3/15/2011
Retaining Overpayments Isn’t
Mickey Mouse Anymore
Karen Murray, Yale New Haven Health System
Kelly Sauders, Deloitte & Touche
James Sheehan, NY Office of Medicaid Inspector General
Larry Vernaglia, Foley & Lardner
Health Care Compliance Association’s 15th Annual Compliance Institute
April 10 – 13, 2011
Outline of Today's Discussion
• Background and discussion of PPACA, FERA and
current “open” definitions and interpretations
• An overview of leading practices for conducting internal
investigations and refunding overpayments
• Case studies/discussion of scenarios to explore when an
overpayment is “identified” and potential actions a
compliance officer may take
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Legal/Regulatory Overview
Background and Current Interpretations
PPACA and FERA
• PPACA: Patient Protection and Affordable Care Act (H.R.
3590); signed into law on March 23,2010
• FERA: Fraud Enforcement and Recovery Act; signed into
law on May 20, 2009
“We've estimated that most of this [health care reform] plan
can be paid for by finding savings within the existing health
care system, a system that is currently full of waste and
abuse.” – President Obama
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Historical Treatment of Overpayments
• The FCA contains a provision for “reduced damages”
(reduced to 2X damages) if a court finds that:
– the violator furnished the government all information known to
such person about the violation within 30 days after the date
on which the defendant first obtained the information;
– such person fully cooperated with any Government
investigation of such violation; and
– at the time such person furnished the United States with the
information about the violation, no criminal prosecution, civil
action, or administrative action had commenced under this title
with respect to such violation, and the person did not have
actual knowledge of the existence of an investigation into such
violation.
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FERA & PPACA Changes to
the FCA and CMPL
• May 20, 2009 FERA changes:
– Expressly referenced improper retention of “obligations”
– Broadened the definition of a false claim to include the situation where a
person “knowingly conceals or knowingly and improperly avoids or decreases
an obligation to pay or transmit money or property to the government…”
• March 23, 2010 PPACA changes:
– Civil Monetary Penalties Law
• Failing to report and return known overpayment within 60 days or when cost
report due (such failure is also subject to potential FCA liability)
• This provision was less noticed…but related…
– False Claims Act Provision
• PPACA § 6402(a): Express duty to refund and report Medicare and Medicaid
overpayments
• By the later of 60 days after overpayment “identified” or the date cost report
is due
• Failure to report and return is an “obligation” for the purpose of FCA
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Considerations for Compliance Officers
• Key principles of PPACA:
– What is an “overpayment”?
– When is it “identified”?
– What is the provider’s actual duty?
– What is the timeframe for returning and disclosing
overpayments?
– Who is a “person” receiving or retaining an overpayment?
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So what exactly is an “overpayment”?
• PPACA Section 6402 Medicare and Medicaid Program
Integrity Provisions:
– The term ‘‘overpayment’’ means any funds that a person
receives or retains under title XVIII (Medicare) or XIX
(Medicaid) to which the person, after applicable reconciliation,
is not entitled under such title” (“funds” not “benefit”)
– Reporting and Returning of Overpayments (paragraph 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.””
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Deadlines for reporting and
returning “overpayments”
• PPACA Section 6402 Medicare and Medicaid Program
Integrity Provisions (continued):
– 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.”
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Enforcement of PPACA overpayment
provisions
• “(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.
• “(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, U.S.
Code
– (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 1860D41(a)(13)).
“(ii) Exclusion – such term does not include a beneficiary.”
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What is not currently defined in PPACA?
• No definition of “not entitled”
• No definition of “after reconciliation”
• No explanation of when the “cost report” deadline applies
• No definition of “identified”
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What is “not entitled”?
• The same analysis of overpayments as providers historically
used…condition of payment not met
• New York State OMIG definition:
– Kickback
– Stark
– Beneficiary eligibility
– Conditions of payment
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What is “after reconciliation”?
• Possibilities:
–
–
–
–
–
Calculating co-pay/deductibles
Running through cost report
Calculating actual reimbursement impact
Offsetting underpayments
Interim payments vs. final settled payments
• New York State OMIG:
– Applies to interim payments prior to cost report-based payment determinations
– Reconciliations related to Medicaid best price determinations for prescription
drugs
– CMS 838 quarterly report of Medicare credit balances
• Providers may view this principle as contemplating mathematical
calculations to arrive at the precise financial impact of the
overpayment
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When does the “cost report”
deadline apply?
