Several weeks ago, Nancy J. Griswold, chief administrative law judge at the Office of Medicare Hearings and Appeals, sent a memorandum to various providers warning that, effective July 15, 2013, administrative law judge assignments would be delayed for at least 24 months. Judge Griswold stated that she also expects post-assignment hearing wait-times to continue to exceed six months. In total, some cases may linger three years or more before an ALJ hearing occurs and an adjudication is issued.
Aside from the potential constitutional violations (which require an entirely separate article to discuss), a delay may not seem that significant: it’s just a longer time to wait, right? Wrong! Many Medicare Part B providers and suppliers (cumulatively, “providers”) remain unaware of the tools that the United States government has at its disposal to collect Medicare overpayments. This article uses a hypothetical scenario to summarize the Medicare recoupment process to ensure your awareness of the exacting methods the government can take to collect from providers.
The consequences of a delay ALJ assignment, hearing, and adjudication are substantial. Even a cursory investigation of the latest developments makes it patently clear that these delays may put more Medicare providers out of business than any other issue facing healthcare companies today.
A provider receives a letter from CMS stating that 40 percent of the provider’s claims for certain HCPC or CPT codes were improper in the past year, translating to an overpayment amount of $150,000. CMS then extrapolates the denial percentage to all of the provider’s claims for those certain HCPC or CPT codes within the past five years, leading CMS to demand the provider pay $4.5 million for overpayments.
I. Extended Repayment
First, the provider must decide whether to submit a request for an extended repayment schedule. Below are some general facts about the ERS process:
– The ERS process changed in 2013.
– The government will approve an ERS if the total amount of all outstanding overpayments is 10 percent or greater than the total Medicare payments made for the previous calendar year.
– The longest time period an ERS can last, if approved, is 60 months from the date of the initial demand letter.
– The interest rate associated with an ERS is statutorily set at 10.875 percent.
– Payments recouped during ERS processing will not be refunded to the provider.
– Providers that submit a request for an ERS lasting greater than six months must submit a multitude of financial documentation, including a letter from a bank denying a request for a loan in the amount of the alleged overpayment.
– Just because an ERS request was made for a specific amount of time does not mean CMS will approve the ERS for that time period.
In the hypothetical example listed above, assuming a maximum ERS approval of 60 months:
1. The provider must pay $97,560.61 in principal and interest each month.
2. Based on the 3-year delay outlined in Judge Griswold’s memorandum, the provider will pay $3,512,181.96 before an ALJ adjudicates the claim.
II. Interest and Recoupment During the Appeals Process
Interest, at a rate of 10.125 percent, begins to accrue on all unpaid overpayments within 30 days of the provider’s receipt of the initial demand letter until the overpayment is repaid in full.
The first level of appeal is redetermination. Although a provider has 120 days after receipt of an initial determination notice to submit an appeal for redetermination, unless one of the following occurs, CMS will start recouping the overpayment following the 41st day after the date of the initial demand letter:
1. Provider timely submits a request for ERS.
2. Provider timely submits a rebuttal statement.
3. Provider timely submits a request for redetermination.
The second level of appeal is reconsideration. Although a provider has 180 days after the redetermination decision date to submit a reconsideration appeal, unless the provider timely submits a request for reconsideration, CMS will start recouping the overpayment from:
1. The 60th calendar day after the redetermination notice date if the redetermination decision affirms the entire overpayment in question.
2. The 60th calendar day after the redetermination decision date, if the redetermination decision affirms, in part, the overpayment in question.
If the reconsideration decision does not overturn all of the alleged overpayments, CMS will start recouping the remaining overpayment amount upon sending the reconsideration decision to the provider.
Based on the hypothetical example listed above, if the provider did not submit an ERS and wins 40 percent of the claims at the redetermination and reconsideration levels, then CMS will begin recouping approximately $2,768,343.75 after the reconsideration decision is issued.
III. Treasury Offset Program
If the provider fails to make payment arrangements with CMS, or CMS is unable is to recoup the entire alleged overpayment debt within 180 days, the debt becomes “delinquent.” Upon delinquency, CMS refers the debt to the U.S. Department of Treasury for further collection under the Treasury Offset Program.
Under the TOP, the Treasury Department can collect debt from the provider by collecting funds directly from any of the below federal sources of debtor income:
1. Debtor’s income tax return.
2. Social Security, Black Lung, and Railroad Retirement programs.
3. Federal salary payments.
4. State payment offset.
5. Other federal offsets (i.e. vendor payments; military retirement pay, etc.).
In addition to the TOP, CMS has the prerogative to refer debt collection activity to: (i) another debt collection center; (ii) a private collection contractor; or (iii) the Department of Justice, under a process called “cross-servicing.” By law, these entities may initiate lawsuits against the provider for the remainder of the debt. Lawsuit collection efforts include rights to collect on all of a provider’s assets—not simply the Medicare funds at issue—allowing a collection from all of the following sources:
1. All accounts receivable (from Medicaid, private insurance, or retail).
2. Bank accounts.
3. Real estate interests.
4. Administrative wage garnishments.
IV. Providers with the Same Tax Identification Number
Section 6401 of the Affordable Care Act added the option to collect overpayments from entities sharing a tax identification number. Specifically:
Based on above statute, a provider needs to be aware that if it owes a debt to Medicare, the Department of Health and Human Services may withhold or recoup any payments made under Title 42 of the United States Code (i.e. Medicare, Medicaid) to any other provider or location of a provider that shares the same TIN, regardless of a difference in NPI or billing numbers.
V. Auditors and Appeals
The government prevents a provider from appealing a claim at any level of the administrative appeals process, including the ALJ, if that provider does fails to comply with any Medicare conditions of participation (i.e. accreditation, licensure). Consequently, even if a provider has millions of dollars subject to appeal at the ALJ level, but the provider cannot afford to stay in business (because its payments have been recouped), the provider loses its ability to appeal the claims at the ALJ level as soon as the provider fails to comply with any Medicare conditions of participation.
This is particularly worrisome given the manner in which auditors are compensated. For example, RACs are compensated based on a percentage of claims they win. As such, it is in the RACs’ financial interest to audit and extrapolate overpayments from as many providers as possible given that the RACs: (a) know that most of the providers’ payments will have been recouped by the time the ALJ hearing occurs; and (b) if the providers have no payments coming in, they cannot afford to comply with the mandatory conditions of participation; and (c) providers that cannot comply with the mandatory conditions of participation have no right to appeal those claims at the ALJ level! The RACs will end up initiating thousands of audits with the knowledge that the providers will be unable to appeal the audits at the ALJ level (where most claims are overturned), thus allowing the RACs to collect a commission on the recouped overpayment.
Edward L. Vishnevetsky, an associate at Munsch Hardt, focuses on health law and commercial litigation.