Overpayments can also result from activities which may be in violation of federal fraud and abuse laws such as the federal False Claims Act (FCA) or the federal Stark statute. From a legal liability standpoint, these activities are of greatest concern since, in addition to repaying the overpayment, physicians found to have violated these laws may also face severe civil penalties and even criminal prosecution. For example, a violation of the FCA, which prohibits the knowing submission of false or fraudulent claims to obtain payment from the federal government, is punishable by civil penalties equal to three times the government’s damages plus an additional $5,500 to $11,000 per false claim submitted. Violations of Stark statute, which prohibits a physician from referring for certain designated health services (DHS) to an entity with which he or an immediate family member has a financial relationship, are punishable by a civil penalty of $15,000 for each improper referral and for each claim submitted. Stark violations may also form the basis for prosecution under the FCA.

Once an overpayment is discovered, practices face a number of choices in terms of how they disclose the overpayment and to whom within the government it will be disclosed. These decisions may mean the difference between having to simply repay the overpayment without further consequence and having to undergo investigation and possible prosecution for health care fraud. Accordingly, once an overpayment has been identified, physicians should, with the assistance of legal counsel, carefully evaluate their options for disclosing the overpayment.

To Disclose or Not to Disclose

It is generally accepted that physicians have an obligation to disclose and repay overpayments received from the federal government. At least one federal law makes it a felony for anyone to knowingly conceal or fail to disclose events affecting a personinitial or continued right to any benefit under a federal health care program. Similarly, the Stark regulations require a physician who has collected payment for a DHS pursuant to an improper referral to refund that payment or face civil penalties of up to $15,000. In addition, physicians who participate with Medicare are required, pursuant to their Medicare participation agreements, to make adequate provision for the return of monies incorrectly collected from any individual or other person.

Notwithstanding the foregoing obligations, disclosing billing irregularities or other potentially improper conduct may also make good sense under the FCA, since, among other things, the FCA permits an individual (i.e., a whistleblower) to institute a false claims action on behalf of the government against providers for the submission of false claims. If the government intervenes in the action and obtains a recovery, the whistleblower is entitled to between 15 and 30 percent of that recovery. However, the government has demonstrated a reluctance to intervene in cases where the matter was already disclosed to the government prior to institution of the false claims action. Accordingly, promptly disclosing potentially improper conduct to the government may head off would-be whistleblowers.

Who Gets the Call

When a potential overpayment has been discovered, the first step is to investigate the nature of the conduct or circumstances giving rise to the potential overpayment. Whether the conduct or irregularity amounts to a simple billing mistake or rises to the level of fraudulent or abusive conduct will drive the decisions about whether a disclosure is required and, if so, how and to whom the disclose should be made. This analysis will typically entail a close review of the conduct or billing irregularities in light of the applicable billing rules and statutes or regulations potentially implicated by the conduct. For these reasons, it is usually advisable for physicians to involve legal counsel as soon as potentially improper conduct or irregularities have been identified.

Once the nature of the conduct or irregularities has been identified and any potential overpayment has been quantified, the next step will be to determine whether and how the matter will be disclosed to the federal government. Small-dollar overpayments resulting from minor data entry or claims processing errors should generally be returned to the practice’s local Medicare carrier. In addition, even substantial overpayments which result from billing mistakes or failure to adhere to coverage rules and which do not appear to involve fraud, abuse or other violation of law, may be refunded to the Medicare carrier. However, larger repayments or those which, if misinterpreted by the carrier, could show a pattern or practice of improper billing (e.g., overpayments resulting from a longstanding billing error) should be handled with greater care.

When making significant or complex repayments to the carrier it may be advisable to include with the repayment check, a letter detailing the circumstances surrounding the overpayment, including how it occurred, how it was discovered, how it was quantified and what steps a practice has taken to ensure that the errors will not occur going forward. However, because carriers have discretion to refer matters they believe may involve fraud or abuse to the Office of Inspector General (OIG) for investigation, practices should not make other than the most routine refunds to a carrier without first consulting with experienced legal counsel.

While many overpayments may be effectively made to a practice’s Medicare carrier, those involving suspected violations of law (e.g., Stark violations) or other fraudulent or abusive billing practices will typically need to be made directly to the OIG. The OIG’s preference in these cases is that practices utilize the OIG’s Self-Disclosure Protocol. The Protocol, published by the OIG in 1998, establishes a structured process by which providers of all types may voluntarily report suspected fraudulent conduct relating to federal health care programs. The OIG has never indicated the extent to which a provider may benefit from using the Protocol but has stated that using the Protocol to open lines of communication early on in the process will generally benefit a provider.

The Protocol imposes a number of specific technical requirements on providers seeking to take advantage of it. These technical requirements include the following:

· The disclosure must be in writing and the disclosing provider must be identified by name, address, provider identification number and tax identification number.

· The disclosure must include a full description of the nature of the matter being disclosed, including the type of claim, transaction or other conduct giving rise to the matter, the names of entities and individuals believed to be implicated and an explanation of their roles in the matter, and the relevant periods involved.

· The disclosure must include a description of the type of provider implicated and any provider billing numbers associated with the matter disclosed.

· The disclosure must include the reasons why the disclosing provider believes that a violation of federal criminal, civil or administrative law may have occurred.

· The disclosure must include a certification by the provider or that to the best of the provider’s knowledge the submission contains truthful information and is based on a good faith effort to bring the matter to the government’s attention for the purpose of resolving any potential liabilities to the government.

Disclosing providers seeking to use the Protocol must also conduct an internal investigation of the matter and must include with the disclosure a detailed written report of the internal investigation including, among other things:

· A chronology of the investigative steps taken in connection with the provider’s internal inquiry.

· A list of all individuals interviewed and their contact information.

· A description of files, documents, and records reviewed as part of the internal investigation.

· An estimate of the financial losses to the government resulting from the activity and a summary of the documents relied upon in support of the estimation of losses.

The OIG has been clear that it will not make any commitment to Providers as to how a disclosure will ultimately be resolved. In other words, even if a disclosing provider meets all of the technical and substantive requirements of the Protocol, there is still no guarantee that a provider will not be investigated further or prosecuted for the conduct being disclosed. It is important to note that use of the Protocol is not mandatory, even when making a disclosure to the OIG. In light of the significant burden the Protocol places on providers, and the uncertainty of the risks and benefits from using it, many practices may, with the advice of legal counsel, come to the conclusion that making a disclosure without relying on the Protocol actually allows for greater flexibility in identifying, quantifying and resolving an improper overpayment.

Medicare overpayments will happen. Most often these overpayments are an indication of nothing more than some minor glitch in the claims processing/payment system and can be fixed by simply sending a check back to the carrier. Even large-dollar, complex overpayments, if handled with care, need not be catastrophic for a medical practice. However, practices must be diligent about identifying overpayments, investigating them and, where appropriate, returning them to the government, since failing to do so can literally make a federal case out of an otherwise simple mistake.