Recent changes ushered in by the Patient Protection and Affordable Care Act of 2010 (PPACA) create new risks for false claims liability when auditors identify overpayments.

Section 6402(d) of PPACA amended the Social Security Act to require an entity to return any overpayments it receives and to notify the appropriate authorities. The overpayment must be reported and returned to the appropriate entity (such as CMS, OIG or the carrier) no later than 60 days from “the date on which the overpayment was identified” or “the date any corresponding cost report is due, if applicable,” according to the language of the legislation. Furthermore, the PPACA makes the retention of an overpayment beyond this time frame an issue under the False Claims Act.

Prior to passage of the Fraud Enforcement and Recovery Act of 2009 (FERA), the False Claims Act extended liability to  “any person who … knowingly makes, uses or causes to be made or used a false record or statement to conceal, avoid or decrease any obligation to pay or transmit property to the government.” FERA focused on retention of overpayments (“reverse false claims”), rather than the affirmative submission of a false record or statement. FERA expanded false claims liability to include a person who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government.”  The term “knowing” is defined to include “deliberate ignorance” or “reckless disregard.” Thus, FERA eliminated the requirement of an affirmative act of concealment, expanding false claims liability to include knowing failure to repay an overpayment.

Impact on Overpayments

The changes implemented under PPACA and FERA directly impact overpayments identified by audit contractors and raise important issues for providers weathering a RAC or Medicare audit. For instance, when does an overpayment become “identified,” triggering the 60-day deadline for reporting and returning the overpayment? The Office of the Inspector General (OIG) has yet to clarify at what point these obligations are initiated in the audit context.

The Medicare appeals process may shelter providers appealing claim denials from an immediate obligation to repay during the appeal, but the obligation may apply once the matter is resolved. The appeals process also creates a limitation on recoupment of current Medicare payments during the first two stages of appeal, and this may satisfy the overpayment reporting requirement. At present, the application of the 60-day time frame for reporting and returning remains unclear, as it applies to the various aspects of the appeals process.

Minimizing Risk of Liability

The interplay between PPACA and FERA also raises questions about the responsibilities of providers who realize during an audit review that they received an overpayment – and the potential penalties for providers with an inability to pay back an overpayment. While these issues do not have clear answers at this time, providers can expect to gain clarity as to their liabilities and responsibilities pertaining to the retention of overpayments as these statutory provisions are applied in practice. In the meantime, it is important for entities involved with RAC and Medicare audit processes to consider carefully whether, at any stage in the appeals process, the facts demonstrate an existing overpayment. If an overpayment is discovered, healthcare providers are advised to discuss their obligation to repay with legal counsel in order to help minimize the risk of liability under the False Claims Act.

Liability under the False Claims Act is significant. The retention of an identified overpayment can result in civil monetary penalties, which can include $10,000 for each item or service and an assessment of three times the amount claimed for each item or service. Moreover, failure to report and return an overpayment may result in an exclusion from participation in federal and state healthcare programs.

New Recoupment Authority

In addition to the aforementioned liability under the False Claims Act, any additional potential liability is enhanced by Medicare’s new recoupment authority under PPACA. Section 6401(a) of PPACA grants CMS the authority to adjust payments to related providers and suppliers on the basis of their federal tax identification numbers. The new rules allow CMS to hold liable for the debts of “related parties” providers and suppliers with the same tax identification number, regardless of those entities’ billing numbers or NPI numbers.) Previously, CMS only could recover unpaid Medicare overpayments from related entities sharing the same provider number. The previous system limited Medicare’s recoupment ability, since most entities with multiple sites enroll under different provider numbers. CMS now may withhold funds due to related providers and suppliers as long as they share a federal tax identification number. This change to permit “cross-provider” recoveries enhances Medicare’s ability to collect overpayments from entities with multiple locations and provider numbers.


As accelerated audit activities performed by a variety of audit contractors continue to pick up steam, providers are advised to become aware of the potential liabilities related to the identification of Medicare overpayments, and to develop a comprehensive plan for a successful audit appeal.

About the Authors

Andrew B. Wachler is the principal of Wachler & Associates, P.C.  He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980.  Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters.  He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topics.

Jennifer Colagiovanni is an attorney at Wachler & Associates, P.C.  Ms. Colagiovanni graduated with Distinction from the University of Michigan and Cum Laude from Wayne State University Law School.  Upon graduation, Ms. Colagiovanni was nominated to the Order of the Coif. Ms. Colagiovanni devotes a substantial portion of her practice to defending Medicare and other third party payer audits on behalf of providers and suppliers.  She is a member of the State Bar of Michigan Health Care Law Section.

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