Recoupment, Extended Repayment and Strategies in Medicare Appeals Cases.

(December 3, 2010):  In recent years, Medicare Administrative Contractors (MACs) have become much more likely to initiate recoupment of alleged overpayments in connection with post-payment audits as soon as they are permitted to do so.  The purpose of this article is to examine steps that a health care provider should consider when it is faced with a Medicare appeal and must consider how it will handle the recoupment / repayment issue.

I.      Recoupment Considerations When Filing a Medicare Appeal at the Redetermination Level.

CMS’ current recoupment rules effectively vitiate the ability of a provider to use the 120-day period to prepare their case before filing for redetermination appeal.  As the limitation on recoupment rules are currently applied, if a health care provider does not file for redetermination appeal within 30 days of the date of the MAC’s demand letter, then on day 41 the contractor will begin recouping the overpayment that is allegedly owed.

As a result, instead of having 120 days to file for redetermination appeal, providers are under significant pressure to file for appeal within the 30 days of the date of the contractor’s overpayment determination letter.  To be clear, the 30-day clock does not start when the ZPIC sends out their decision letter.  Rather, the clock starts as of the date that is indicated at the top of the MAC’s demand letter, not as of the date that the provider actually receives the demand letter.  If the mailing of a MAC post-payment demand letter is delayed, or if the U.S. Postal Service takes longer than normal to deliver the demand letter to the provider (I know, that’s a real stretch of the imagination – nevertheless, just work with me so I can illustrate the problem), the  provider won’t even have 30 days to file for redetermination appeal in order to avoid recoupment.  Unfortunately, this example is all too real.

In a recent “big box”[1] case we defended, for whatever reason the demand letter was not received by the provider until almost 10 days after the demand letter was dated.  As a result, the provider (and our Firm) had to fully assess the ZPIC’s reasons for denial and work up compelling arguments in support of payment in less than 20 days, despite the fact that a provider is supposed to have 120 days after the receipt of the MAC’s demand letter to file for Medicare appeal at the redetermination level.

Notably, if a provider is willing to enter into an extended repayment plan with the MAC (whereby the alleged overpayment is paid out over a 12 – 60 month period), the provider can then take advantage of the full 120 day period to assemble relevant documents, assess applicable coverage and payment guidance and prepare arguments in support of payment.  While most providers prefer not to pay anything in recoupment until it is absolutely necessary that they do so, such an approach may be short-sighted.  In a number of cases, providers have been unable to track down supporting documentation and assemble persuasive arguments within the 30-day period.

II.       Recoupment Considerations When Filing Your Medicare Appeal at the Reconsideration Level.

Once reviewed at redetermination appeal and the MAC sends out its redetermination decision, a health care provider only has 60 days to file for reconsideration appeal if it wishes to avoid any recoupment. Once again, if the provider is willing to enter into an extended repayment plan, it can use the 180-day period permitted by regulation to file its appeal for reconsideration. In many cases, however, the provider insists that we file for reconsideration appeal within the 60 day deadline. Unless the record has been fully assembled, this can be quite problematic. Providers are required to show “good cause” if they wish to have new information (typically in the form of medical records) after the reconsideration level of appeal.

Applying an appeals strategy which attempts to avoid recoupment until the last possible moment only postpones the inevitable.  Once a reconsideration decision is issued, most MACs will seek to recoup the overpayment owed by a provider 30 days from the date of the reconsideration decision (not 30 days from the provider’s receipt of the reconsideration decision). While in some cases, we have seen the MAC wait until the current amount owed is recalculated by the ZPIC, the most prudent strategy is to expect for recoupment to begin 30 days from the date of the reconsideration decision letter.  Importantly, recoupment will take place regardless of whether a provider files for Administrative Law Judge (ALJ) appeal.  Therefore, if the provider has not already done so, it is highly recommended that the provider apply for extended repayment as soon as the reconsideration decision has been received.

III.     Impact of CMS’ Current Recoupment Policies on Your Medicare Appeal.

Overall, the recoupment policies currently in place provide a short-term “fix” that is all to often taken by providers, possibly to the detriment of the provider’s case.  In many cases, the desire to put off any recoupment merely delays the inevitable by a few months. As a result, it is recommended that providers discuss these options with experienced legal counsel and carefully weigh the benefits and disadvantages of each approach before choosing a course of action in connection with your Medicare appeal.

