone: (312) 988-0473 Office Location: 1701 S. Racine Ave. Chicago, IL 60608 wilson@fedspecserv.com Copyright 2015 Kenneth R. Marcus

New Paragraph (j) to 42 C.F.R. 413.24 WHAT’S NEW IN 2016: AMENDED COST REPORT RULE 42 C.F.R.§ 413.24(j) “CLAIM OR EXPLAIN” New Paragraph (j) to 42 C.F.R. 413.24 Establishes the substantive reimbursement requirement for an appropriate cost report claim. The provider must either “[c]laim. . . . full reimbursement in the provider’s cost report for the specific item in accordance with Medicare policy, if the provider seeks payment for the item that it believes comports with program policy” or “[s]elf-disallow... the specific item in the provider’s cost report, if the provider seeks payment that it believes may not be allowable or may not comport with Medicare policy (for example, if the provider believes the Contractor lacks the authority or discretion to award the reimbursement the provider seeks for the item). . . .” Effective: Cost Report Periods Beginning On / After 1/1/2016

WHAT’S NEW IN 2016: AMENDED COST REPORT RULE 42 C.F.R.§ 413.24(J) Substantive reimbursement requirement of an appropriate cost report claim (1) General requirement. In order for a provider to receive or potentially qualify for reimbursement for a specific item for its cost reporting period, the provider's cost report, whether determined on an as submitted, as amended, or as adjusted basis (as prescribed in paragraph (j)(3) of this section), must include an appropriate claim for the specific item, by either— (i)Claiming full reimbursement in the provider's cost report for the specific item in accordance with Medicare policy, if the provider seeks payment for the item that it believes comports with program policy; or (ii)Self-disallowing the specific item in the provider's cost report, if the provider seeks payment that it believes may not be allowable or may not comport with Medicare policy (for example, if the provider believes the contractor lacks the authority or discretion to award the reimbursement the provider seeks for the item), by following the procedures (set forth in paragraph (j)(2) of this section) for properly self-disallowing the specific item in the provider's cost report as a protested amount.

WHAT’S NEW IN 2016: AMENDED COST REPORT RULE 42 C.F.R.§ 413.24(J) 413.24(j)(2) specifies the procedural requirements for a self-disallowed claim by requiring that the provider: Include an estimated reimbursement amount for each specific self-disallowed item in the protested amount line (or lines) of the provider’s cost report; and Attach a separate worksheet to the provider’s cost report for each specific self-disallowed item, explaining why the provider self-disallowed each specific item (instead of claiming full reimbursement in its cost report for the specific item) and describing how the provider calculated the estimated reimbursement amount for each specific self-disallowed item.

WHAT’S NEW IN 2016: AMENDED COST REPORT RULE 42 C.F.R.§ 413.24(J) Paragraph (j)(3) Prescribes the procedure for determining the presence of an appropriate cost report claim where (1) the provider submits an amended cost report accepted by the contractor, (2) the contractor adjusts the original or amended cost report; and (3) the contractor reopens and adjusts the cost report. Note: The MAC has discretion whether to accept an amended cost report. Exception: The MAC must accept an amended cost report within 12 months following the cost report filing deadline for DSH Medicaid eligible days. See 80 Fed. Reg. 70564 (11/13/2015).

WHAT’S NEW IN 2016: AMENDED COST REPORT RULE 42 C.F.R.§ 413.24(J) Paragraph (j)(4)Reimbursement Effect Of Contractor’s Determination If the contractor determines that the provider's cost report included an appropriate claim for a specific item (as specified in paragraphs (j)(1), (2), and (3) of this section) and that all the other substantive reimbursement requirements for the specific item are also satisfied, the final contractor determination (as defined in§ 405.1801(a) of this chapter) must include reimbursement for the specific item to the extent permitted by Medicare policy. If the contractor determines that the provider made an appropriate cost report claim for a specific item but the contractor disagrees with material aspects of the provider's claim for the specific item, the contractor must make appropriate adjustments to the provider's cost report and include reimbursement for the specific item in the final contractor determination in accordance with such cost report adjustments and to the extent permitted by program policy. If the contractor determines that the provider did not make an appropriate cost report claim for a specific item, the final contractor determination must not include any reimbursement for the specific item, regardless of whether the other substantive reimbursement requirements for the specific item are or are not satisfied.