• Is it only for interim payments that don’t get resolved
through the cost report?
• Could it apply to all cost-reporting providers, and use the
“attachment package” to report and refund overpayments?
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What does it mean to “identify” an
overpayment?
• Not defined in the Statute
• Possibilities could range from:
1. Any “whiff of an overpayment” with no clue of whether it is
accurate
2. Awareness that an overpayment has been received, but no
knowledge of how much has been overpaid
3. Confidence that an overpayment has been received, and the
amount of the overpayment has been determined using
commercially reasonable methods and a responsible process
4. To moral certainty that an overpayment has been received,
with no possible defenses or counterarguments and an
absolute certainty of the amount of the overpayment
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What does the NYS OMIG think it means to
“identify” an overpayment?
• “Identified” for an organization means that the fact of an
overpayment, not the amount of the overpayment, has been
identified. (e.g., patient was dead at time service was
allegedly rendered, Ambulatory Payment Group (APG) claim
includes service not rendered, charge master had code
crosswalk error)
• Compare with language from CMS proposed 42 CFR
401.310 overpayment regulation 67 FR 3665 (1/25/02 draft
later withdrawn)
– “If a provider, supplier, or individual identifies a Medicare payment
received in excess of amounts payable under the Medicare statute
and regulations, the provider, supplier, or individual must, within 60
days of identifying or learning of the excess payment, return the
overpayment to the appropriate intermediary or carrier.”
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What are some of the NYS OMIG’s
examples of “identified” overpayments?
• Employee or contractor identifies overpayment in hotline call
or email
• Patient advises that service not received
• RAC advises that dual eligible Medicare overpayment has
been found
• OMIG sends letter re: deceased patient, unlicensed or
excluded employee or ordering physician
• Qui tam or government lawsuit allegations
• Criminal indictment or information
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Implications of NYS OMIG view on when
an overpayment is “identified”
• The degree of knowledge required to be considered
identified
• How to address the knowledge of fact of overpayment
without knowledge of amount
• CMS, state expectations of payment, escrow, inability to pay
• Impact of a complaint or indictment on the duty to report and
refund
• 5th Amendment issues in mandatory reporting
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Challenges facing providers
in responding
• Difficulty completing certain investigations and fact
gathering/data collection within 60 days after the first
allegations
• Challenges in completing "reconciliation" to make the refund
• Level of disclosure required (where to go)
• Getting the contractor/payer to accept the money (e.g.,
complexity of refund forms/processes)
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How can providers demonstrate
good faith efforts?
• Create a record to demonstrate to the government that your
organization collected or attempted to address allegations of
overpayments
– Develop standard form to document employee’s internal disclosure
– Document interviews
– Document evidence and means to determine credibility
– Record employees involved in deliberations and decisions
• Keep an ongoing record of overpayment refunds made by your
organization (federal, state, private payers)
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How can providers refund overpayments?
• Providers must state the reason for overpayment
• Notify the State to whom the overpayment was returned in
writing and the reason for the overpayment
– Use OMIG’s Disclosure Protocol, available on the OMIG web
site: www.OMIG.ny.gov
– See Pennsylvania’s 2010 Self-Audit Protocol:
http://www.dpw.state.pa.us/omap/omapfab.asp
– See New Jersey’s Self-Disclosure Process
www.nj.state.us/njomig
– See the Federal OIG Self-Disclosure Protocol
http://oig.hhs.gov/authorities/docs/selfdisclosure.pdf
– Also CMS “unsolicited/voluntary refunds” to Medicare
contractors (checked July 2, 2010)
– See, e.g., http://www.wpsmedicare.com
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Conducting Internal Investigations
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Internal Investigations
• When and how should attorney-client privilege be used?
• What are the underlying tensions between mandatory
reporting statute and “confidential” disclosures?
• Internal or external counsel?
• What documents should be marked “privileged”?
• Who should be on the investigation team and who should
lead?
• Do you need external expertise?
• What are things to consider when planning the
investigation?
