Medicare Takes Back Overpayments Made to Hospitals

Money changing hands

In June 2016, the US Government addressed the financial outlook for both Medicare and Social Security, and highlighted that both programs face long-term issues. As a result, the Centers for Medicare and Medicaid Services (CMS) decided to get tough with physicians and hospitals concerning outstanding overpayments in an effort to bolster the financial solvency of Medicare and Social Security.

The 60-day Rule

The “60-day Rule” states that anyone in receipt of an overpayment from Medicare or Medicaid must return the money either within 60 days of identifying the issue or by the corresponding cost report’s due date. According to the CMS, an overpayment is identified once a provider has quantified it through what it calls “reasonable diligence.”

This will place a large number of individuals and medical facilities in a challenging position. Practices must go back six years when checking their books to find evidence of an overpayment. If organizations and beneficiaries fail to report or return the money on time, they could face heavy penalties, as they would be subject to federal False Claims Act (FCA) liability.

Challenges to the Rule

According to the President of Stark Medical Auditing & Consulting, Mick Raich, a significant number of practices will have problems meeting the new standards. He stated that while certain practices will occasionally identify an overpayment, a majority of practices are careless and are either unable to properly identify an overpayment or else they find one and fail to report it. Upon receipt of a “demand letter” from Medicare, these practices will simply ignore it. Under the new regulations, not only must these practices respond, but they must also provide evidence of possible overpayments.

Practices that fall foul of the rule will face harsh penalties. If any practitioner or practice is in violation of the FCA, it could receive a $5,500-$11,000 fine per claim along with a repayment of up to triple the damages suffered by the government. Therefore, if a clinic owed $10,000, it could face fines up to $41,000.

While these penalties are strict, CMS grants physicians up to six months to investigate the error and another 60 days to repay the money.

Three Mount Sinai Hospitals Forced to Pay Overpayment Settlement

One of the first high-profile instances of a medical institution forced into an overpayment settlement occurred in August 2016. A trio of hospitals within the Mount Sinai Health System had to pay $2.95 million.

Had Mount Sinai not settled out of court, New York provider would face charges in relation to not repaying $844,000 in Medicare overpayments. There were 444 cases of overpayments retained too long, and the provider could have been liable for over $4.4 million in FCA fines.