A legal expert discusses the implications of Medicare's final rule governing billing and coding errors on physicians practices and hospitals.
A final rule change issued last month by the Centers for Medicare & Medicaid Services could have a significant impact on how physician practices address billing and coding errors dating back six years.
John Fanburg, managing partner and chair of the health law practice at Brach, Eichler in Roseland, NJ, spoke with HealthLeaders Media about the final rule and what physician practices should do to prepare for any billing discrepancies, and what the potential implications are for hospitals. The following is an edited transcript.
HLM: What does this rule change do?
Fanburg: The issue had to go with how far back the provider had to go to make the refund. For some time there has been this 60-day timeframe within which to make the refund due to the overpayment.
There has been some ambiguity as to when that clock runs and the proposed rule required the timeframe to go back 10 years. For obvious reasons, the healthcare industry totally rejected and lobbied against a 10-year look-back period, but they did settle on six.
Some providers would say that is not much better, but at least it’s not 10. The rule clarified the use of the word ‘identification:’ When the overpayment is identified, what does that really mean, and what is the look-back period. These were critical for providers to understand how to be compliant.
HLM: What was the look-back period before the rule change?
Fanburg: There was always a proposed rule. No one was ever clear. There was a statute of limitations argument and depending upon the case it could be four, five, or six years.
HLM: When does the clock start on the 60-day identifier?
Fanburg: Where they ended up is when the provider knew or should have reasonably known. That could be played with as well. So, they impose an obligation to make reasonable inquiry if something were to happen. They are saying that if you get some type of credible inquiry or report you have an obligation relatively quickly based upon the facts to make due inquiry in terms of whether or not there was a problem.
Lots of things can be inadvertent. For example, the practice sees their Medicare reimbursement jump up for no apparent reason. It could be coding mistakes, which occur all the time. Sometimes there is a computer glitch and a different code goes out.
Maybe, in more egregious situations, the practice is involved in some type of fraudulent action. Maybe a provider who you thought was licensed is not licensed, whether it’s a physician or a physician assistant, etc. And when it is identified or comes to the level of being a problem, the group has to make relatively quick inquiry to determine whether or not that has happened. That is when the clock would start to run.
HLM: What should a practice do if they think they’ve got a problem?
Fanburg: I usually recommend that they bring in an independent third party and do a quick assessment to determine if their suspicions are correct, because a lot of times the provider really doesn’t know the magnitude of the economics that is called for so that they can comply.
The government is trying to make this as user-friendly as possible (although some might disagree) because they want the providers to voluntarily do this. It is a lot easier for providers to voluntarily do it than for the government to do audits and investigations, or wait for their hotline tips to identify. They seem to be very cooperative when a provider comes to them voluntarily and they respond in kind.
HLM: What sort of challenges are created with this six-year look-back period?
Fanburg: Let’s say a physician leaves the practice, retires, is bought out, and all of a sudden two years later there’s an identified overpayment. They go back six years. This retired physician was part of the practice at that time who received their pro rata portion of the money.
Well, who is now obligated to refund the money? Clearly, the practice is. But should that retired physician have any obligation to contribute to that refund since he or she received the proceeds from that? Because of that, physician practices need to consider updating their retirement documents and buy/sell documents to address this situation.
If I were in my early 40s and we were forming a practice, absolutely we would put some version of that obligation. But if I were 65 and within five years of retiring I’d be scared to death because I am the one they are going to come after and I may not be willing to do that.
So, there is going to be a political issue when addressing this in the practice. There is going to be some balancing act where up to a particular point you are going to have to contribute something.
I am thinking we may see the development of some type of insurance policy to fund this, because it could be very damaging to the remaining physicians in the practice. That is why as uncomfortable as this discussion may be, it requires a dialog and some compromise as to how this thing is going to play out.
HLM: What steps should practices have in place should a problem arises?
Number one, they have to have a corporate compliance program that is real and not just a book on a shelf. A subset of that is they need to be proactive in their own random audits of coding and billing to ensure that they have the right checks and balances and systems in place.
Number 2, because of the look-back period, they need to review their corporate documents and determine to what extent should they have provisions in the documents to require physicians to contribute to an overpayment refund request for the period they were in the practice. Whether that is for all six years or a smaller timeframe for that is subject to negotiation, but they should not ignore it.
Number 3, if they do identify or someone does bring to their attention that there has been a mistake in billing, coding, or collecting, they cannot ignore it. They have to jump on it right away because the clock starts ticking and you don’t want to create a whistleblower in the practice.
HLM: Does the same scenario apply if a physician leaves a practice, rather than retires?
Fanburg: When someone is bought out, typically there is an indemnification. That is a pretty standard provision, but a refund obligation or contribution for up to six years could be significant. Sometimes in the indemnification there is insurance to cover that. This is an uninsured potential liability.
HLM: What happens if a hospital acquires the practice?
Fanburg: Almost all hospital/physician transactions we do have that indemnification with the physicians indemnifying the hospitals in case there is a refund obligation.
Now that it is specified in terms of six years, that could be a sizeable obligation back to the hospital. If a couple of the doctors are no longer there, then the remaining physicians are on the hook to cover the gap.
HLM: Will ICD-10 help or make matters worse?
Fanburg: Knowing how easily it is for physicians to adapt to these new programs, the likelihood is that innocent mistakes will occur and it will cause a little more chaos.
HLM: Will commercial payers follow suit on the six-year look-backs?
Fanburg: That would require state regulatory or legislative changes to do that.
HLM: Do you foresee any effort to overturn this six-year look-back period?
Fanburg: I don’t see that happening unless the collateral implications of physicians who are long gone from the practice create an unfair result for innocent third parties.
It is going to take a long time for that to flush out to the point where it would become politically viable to change the rules. So, I don’t see any change to this for a long time.
John Commins is the news editor for HealthLeaders.