WHAT’S NEW IN 2016: AMENDED COST REPORT RULE 42 C.F.R.§ 413.24(J) Paragraph (j)(5) Administrative Review If the provider files an administrative appeal (pursuant to Part 405, Subpart R of this chapter) seeking reimbursement for a specific item and any party to such appeal questions whether the provider's cost report included an appropriate claim for the specific item under appeal (as specified in paragraphs (j)(1), (2), (3), and (4) of this section), the reviewing entity (as defined in § 405.1801(a) of this chapter) must follow the procedures prescribed in § 405.1873 of this chapter (if the appeal was filed originally with the Board), or the procedures set forth in § 405.1832 of this chapter (if the appeal was filed initially with the contractor), for review of whether the substantive reimbursement requirement of an appropriate cost report claim for the specific item under appeal is satisfied. The reviewing entity must follow the procedures set forth in paragraph (j)(3) of this section in determining whether the provider's cost report included an appropriate claim for the specific item under appeal. The reviewing entity may permit reimbursement for the specific item under appeal solely to the extent authorized by § 405.1873(f) of this chapter (if the appeal was filed originally with the Board) or by § 405.1832(f) of this chapter (if the appeal was filed initially with the contractor).

WHAT’S NEW IN 2016: AMENDED APPEALS RULE 42 C.F.R. §§405.1801, .1803, .1813, .1814, .1832, .1834, .1835, .1837, .1839, .1840, .1873, .1875 Some of these rules apply to appeals of amounts less than $10,000, which are conducted by the MAC and FSS. Discussion here on appeals to PRRB. Three major changes: CMS amended 42 C.F.R. § 405.1835 by deleting the jurisdictional requirement that a provider must include a protested amount in order to self-disallow a reimbursement item. CMS promulgated an entirely new section, 42 C.F.R. § 405.1873, which prescribed in exacting detail the PRRB’s review of whether the Provider complied with the requirements of 413.24(j). CMS amended the CMS Administrator’s review of the decision of the PRRB.

405.1835(a)(1)(ii) 42 C.F.R. §405.1835(a)(1)(ii) Effective FYE’s Ending On/After 12/31/2008: Protested amount required if do not claim a payment item. The MAC routinely challenges the PRRB’s jurisdiction over an appeal for which there is no audit adjustment if the provider did not file a protested amount.

405.1835(a)(1)(ii) Provider has right to appeal during the 180 days of the first anniversary of filing a complete cost report (“Delayed NPR”) (42 USC 1395oo(a)(1)(B) and (3)) Dissatisfaction Not Required For Delayed NPR Appeal Injunction Issued: Charleston Area Med. Ctr. v Sebelius, D.D.C., No. 13-766 (August 6, 2014). 2015 Technical Correction 42 C.F.R. 405.1835(c)(1)

Elimination Of Protested Amount As For Jurisdictional Purposes “. . . [B]ecause we would require an appropriate cost report claim in proposed § 413.24(j), it is reasonable to eliminate the Board jurisdiction requirement in existing §§ 405.1835(a)(1) and 405.1840(b)(3) of an appropriate cost report claim. We note that once this amendment to the Board appeals regulations becomes effective, this proposal will facilitate an orderly end to any litigation regarding the Board jurisdiction requirement of an appropriate cost report claim.  

New Appeals Rule 405.1873 New section, 42 C.F.R. 405.1873 provides for the PRRB’s review of whether the Provider complied with the requirements of 413.24(j), which the PRRB will review as a condition of payment rather than as the bases for determining jurisdiction. This amendment reflects a major paradigm shift. Notably, the PRRB’s findings of fact and law are will not be the bases for dismissing the Provider’s claim. Rather, upon issuing its findings to the parties, PRRB is required to issue one of four types of decisions. The effect of this rule is that the resources of PRRB become more greatly devoted to resolving the question of “what did the provider claim, and when did the provider claim it?” “CLAIM OR EXPLAIN”

New Appeals Rule 405.1873 405.1873(a) If any party to an appeal “questions whether the provider’s cost report included an appropriate claim for the specific item, the Board must address such question in accordance with the procedures set forth in this section.” Notably, this provision is silent on whether the Board, on its own motion, can raise this question. As the MAC routinely files a jurisdictional challenge, expect the MAC to now challenge the cost report filing.

