September 20, 2016

Caution: Do not hold on to Medicare overpayments

From international law firm Arnold & Porter LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today's physicians and health care executives.

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Recently, we advised you about regulations issued by CMS implementing what is known as the "60-Day Rule," which requires providers to refund any Medicare overpayment within 60 days after the date on which the overpayment was identified. The rule was based on a 2009 statutory amendment that applied to Medicaid, as well as Medicare, overpayments. We explained that the regulation provided that once a provider has "credible evidence" of an overpayment, the provider has the obligation to undertake "reasonable diligence" to determine whether or not an overpayment exists, and, if so, the amount of that overpayment. Failure to fix such action could result in imposition of False Claims Act liability, which carries with it triple damages plus a penalty of up to $11,000 per claim.

On Aug. 24, the first settlement relating to the 60-Day Rule was announced. In a case that began in 2011, Mount Sinai Health System in New York agreed to pay $2.95 million relating to its failure to repay $844,000 in Medicaid overpayments. The significance of this case is not so much for the settlement of more than three times the amount of the overpayment. Perhaps more noteworthy was that the case was triggered by an employee who raised concerns about the overpayment but whose concerns were not taken seriously enough by the hospital. The employee then filed a whistleblower False Claims Act suit; based on the settlement, he received a $354,000 share of the settlement proceeds. As the result of this case becomes more widely known, there is little doubt that it will trigger additional whistleblower lawsuits.

Over the past several years, we have seen many physician practices take a cavalier attitude toward improper payments, with credit balances that have built up over the years to several hundred thousand dollars. To the extent that these credit balances reflect Medicare or Medicaid overpayments, they reflect a significant potential liability beyond the face value of the overpayment. Practices should take steps to refund any identified overpayments to avoid risking a more serious liability.

Alan E. Reider, JD, MPH, a partner at Arnold & Porter LLP, can be reached at

Matthew T. Fornataro, JD, an associate at Arnold & Porter LLP, can be reached at

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