The 60-Day Rule: Imposing Major Liability on Unsuspecting Medicare and Medicaid Providers


Attorney Eric R. Hunt
ehunt@axley.com
608.260.2489

The Affordable Care Act (“ACA”), also known as Obamacare, created a civil and criminal liability pitfall for medical providers, including those here in Wisconsin, by setting a time limit for return of Medicare and Medicaid overpayments known as the “60-day rule.” The 60-day rule requires individual and institutional providers to report and return an overpayment of Medicare or Medicaid funds no later than: (1) 60 days from the date on which the overpayment is identified; or (2) the date any corresponding cost report is due, if applicable. Under the 60-day rule, “overpayment” means any funds payable under Medicare or Medicaid to which the recipient is not entitled. Further clarification of the 60-day rule is due in the near future from the Centers for Medicare & Medicaid Services (“CMS”), which issued a proposed rule in February of 2012, but has since delayed implementing that rule.

Once an overpayment is identified, the provider must return the funds to the applicable department, which could be the U.S. Department of Health and Human Services, a state, fiscal intermediary, carrier, or contractor. In addition to returning the funds, the provider must state a reason for the overpayment in writing. Overpayments can occur in a variety of ways, including but not limited to, payments for services not covered, payments in excess of allowable amount for a service, or duplicate payments.

The penalties for failing to return an overpayment are severe. An overpayment not reported and returned within the 60-day time limit becomes an “obligation” to the federal government for the purposes of the federal False Claims Act. The False Claims Act subjects medical providers in violation of the 60-day rule to both criminal and civil liability. The False Claims Act imposes fines of up to $11,000 per false claim and triple damages of any actual overpayment. Because of these stiff fines and triple damages, liability under the 60-day rule can quickly balloon out of control.

The federal government may investigate and bring a direct action against a provider for the recovery of Medicare and Medicaid funds. However, the False Claims Act also permits qui tam actions, which are brought by whistleblowers and allows whistleblowers to share in the recovery of any funds. Hence, employees or contractors of medical providers are incentivized to report and bring suit against a provider who has failed to return overpayments.

The federal government has shown a willingness to pursue enforcement of the 60-day rule despite uncertainty in its interpretation. In Kane v. Healthfirst, Inc., a number of hospitals erroneously billed Medicaid due to an alleged software glitch, resulting in overpayment. The hospitals were notified of a potential overpayment in 2010, and an internal investigation revealed the possibility of overpayments in 2011. However, the overpayments were not conclusively identified, and the return of funds was not completed until 2013. The federal government directly intervened after a qui tam action was brought against the hospitals. On the hospitals’ motion to dismiss the lawsuit, the government successfully argued hospitals could be liable, even though they did not conclusively identify the overpayments, because the “conclusive” standard would perversely incentivize providers to delay learning the amounts due under the 60-day rule. As such, providers may be subject to liability even if they exercise diligence in investigating and returning Medicare and Medicaid overpayments.

Despite the uncertainty surrounding the 60-day rule, the federal government has shown its intent to enforce the rule through the Federal False Claims Act. Providers who receive payments from Medicare and Medicaid need to be alert to any signs or warnings of overpayment, and should be alert to any upcoming changes in the interpretation of the 60-day rule. As the 60-day rule becomes clearer, it is very likely that we will see more qui tam whistleblower lawsuits and more direct federal enforcement actions seeking penalties and the recovery of Medicare and Medicaid funds.

Axley Brynelson law firm offers a variety of services to our clients including reviewing billing practices, providing guidance through internal or government investigation of overpayment, and, if necessary, litigating or negotiating the best settlements to qui tam lawsuits or charges brought under the Federal False Claims Act. Furthermore, we have broad experience in addressing the issues facing medical providers here in Wisconsin, and have extensive experience in both state and federal courts. If you have any questions or believe you may have received a Medicare or Medicaid overpayment, we invite you to contact us so your institution or practice does not step into the pitfalls of the 60-day rule or the Federal False Claims Act.

For more information about The 60-Day Rule: Imposing Major Liability on Unsuspecting Medicare and Medicaid Providers, contact Attorney Eric R. Hunt at ehunt@axley.com or 608.260.2489.

Axley Brynelson is pleased to provide articles, legal alerts, and videos for informational purposes, but we are not giving legal advice or creating an attorney/client relationship by providing this information. The law constantly changes, and our publications may not be currently updated. Before relying on any legal information of a general nature, please consult legal counsel as to your particular situation. While our attorneys welcome your comments and questions, keep in mind that any information you provide us, unless you are now a client, will not be confidential.

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