New Appeals Rule 405.1873 405.1873(b) PRRB Procedures The PRRB must give the parties an opportunity to submit factual evidence and legal arguments, on which the Board must issue findings of fact and law based on the provisions or 413.24(j)(3). The PRRB’s findings of fact and law are not the bases for dismissing the provider’s claim. Rather, upon issuing its findings to the parties, PRRB must issue one of four types of decisions.

WHAT’S NEW IN 2016: AMENDED APPEALS RULE 405.1873(d)Two Types Of PRRB Decisions That Must Include Factual Findings and Legal Conclusions On Whether The Provider’s Cost Report Complied With 413.24(j) PRRB Hearing Decision PRRB EJR Decision Where EJR is granted

WHAT’S NEW IN 2016: AMENDED APPEALS RULE 405.1873(e)Two Types Of PRRB Decisions That Must Not Include Factual Findings and Legal Conclusions On Whether The Provider’s Cost Report Complied With 413.24(j) PRRB Jurisdictional Dismissal Decision PRRB EJR Decision Where EJR Is Not Granted But must be included if PRRB conducts further proceedings and issues a decision where EJR is granted But must not be included if PRRB does not grant EJR in further proceedings.

New Appeals Rule 405.1873 405.1873(b) PRRB Procedures: Limits on PRRB Actions The PRRB is prohibited from denying jurisdiction or declining to assert jurisdiction based on factual and legal findings under the standard established by 413.24(j)(3). If PRRB issues a hearing decision or a decision granting expedited judicial review (EJR), it must include its findings of fact and conclusions of law regarding 413.24(j)(3). If the PRRB issues a jurisdictional decision or a decision denying EJR, PRRB may not include its findings of fact and conclusions of law in the decision.

WHAT’S NEW IN 2016: AMENDED APPEALS RULE 405.1873(c) PRRB Procedures Prohibited Decisions If the PRRB finds that a Provider’s cost report did not include a specific claim, the PRRB may not: Deny jurisdiction over the claim based on its factual findings regarding the claim Decline to exercise jurisdiction based on its factual findings regarding the claim Take any actions in 405.1868(b),(c ) or(d) [dismissal or lesser sanctions], impose sanctions or take other action adverse to a party’s interest except as provided in paragraph (f)

WHAT’S NEW IN 2016: AMENDED APPEALS RULE 405.1873(c) PRRB Procedures Prohibited Decisions Regardless of whether the PRRB finds that a Provider cost report did or did not include a specific claim, the PRRB may not Deny jurisdiction over the claim based on its factual findings regarding the claim Exception: If appeal based on reopening without a specific adjustment, the PRRB must deny jurisdiction. Decline to exercise jurisdiction based on its factual findings regarding the claim Take any actions in 405.1868(b),(c ) or(d) [dismissal or lesser sanctions], impose sanctions or take any action adverse to a party’s interest except as provided in paragraph (f).

New Appeals Rule 405.1873 405.1873(f) Paragraph (f) of 405.1873 provides for the effects of the PRRB’s findings of fact and conclusions of law regarding whether the provider complied with 413.24: If the PRRB finds that the provider complied, “the specific item is reimbursable in accordance with Medicare policy, but only if the Board further determines in such final hearing decision that all the other substantive reimbursement requirements for the specific item are also satisfied.” If the PRRB finds that the provider “[did not include an appropriate cost report claim for the specific item under appeal, then the specific item is not reimbursable, regardless of whether the Board further determines in such final hearing decision that the other substantive reimbursement requirements for the specific item are or are not satisfied.” In the case of EJR, whether the item is reimbursable ultimately hinges on whether the provider complied with §413.24.

Amended CMS Administrator Review Of prrb decision 405.1875(a)(2)(v): Administrator’s Review If the Administrator reviews a Board hearing decision regarding a specific item, or for a Board EJR decision the question of whether there is Board jurisdiction over a specific item, the Administrator's review of such a hearing decision or EJR decision, as applicable, will include, and any decision issued by the Administrator (under paragraph (e) of this section) will address, the Board's specific findings of fact and conclusions of law in such hearing decision or EJR decision (as prescribed in § 405.1873(b)(1) and (d)) on the question of whether the provider's cost report included an appropriate claim for the specific item under appeal (as prescribed in § 413.24(j) of this chapter).

