0. Voluntary Refunds of Overpayments Now Mandatory:
New Deadlines, Definitions, and Difficulties
Timothy P. Blanchard
Judith A. Waltz
American Health Lawyers Association
Regulation, Accreditation, and Payment
Practice Group Luncheon
June 28, 2010

1. Mandatory “Voluntary” Refunds
“Voluntary” = not in response to government overpayment demand letter
Under PPACA, refunds are now mandatory
Not just refund OR report (as under prior law)
REPORT and RETURN and NOTIFY
All within sixty days of “identification”
Failure to meet the deadline renders the overpayment an “obligation” under the FCA
Social Security Act §1128J(d); PPACA §6402(a)

2. The Old Rule: “Failure to Disclose”
42 U.S.C. § 1320a-7b(a)(3)
A felony is committed by a person who
having knowledge of the occurrence of any event affecting initial or continued right to any benefit or payment
conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment
Avoid violation by disclosing OR refunding (i.e., no intent to secure/retain)

3. Proposed CMS Rule - Withdrawn
67 Fed. Reg (January 25, 2002)
“This proposed rule would further memorialize the longstanding responsibility for all providers, suppliers, individuals, and other entities to report overpayments”
“[The] provider, supplier, or individual must, within sixty days of identifying or learning of the excess payment, notify the intermediary or carrier, in writing, of the reason for the overpayment, and return the overpayment at the correct address.”
CMS estimated: “[I]t will take 5 minutes per instance to notify us.”

4. Reverse False Claims & FERA 2009
Pre-FERA:
31 U.S.C. § 3729(a)(7)
Knowingly makes, uses or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.
FERA:
31 U.S.C. § 3729(a)(1)(G)
Knowingly makes, uses or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government. 4

5. FCA “Obligations” FERA PPACA
[T]he term “obligation” means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment. 31 U.S.C. § 3729(b)(3).
PPACA
“Any overpayment retained by a person after the deadline for reporting and returning the overpayment under [SSA §1128J(d)] is an obligation” for FCA purposes.
FCA violation only if “knowingly and improperly” avoided or reduced. 31 U.S.C. §§ 3729(a)(1)(G); (b)(3)

6. New Social Security Act § 1128J(d)
(1) IN GENERAL.—If a person has received an overpayment, the person shall—
(A) report and return the overpayment to the Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address; and
(B) notify the Secretary, State, intermediary, carrier, or contractor to whom the overpayment was returned in writing of the reason for the overpayment.
(2) DEADLINE FOR REPORTING AND RETURNING OVERPAYMENTS.— An overpayment must be reported and returned under paragraph (1) by the later of—
(A) the date which is 60 days after the date on which the overpayment was identified; or
(B) the date any corresponding cost report is due, if applicable.
(3) ENFORCEMENT.—Any overpayment retained by a person after the deadline for reporting and returning the overpayment under paragraph (2) is an obligation (as defined in section 3729(b)(3) of title 31, United States Code) for purposes of section 3729 of such title.

7. New Section 1128J(d) (continued)
(4) DEFINITIONS.—In this subsection:
(A) KNOWING AND KNOWINGLY.—The terms ‘knowing’ and ‘knowingly’ have the meaning given those terms in section 3729(b) of title 31, United States Code.
(B) OVERPAYMENT.—The term ‘‘overpayment’’ means any funds that a person receives or retains under title XVIII or XIX to which the person, after applicable reconciliation, is not entitled under such title.
(C) PERSON.—
(i) IN GENERAL.—The term ‘person’ means a provider of services, supplier, medicaid managed care organization (as defined in section 1903(m)(1)(A)), Medicare Advantage organization (as defined in section 1859(a)(1)), or PDP sponsor (as defined in section 1860D–41(a)(13)).
(ii) EXCLUSION.—Such term does not include a beneficiary.

