Health Care Financing Administration Issues Payment Suspension Rules

The Health Care Financing Administration ("HCFA") recently issued final rules, effective January 2, 1997, governing suspension of Medicare payments. Existing regulations provide that payments to providers and suppliers may be suspended by a Medicare carrier or intermediary ("Medicare") when a determination has been made that the provider or suppler has been overpaid, if Medicare has reliable evidence that either an overpayment exists or that payments may not be correct, or when there is reliable evidence of fraud. The existing regulations do not have any time limit on the length of the suspension, nor do they contain specific requirements regarding the notice to be provided to suppliers and providers.

The new regulation differentiates between the terms "offset," "recoupment' and "suspension of payment." An "offset" occurs when Medicare recovers a non-Medicare debt by reducing Medicare payments (i.e. a Medicaid debt recovered by HCFA through offset Medicare payments). "Recoupment" is recovery by Medicare of an outstanding Medicare debt by reducing present or future payments and applying the amount withheld to the indebtedness. "Suspension of payment" is the withholding of payment by Medicare before a determination of the amount of overpayment. Medicare may suspend payments if it "possesses reliable information that an overpayment or fraud or willful misrepresentation exists or that the payments to be made may not be correct, although additional evidence may be needed for a determination."

If Medicare is to suspend payments, the provider or supplier must be notified of the intention to suspend payments and the reason for the suspension. Medicare does not have to give prior notice, however, where there is a determination that the Medicare trust funds would be harmed by giving prior notice. Where fraud or misrepresentation is involved, HCFA will determine whether a suspension is warranted, the appropriate amount of notice, if any, as well as the content of the notification. Regardless of whether prior notice is given, however, the supplier or provider is given an opportunity to submit a rebuttal statement. Generally, suspensions will be limited to 180 days. Under certain circumstances, however, Medicare or, in cases of fraud and misrepresentation, the Office of Inspector General ("OIG") or a law enforcement agency, may request a one-time 180 day extension of the suspension.

In the case of an offset or recoupment, Medicare must also notify the provider or supplier of its intent to offset or recoup and give the provider or supplier an opportunity to provide a rebuttal statement. Recoupment and offsets will remain in effect until the earliest that the debt is liquidated, Medicare obtains a satisfactory agreement for liquidation or the overpayment or Medicare determines that there has been no overpayment.

If there is an opportunity to submit a rebuttal statement, the supplier or provider usually has fifteen days to do so. Medicare must then, within fifteen days from the date that it receives the rebuttal statement consider the statement along with any evidence submitted and make a determination as to whether or not the suspension, recoupment or offset will continue. Notice of such determination must be made in writing to the provider or supplier and must include the rationale for the notice and any specific findings made.

As many Medicare suppliers and providers have discovered, suspension of payments has become an increasingly popular tool used by Medicare to eliminate fraud and abuse. Suspensions have a significantly detrimental effect on a provider or supplier, many of whom are dependent on Medicare revenues to stay in business. As Medicare becomes more aggressive in its use of suspensions, as well as offsets and recoupments, the only avenue open to suppliers and providers, in most cases, is litigation. However, negotiations with Medicare may help to resolve the situation that led to the payment suspension. Therefore, from the outset, how a provider or supplier responds to a suspension of payments is very important. Any statements submitted by the provider or supplier may be used against the provider or supplier in any investigation regarding an administrative overpayment or civil or criminal fraud. For this reason, it is important that suppliers and providers seek competent legal advice prior to responding to a notice of suspension. A bad situation can be inadvertently made worse by inappropriate efforts to prevent the suspension.

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