Are you of good report?

Healthcare Financial Management, Nov, 2004 by Shelley R. Slade

AT A GLANCE

Past Medicare credit balance reports may come back to haunt you as current federal enforcement activities indicate they could easily fall under False Claims Act scrutiny.

Imagine that your coworker suspects that the medical provider for whom you both work may have overbilled Medicare several years back. She is confident that the practice that led to the potentially inflated claims has been corrected, and she is certain that the reason for any inappropriate billing would have been an innocent misunderstanding or mistake. Should you or your employer fear a False Claims Act (FCA) lawsuit?

Chances are, you and most financial managers would answer "no," basing your conclusion on the frequently repeated caveat that the FCA doesn't apply to mere mistakes. Further, because your coworker isn't sure that the provider overbilled Medicare, an accusation of knowingly covering up false claims on your credit report would appear to be rather unfounded.

The problem? Such assumptions would be wrong. In these types of situations when someone submits a credit report with reckless disregard for its accuracy, an obscure prong of the FCA does indeed allow the federal government to use triple damages as a remedy.

The key factor in applying the provision is whether the provider made any false statements to Medicare after it had reason to suspect potential overpayments. Just as important, even a provider's failure to make a reasonable inquiry into whether it previously overbilled the government could create FCA liability if the provider makes inaccurate representations to the government concerning overpayments.

The Reverse False Claims Provision

Practitioners colloquially refer to the section of the FCA that applies in this situation, 31 U.S.C. [section] 3729(a)(7), as the "reverse false claims" provision. The provision applies to statements that are essentially the opposite of claims in that they concern whether the provider owes the government any repayment of funds.

The key statutory language that applies is the following: "Any person who ... knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty ... plus 3 times the amount of damages which the Government sustains because of the act of that person."

Even though this provision was added to law by 1986 amendments, it is of particular interest now thanks to two Department of Justice enforcement initiatives. In the first initiative, the government and private qui tam bar aggressively used the reverse false claims provision against energy companies that underreported the amount of resources, such as oil, gas, or coal, that they removed from federal land so as to avoid contractually owed royalty payments. The false statements in these cases were on the federal Mineral Management Service's form 2014, "Report of Sales and Royalty Remittance." Between 1998 and 2003, the government recovered more than half a billion dollars from energy companies from these actions.

The second initiative has involved the federal government's application of the provision against pharmaceutical companies that avoid the payment of rebates owed to state Medicaid programs. Pharmaceutical companies with products approved for sale to Medicaid beneficiaries are required by federal law to pay quarterly rebates to states to account for discounts given by the drug companies to their best customers. The pharmaceutical companies must then report their best prices so the federal government can monitor their compliance with the rebate program. In 2001, Bayer settled claims that it had violated the FCA when it tailed to report discounts and pay rebates on some of its biologic products that were paid for by state Medicaid programs. The next year, Pfizer and two subsidiaries agreed to pay $49 million to resolve the United States' allegation that they had violated the reverse false claims provision by failing to report their best prices for the cholesterol-lowering drug Lipitor.

Medicare's Credit Balance Report

Such actions lead many to wonder whether healthcare providers are next. A provider's failure to disclose overpayments-even those overpayments obtained innocently-on its Medicare credit balance report, CMS form 838, could easily create liability under the FCA's reverse false claims provision. In written instructions regarding the form, CMS informed hospitals and other providers participating in Medicare that they "are responsible for ... repaying all improper or excess payments [they] have received from the time [they] began participating in the Medicare program."

In support of this direction, CMS cites a section of the Social Security Act, 42 U.S.C. [section] 1395ec(a)(1)(c), which requires providers participating in Medicare "to make adequate provision for return (or other disposition, in accordance with regulations) of any moneys incorrectly collected from such individual or other person." Moreover, the agency's Hospital Manual specifically instructs hospitals in section 484.3 to "[p]ay all amounts owed Medicare as shown in column 9 of the credit balance report at the time you submit the HCFA-838." In the Medicare secondary payer area, Medicare's regulations, 42 C.F.R. [section] 489.20(h), specifically require providers to reimburse Medicare any overpaid amount within 60 days when the provider receives payment for the same services from Medicare and another payer that is primary to Medicare.