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Privileged Investigation
• The attorney-client privilege – client seeks / receives legal
advice from an attorney in confidence
• The communications may be protected forever
• The underlying facts, on which the communications are
based, are not protected
• The burden of proving the existence of the privilege rests on
the party asserting it
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Tension between mandatory reporting
statute & “confidential” disclosures
• Privilege does not protect underlying documents and
information
• Privilege does protect communication of legal advice sought
and received
• Can client disclose facts of an identified overpayment
without waiving the privilege?
• What about the role of in-house counsel who “wears two
hats”?
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Internal / External Counsel
Privileged Investigation
• Internal, External or Both? Depends on situation
– Internal Counsel: privilege does not apply to communications made to
obtain “business advice,” only “legal advice”
– External Counsel: the retainer should specify the organization is
“seeking legal advice” from counsel
• Note documents prepared to assist the attorney with “prepared at
the request of counsel” or “attorney-client privilege”
• Keep all documents confidential
• Even privileged documents should be prepared as if they might
become public – risk of waiver of the privilege / possibility that the
materials will be voluntarily disclosed to the government
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Investigation Team
• Selection of investigation team & team leader
• Required skill sets of the investigative team – depends on
the matter under investigation
• Early planning meeting of the investigation team
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Internal / External Expertise
• Internal Expertise: generally more cost effective; personnel
are more knowledgeable about the organization’s own
compliance standards
• External Consultants: may have more experience with
investigations and litigations; the court or government
attorney may perceive an outside consultant as more
objective than an employee of the organization
• When investigation is under privilege, engagement letter
should note that the consultant is working at the direction of
counsel
• Be sure consultant report is sent directly to legal counsel
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Planning the Investigation
Investigation Strategy – Create a Road Map
• Consider what is known about the matter
• Determine possible regulatory issues involved
• When to escalate issue to leadership
– Criminal Action
– Patient Harm
– High Dollars
– Bad Facts or Timing
– OIG Inquiry
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Planning the Investigation
(Continued)
• Set the scope and stick to it
– Design auditing procedures around the key issues – keep
scope narrow
– Use parking lot for other unrelated or new issues that arise and
deal with them separately later
• Identify witnesses, documents, computer data, etc.
• Prepare a written list of documents and data requests
• Draft a list of witness interview questions
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Document Management
• One person within the organization with overall responsibility for
collecting the documents and providing them to counsel
– Ensures documents are organized and you have “control” over
them
– Ensures documents are protected
• May need communication from senior management directing
employees not to destroy certain types of documents or
computer records
• Any routine document destruction practices which have the
potential for destroying the specified documents must be
postponed until further notice
– Follow up to ensure the communication reached the right
people – ensure directives obeyed
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Witness Interviews
• Interview the most knowledgeable persons first – this allows the
investigation to reveal as much as possible, as soon as possible
• Advisable to have more than one person present for an
interview – protects against false accusations of improper
conduct
• If the interview is being undertaken by legal counsel under
privilege, ensure protection of the organization’s attorney-client
privilege
– Employee must know that counsel is representing the
company and not the individual employee being interviewed
– Employee must understand that the content of the
conversation is confidential
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Witness Interview Tips
• The ultimate objective of an interview is to get the witness to
speak as much as possible and to share everything he or
she can remember
• Begin with open-ended questions which may open up
avenues for follow-up questions
• Follow-up questions should be more narrow or focused
• More listening and less talking
• Silence is a helpful tool in obtaining a response
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Witness Interview Tips (Continued)
• Ask about time periods – answers may differ depending on
the period of time the issue has occurred (e.g., "We did it
this way, until 2008 when we changed the process to X”)
• Ask witness to identify the names of all other persons
knowledgeable about a set of facts – adds to interview list
• Create memo summarizing each witness interview as soon
as possible – before memories fade
– Memo should not be shown to or signed by the interviewee –
may significantly weaken claims of protection under attorneyclient privilege and the work product doctrine
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Witness Interview Tips (Continued)
• Keep track of the facts of your investigation
• Compile relevant facts in a chronology that is continually
updated as more facts are learned
– This keeps the accumulated learning organized and highlights
discrepancies in witness accounts that must be further
investigated or evaluated
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Investigation Findings Report
• Written report for a designated person, identified group in
senior management and/or the board
• Report will likely take on a number of different forms
depending on the complexity and extent of the investigation
• Due to the sensitive nature of a final report, dissemination
should be limited (e.g., be careful about the creation and
dissemination of “draft” copies)
• Very sensitive/serious issues – counsel should write the
report and keep track of all copies distributed
– When possible, copies should be collected from the board or
management to avoid dissemination and unauthorized copying
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Case Studies
Case Study #1: Hotline report
• A hotline call came in on a Sunday night. The caller didn’t leave a
name, but said she had worked in the emergency department
over the weekend.