Robert W. Liles and his team of attorneys and paralegals in Washington, D.C., Houston, TX., and San Antonio, TX have handled a wide variety of post-payment Medicare audits around the United States.  Our legal professionals have represented health care providers in front of ALJ in each of the four Offices of Medicare Hearings and Appeals handling ALJ level appeals.  Please feel free to call us for a free initial consultation.  We can be reached at: 1 (800) 475-1906.

[1] The term “big-box” case is typically used by ALJs and Medicare contractors to described large, multi-claim post-payment audit cases.  In approximately 90% of the big-box Medicare appeal cases handled by our Firm, the ZPIC or PSC has taken an allegedly statically relevant sample of between 25 and 200 claims and has extrapolated the overpayments found in this sample to the entire universe of claims.  As a result, in a majority of the cases we have handled, the extrapolated damages sought by Medicare often range from $100,000 to $5,000,000.

Final Rule Outlining Recoupment Limitations and the Impact on Ongoing Medicare Overpayment Appeals Cases

(February 1, 2010):  Last September, the Centers for Medicare and Medicaid Services (CMS) published its Final Rule addressing limitations on the recoupment of alleged overpayments by its Medicare contractors (e.g. Medicare Administrative Contractors and Qualified Independent Contractors).  This Final Rule finalizes how Medicare contractors are to proceed when pursuing recoupment actions of alleged overpayments owed by a health care provider.   “Recoupment” is defined as the recovery of a Medicare overpayment by reducing present or future Medicare payments and applying the amount withheld against the debt.

Under existing regulations, health care providers may postpone recoupment by engaging in the administrative appeals process.  Prior to passage of the Medicare Modernization Act (MMA), CMS could recoup overpayments, regardless of whether the provider or supplier had filed an appeal challenging an alleged overpayment.  With CMS’ Final Rule in place, limitations have been set on the ability of its Medicare contractors to pursue a recoupment action.  As the Federal Register states:

“This final rule defines the overpayments to which the limitation on recoupment applies, how the limitation works in concert with the appeals process, and sets time limits for recouping overpayments, specifically providing 41 days for a provider or supplier to file the first level of appeal before the contractor can begin recoupment and providing the provider or supplier 60 days to appeal at the second level before the contractor can begin recoupment” (74 Fed. Reg. 47458, 47458 (Sept. 16, 2009)).

Notably, a Medicare contractor may freely initiate recoupment on an overpayment once a reconsideration decision has been rendered, regardless if an Administrative Law Judge (ALJ) appeal has been filed or is going to be filed.

Should a provider elect to delay recoupment, the amount owed will be subject to the Medicare interest rate. This amount varies but is generally quite high. For example, as of January 25, 2010, the interest rate has been set at 11.25 percent.  As such, it is especially important that providers consider the following:

(1) If an overpayment determination is overturned past the reconsideration level of appeals, CMS is liable for interest on recouped overpayments that has accrued.

(2) If a health care provider or supplier takes advantage of the limitation on recoupment and ultimately loses an administrative appeal, the provider is liable for all interest accrued since the original determination, along with the overpayment which remains after going through the administrative appeals process.

While the Medicare interest rate is quite high, it is essential that health providers understand the nuances of the administrative appeals process before rushing to postpone recoupment.  For example, to avoid recoupment after a redetermination appeal decision has been issued, a provider (or its representative) must file for  reconsideration appeal within 60 days.  Should they choose to do so, they will be forfeiting the statutory right to avail themselves of the full 180 period that is permitted to file for reconsideration appeal – merely to avoid the initiation of recoupment.  In some cases, a provider would be better off taking the necessary time (up to 180 days) to ensure that its files are complete and its arguments in support of payment are fully developed prior to filing their appeal.  Filing an incomplete appeal within the 60 day deadline may ultimately harm, rather than help a provider’s chances of prevailing on appeal.

Ultimately, CMS’ Final Rule makes it more important than ever that health care providers undergoing overpayment review get qualified, experienced legal advice to help guide them through the administrative appeals process.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.