8. Critical Definitions “Identified” is NOT further defined
But FCA’s “knowing/knowingly” includes reckless disregard
“After applicable reconciliation”
“Corresponding cost report”
The “Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate”
The “correct address”

9. OIG Enforcement Authority
PPACA § 6402(d)(2)added a new section to SSA §1128A(a) (42 U.S.C. § 1320a–7a(a)) as follows:
(10) knows of an overpayment (as defined in paragraph (4) of section 1128J(d)) and does not report and return the overpayment in accordance with such section;
Administrative sanctions
Civil money penalties not more than $10,000 for each item or service, plus an assessment of not more than three times the amount claimed for each such item or service.
Existing law provides that “the Secretary may make a determination in the same proceeding to exclude the person from participation in the Federal health care programs.”
42 U.S.C. § 1320a–7a(a))

10. Open Issue: “Identification”
When is an overpayment considered “identified”?
Corporate knowledge concept?
But knowledge of what?
Discovery of an “Overpayment Issue” vs. Identification of an Overpayment
Compliance program approaches to handling § 1128J(d) obligations
Policies and procedures
Workforce training
Documentation issues

11. The “After Reconciliation” Ambiguity
‘‘‘[O]verpayment’’ means any funds that a person receives or retains under title XVIII or XIX to which the person, after applicable reconciliation, is not entitled under such title.”
Does it affect:
Just the fact of, or amount of, an overpayment (i.e., based on the NPR) or
When a return and report is due or
Both
Due date for cost report overpayments?

12. Legislative History of “Reconciliation”
H.R (the one that didn’t pass) would have defined “overpayment” as:
“any finally determined funds that a person receives or retains under title XVIII, XIX, or XXI to which the person, after applicable reconciliation, is not entitled under such title.”
See House Report at 188, 500 (March 17, 2010) (emphasis added).
In H.R. 4872, the only deadline was “60 days after the date the person knows of the overpayment.” Id.

13. FERA Legis. Intent: Reconciliation
The Committee also recognizes that there are various statutory and regulatory schemes in Federal contracting that allow for the reconciliation of cost reports that may permit an unknowing, unintentional retention of an overpayment. The Committee does not intend this language to create liability for a simple retention of an overpayment that is permitted by a statutory or regulatory process for reconciliation, provided the receipt of the overpayment is not based upon any willful act of a recipient to increase the payments from the Government when the recipient is not entitled to such Government money or property.
Moreover, any action or scheme created to intentionally defraud the Government by receiving overpayments, even if within the statutory or regulatory window for reconciliation, is not intended to be protected by this provision. Accordingly, any knowing and improper retention of an overpayment beyond or following the final submission of payment as required by statute or regulation--including relevant statutory or regulatory periods designated to reconcile cost reports, but excluding administrative and judicial appeals--would be actionable under this provision.
Senate Report (March 23, 2009) at 15 (regarding FERA).

14. More Open Issues Stark self-disclosure provision: Inconsistency?
PPACA § 6409 requires self-referral disclosure protocol (SRDP) and gives HHS the authority to reduce amounts otherwise due as a result of prohibited claims
Vs. return and report related overpayment within sixty days or identification?
AKS violations
Under PPACA § 6204(f), claims that include items or services resulting from an AKS violation also constitute false or fraudulent claims for FCA purposes
but is there an “overpayment” under 1128J(d)?

15. Open Technical Issues Waiver of appeal rights: Due process concerns
Limitation on liability, waiver of recovery, appeal rights generally, untimely reopenings
Effect of regulatory reopening periods on look-back period for mandatory voluntary refunds
“Improperly” issue
A continuing violation?
Is report and refund under § 1128j(d) a public disclosure barring relator’s recovery?

16. Still More Open Issues
Are refunds to beneficiaries required by § 1128J(d)?
Impact on propriety of extrapolated overpayment calculations?
Limited options for refunds in some Medicaid programs

17. Judith A. Waltz Foley & Lardner LLP jwaltz@foley.com 415.438.6412
Any Questions?
We’re sure there are more issues.
Let’s discuss.
Judith A. Waltz Foley & Lardner LLP
Timothy P. Blanchard
Blanchard Manning LLP