• The caller was concerned about a case involving an 85-year-old
man with chest pain. The hotline report stated that the patient
came in on Saturday, was seen in the ED and admitted, but spent
the night in the ED due to a bed shortage. On Sunday, it was
determined that the patient had improved enough to go home.
The caller was concerned because a Case Manager decided to
change the patient’s order to “observation status” since the
patient had never been in a bed and ended up staying less than
36 hours. The caller was also worried about the patient and
didn’t think he was ready for discharge.
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Case Study #1: Hotline report
Questions for consideration
• As the Compliance Officer, how might you start your follow-up on
this call?
– Interviews?
– Data?
• What if, after interviewing the Director of Case Management, it
sounds as if the practice of “flipping” patients from inpatient to
observation is fairly common (and sometimes done by Case
Managers)?
• When should you consider attorney-client privilege?
• What might your obligation be to “look back”?
• What if the hospital changed billing systems two years ago and
you can only see billing data for the past two years?
• At what point has an overpayment been “identified”?
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Case Study #2: Excluded individuals
• You are the new Compliance Officer at Very Large Health
System. When you took the job, you knew the compliance
program needed a little work. Soon after starting, you realized
that the System had only been doing OIG exclusion checks for
new hires and new medical staff appointments since 2005.
However, the System had never screened all existing employees
or medical staff members.
• You decide to take quick action to address this deficiency in the
compliance program and run the entire list of employees and
medical staff through the OIG’s List of Excluded Individuals and
Entities.
• After investigation and removal of “false positives” from the list,
you have identified a lab employee who was excluded in 1998
and a radiologist on the medical staff who was excluded in 2008.
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Case Study #2: Excluded individuals
Questions for consideration
• What are your obligations here?
• How might you determine the impact of the excluded lab
employee?
• How might you determine the impact of the excluded Radiologist?
• At what point has an overpayment been “identified”?
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Case Study #3: Electronic Medical Record
• You are the Compliance Officer at an Academic Medical Center
that has recently implemented an electronic medical record
(EMR) in all outpatient areas and clinics. As part of your annual
compliance work plan, there is a planned documentation, coding
and billing review.
• You are a little stretched for resources, so you hire a consultant to
help you perform this proactive review. The consultant is
evaluating a sample of 50 claims on a pre-bill basis. The
consultant starts the review on Monday. On Wednesday, the
consultant requests a meeting with you. During the meeting, you
learn that the consultant has reviewed 30 records so far and, in
all 30, the consultant has seen an automatic script used in the
EMR 100% of the time for nurse visits indicating that the service
was performed incident-to a physician.
• This project is not being conducted under attorney-client privilege.
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Case Study #3: Electronic Medical Record
Questions for consideration
• Since this is being done on a pre-billing basis, has an
overpayment concern been identified?
• What might your first steps be here?
• If this assessment is only being done in one outpatient clinic
location, should you look at any others (given what you’ve heard
about the system)?
• You know you have obligations to Medicare and Medicaid, but
what about other payers who have been billed for this service
which is not supported by the documentation?
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Speaker Contact Information
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Karen Murray, MBA, FACHE, CHC, CHRC
Chief Compliance Officer
Yale New Haven Health System
Office of Privacy & Corporate Compliance
New Haven, CT
Phone (203) 688-3369
Email: karen.murray@ynhh.org
Kelly J. Sauders, CPA, MBA
Partner
Deloitte & Touche LLP
New York, NY
Phone: (212) 436-3180
Email: ksauders@deloitte.com
Jim Sheehan
New York Office of Medicaid Inspector
General
800 North Pearl Street
Albany, NY 12204
Phone (518) 473-3782
Email: jgs05@omig.state.ny.us
Lawrence W. Vernaglia, JD, MPH
Partner & Chair, Health Care Industry Team
Foley & Lardner LLP
Boston, MA
Phone: (617) 342-4079
Email: lvernaglia@foley.com
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