What You Really Need to Know: When Refunds Make Sense

I recently offered training to a health system about how to respond to whistleblower complaints. Regular readers will know many of the tips I discussed.   

Hopefully, you know why a Medicare refund should only go back 48 months, not six years, unless there is fraud or similar fault that necessitates the longer lookback.  

We have covered the fact that Local Coverage Determinations (LCDs) are not binding, and that unless a National Coverage Determination (NCD) specifically says services are not covered, it only extends, rather than limits, coverage. In other words, you should almost never be refunding off of LCDs or NCDs. 

But it’s been a long time since I’ve written about when you should make a refund. And that decision can have a significant economic impact on you. There are many lawyers who recommend using the U.S. Department of Health and Human Services (HHS) Office of Inspector General’s (OIG’s) self-disclosure protocol, or going to the local U.S. Attorney’s Office when you want to make a refund.

While I have done each, I believe they should be done exceedingly rarely. I bet 99 percent of the refunds I have been involved with are made directly to the Medicare Administrative Contractor (MAC). (To be clear, I almost never send a refund under my name. When I am involved, I am ghostwriting a letter to be sent under the compliance professional’s signature.)

There is a very simple reason for this. If you make a refund to a U.S. Attorney, or via the OIG’s self-disclosure protocol, they are going to expect you to pay 50 percent more than the amount of the actual overpayment. If the overpayment was $100,000, they will expect $150,000. In exchange for this additional payment, you will get a release under the False Claims Act (FCA).

That release does have some value; you can be confident that you will not have to face a qui tam lawsuit, because the claims will have been released. But that additional 50 percent is nothing to sneeze at.

It is an expensive sneeze, and I question the value you get for paying that extra sum. While a release assures you that you will not have to face an FCA case, the practical reality is that it is difficult for someone to bring a credible False Claims Act case after you have made a refund.

It’s possible, but they have an uphill climb. And if they do bring such a case, the odds are pretty good you’ll be able to resolve it for that additional 50-percent payment if the government concludes that your disclosure was made in good faith. You might ultimately pay a bit more than the 50 percent, but you have excellent odds of winding up in essentially the same place you would have been at if you had gone to the U.S. Attorney or the self-disclosure protocol.

That extra 50 percent you pay is akin to an insurance premium. It doesn’t seem worth it to spend nearly as much on an insurance premium as you would hope to get in the ultimate payout, especially given that you often won’t be getting any payout at all. If you are making multiple refunds, you will certainly pay more if you routinely pay 50 percent, rather than taking your chances.

It makes far more sense to refund the overpayment to the MAC and see what happens.

That is why, unless I think one of our employees did something intentionally wrong, I am going to cut a check for the overpayment amount to the MAC and leave the OIG and U.S. Attorney’s office out of it.