Could recoupments be unconstitutional?

Case law is changing in favor of healthcare providers who accept Medicare and/or Medicaid.

Without question, accepting Medicare and/or Medicaid payments creates a legal risk of regulatory audits. Because the reimbursements constitute tax dollars, the federal and state governments (sometimes via a contracted entity) have the legal authority to audit the amounts.

These audits can lead to alleged overpayments, after which the government expects you to pay back some or all of the money. However, there is this legal theory embedded in our Constitution called “due process.”

In the past, case law had not deemed Medicare or Medicaid reimbursements a property right of a provider. That interpretation is now being challenged. If the services were actually rendered and medically necessary, the thought is, the reimbursements are a property right of the provider. Thus, if the government attempts to recoup your property without due process, then you have a right to bring legal action to stop it.

In the past, providers undergoing premature recoupments (i.e., recoupments before an impartial, fair hearing is held) were denied injunctions. The injunctions denied were requests for suspensions of the premature recoupments.

Accident, Injury, and Rehabilitation, PC, d/b/a Advantage Health & Wellness v. Azar (Advantage) is a clear example. It is the sixth lawsuit of its kind in which the provider has prevailed in obtaining an injunction against the government.

To use Medicare reimbursements through a Medicare Administrative Contractor (MAC) as an example, if a MAC denies a claim or alleges an overpayment, there is a five-level administrative review process. The third level is the most important because it takes place before an administrative law judge (ALJ).

According to regulation, at the first level, the MACs have 60 days to render a decision. At the second level, the Qualified Independent Contractors (QICs) have 60 days to render a decision. Also, according to law, during the first and second level of appeals, no one can recoup the alleged overpayments.

At the third level, however, the law fails to protect healthcare providers from having the alleged overpayments recouped, even though an independent, fair hearing by that point has not been held (because that happens at the third level). The Office of Medicare Hearings and Appeals (OMHA) is required by law to render its decision at the third level within 90 days. You also can ask to escalate your case if too much time is passing.

This administrative appeal system worked for years. Then, in 2010, the third-level appeal process was imploded by the introduction of the Recovery Audit Contractors (RACs) and Zone Program Integrity Contractors (ZPICs). Medicare provider appeals doubled. Then they tripled. As of June 2017, there was a backlog of 607,402 pending appeals, and providers faced an estimated wait time of three years for an appeal to be processed by an ALJ. The appeal backlog was predicted to reach 950,520 by the end of 2021’s fiscal year. Having the government or its agent recoup an alleged overpayment between the second and third level of appeals violates due process, and can ultimately wipe out a provider’s business.

In this new case, Advantage, a chiropractic provider, had endured allegedly premature recoupment of $6,648,881.30. Prior to 2015, Advantage earned over $6.8 million per year. Medicare comprised of 31 percent of its practice. Then, on or about Sept. 9, 2012, Advancemed, the ZPIC for South Carolina, audited claims for the past four years. Based on a review of 25 claims reimbursed by Medicare Part B, Advancemed suspended Medicare reimbursements after finding an alleged 97.8 percent error rate. Based on the error rate and using extrapolation, Advancemed alleged an overpayment of $5,627,267.30 in Part B claims and $1,021,614.05 in durable medical equipment (DME) claims.

Advantage appealed, but per the normal circumstances, it was unsuccessful at the first and second levels. While the third level was pending, the Centers for Medicare & Medicaid Services (CMS) began withholding the alleged recoupment.

To get an injunction, you must prove:

  1. Likelihood of success;
  2. Irreparable harm;
  3. Balance of the equities; and
  4. Public interest.

When asking for an injunction, you are asking a judge to maintain the status quo, i.e., to not allow recoupment of money before an impartial hearing may be held.

In the Advantage case, the judge found that all the criteria for an injunction were met. The judge found that the irreparable harm was imminent due to the potential and ongoing loss of approximately $6 million, that the CEO contributed $1 million personally to keep the doors open, that 24 staff were terminated and more were to be terminated in the near future, and that the company would be forced to close its doors.

The Advantage case also gave us five important key legal points to argue:

  • You can enter new evidence, even at the third level;
  • You have a property right to your Medicare reimbursements;
  • At the ALJ level, the statutory 90 days is not mandatory;
  • The MACs and QICs are biased; and
  • 66 percent of provider appeals are reversed at the ALJ level.

Interestingly, according to law, a bond must be set in order to obtain an injunction. This bond is not like a criminal bond, in which you can knock on the door of a local bondsman and pay 10 percent of the set bond. Bondsmen do not normally dabble in Medicare reimbursement issues. Providers are usually forced to pay the entire bond for the injunction, which, in it of itself, can be financially burdensome. In Advantage, however, the judge ordered no bond for the provider’s injunction to stop the premature recoupment of approximately $6 million.

The company is still in business because of this lawsuit.

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