The Final 60 Day rule Published in Federal Register on February 12, 2016 (81 Fed. Reg. 3564) Effective March 14, 2016 Note the statutory obligations effective March 23, 2010 Reports and returns made before March 14, “good faith” compliance with statute Applies only to Medicare Parts A and B Fewer than one page of new regulations But: 29 pages of explanations

OVERPAYMENT The Final 60 Day rule No offset for underpayments “Any funds a person has received or retained under title XVIII of the Act to which the person, after applicable reconciliation, is not entitled under such title.” Includes overpayments not caused by provider, such a MAC edit problem paying for non-covered services No offset for underpayments

The Final 60 Day rule Examples: Medicare payments for non-covered services Medicare payments in excess of the allowable amount for an identified covered service Errors and non-reimbursable expenditures in cost reports Duplicate payments Receipt of Medicare primary payment when another payer had the primary responsibility for payment Insufficient documentation Lack of medical necessity

The Final 60 Day rule DEADLINE FOR REPORTING AND REFUNDING Later of: 60 days after the date on which the overpayment was “identified” Date “any corresponding cost report is due”

The Final 60 Day rule “Identified” Overpayment “A person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.” Overpayment is identified “if the person fails to exercise reasonable diligence and the person in fact received an overpayment.” Note overpayment in Final Rule not identified until quantified or should have been quantified with reasonable diligence.

The Final 60 Day rule Reasonable Diligence “ ‘Reasonable diligence’ includes both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayment and investigation conducted in good faith in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.” “We believe that compliance with the statutory obligation to report and return received overpayments requires both proactive and reactive compliance.”

The Final 60 Day rule Credible Information “Information that supports a reasonable belief that an overpayment may have been received.” Examples from proposed rule Hotline complaint that qualifies as credible information (i.e., not all hotline complaints) Provider reviews records and learns it incorrectly coded services resulting in increased reimbursement

Who Must Receive Credible Information? The Final 60 Day rule Who Must Receive Credible Information? CMS rejects comment that a senior official in the organization must receive the credible information to give rise to reasonable diligence obligation “Organizations are responsible for the activities of their employees agents at all levels.” Important to emphasize to employees importance of promptly reporting overpayments internally

The Final 60 Day rule Liability Liability arises only if there is actually an overpayment Failure to exercise reasonable diligence does not create liability unless there is an overpayment But note: It would be risky to rely on non- existence of overpayment and ignore credible information of potential overpayment

The Final 60 Day rule 60 Day Period Begins If provider receives credible information that an overpayment may exist, and exercises reasonable diligence to determine if there is an overpayment, 60 day period begins when reasonable diligence completed, BUT If provider receives credible information that an overpayment may exist, and fails to exercise reasonable diligence to determine if there is an overpayment, the 60 day period begins when provider received the credible information.

The Final 60 Day rule QUANTIFYING Quantifying means determining the amount of the overpayment The 60 days does not begin until the overpayment is quantified, or should have been quantified upon exercise of reasonable diligence Note there is no minimum materiality threshold.

The Final 60 Day rule SIX MONTH GUIDELINE Reasonable diligence demonstrated “through the timely, good faith investigation of credible information” At most 6 months from receipt of the credible information “except in extraordinary circumstances” Total of 8 months, 6 months to investigate, 60 days to report and return, but must act with reasonable speed

The Final 60 Day rule Extraordinary Circumstances The disclosure can be made beyond the 6 month plus 60 days period for “extraordinary circumstances” Unusually complex investigations that provider reasonably anticipates will require more than 6 months to investigate Other examples include natural disasters or state of emergency

Look back Period Proposed: 10 Years Final: 6 Years The Final 60 Day rule Look back Period Proposed: 10 Years Final: 6 Years

Contents Of Overpayment Report The Final 60 Day rule Contents Of Overpayment Report Must use one of the following processes established by the applicable Medicare contractor (in regulation text): Claims adjustment Credit Balance Self-reported refund Other reporting process Exceptions OIG Self-Disclosure Protocol CMS Self-Referral Disclosure Protocol Must report but may not return if seek ERP until ERP denied or fail to comply with ERP

The Final 60 Day rule Statistical Sampling If calculated using a statistical sampling methodology, must “describe the statistically valid sampling and extrapolation methodology in the report” Single refund form with attached spreadsheet of data is acceptable

Report To: The Final 60 Day rule The Medicare contractor Part A/B MAC DME MAC The OIG under the Self Disclosure Protocol CMS under the SRDP Disclosures to DOJ or MFCU do not suspend the deadline

Q & A Questions And Answers