Health Care Overpayment Issues: Preparing for a Return to Normal

On March 4, 2020, the Centers for Medicare & Medicaid Services (“CMS”) directed state survey agencies to focus on care and patient rights issues related to the coronavirus epidemic. CMS also implemented a number of blanket section 1135 waivers retroactive to March 1, 2020, including the relaxation of restrictions on verbal orders for hospitals and the elimination of the 3-day hospitalization requirement for Medicare skilled nursing facility coverage. Combined with the implementation of stay-at-home orders across the states, it is reasonable to expect that attention and resources have been, and will continue to be, temporarily diverted from fraud and abuse investigations. However, providers should expect normal enforcement procedures to resume eventually, and compliance remains as important as ever. Although statutes of limitation apply to state and federal civil monetary penalties related to overpayments and failure to report and return overpayments, Medicare regulations permit Medicare contractors to open claims at any time if they can show fraud.


One overpayment issue that frequently arises involves claims for payment for services provided by a physician, where the services were in fact provided by a fellow, nurse practitioner, or other provider. The Office of Inspector General (“OIG”) for the United States Department of Health and Human Services (“HHS”) reported publicly on two investigations into violations of this rule in January and February 2020. The providers in both investigations agreed to pay over $100,000 and $200,000, respectively, to settle these matters.


The ability to bill Medicare under the physician fee schedule for services or supplies provided to a patient by auxiliary personnel requires strict compliance with CMS’ requirements. Generally, the services and supplies must:

  • Be provided to noninstitutional patients in a noninstitutional setting (hospital and nursing home patients excluded);

  • Not have their own benefit category, such as diagnostic tests;

  • Be furnished under the physician’s direct supervision (although some services require only general supervision);

  • Be integral but incidental to the physician’s service;

  • Be commonly rendered without charge or included in the physician’s bill; and

  • Be of a type commonly furnished in a physician’s office.

Where most providers and billers run into issues is the supervision requirement. Direct supervision by a physician requires that the physician be present in the office suite and immediately available to provide assistance and direction. Ideally, the physician’s records should substantiate the physician’s level of supervision. The physician does not have to be the physician who initiated the course of treatment and management; however, the physician must be an employee, leased employee, or independent contractor of the billing entity.


If a provider discovers a billing issue that has resulted in overpayment, it is important to address the issue as quickly as possible. How long the provider will have to report and return any overpayment to avoid treble damages and other penalties, as well as the best process for doing so, will depend on the facts and circumstances. Whether the provider had a process for uncovering potential fraud, whether conduct underlying overpayment was an isolated issue or an ongoing practice, and diligence in identifying and quantifying the overpayment are a few of many issues to consider in deciding on the right course of action. An attorney knowledgeable in payor fraud and abuse law can assist providers in selecting the best course of action.


If you have any questions about this Legal Briefing, please contact any member of the firm at (585) 730-4773.

This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2020 Law Offices of Pullano & Farrow PLLC


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