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“Overpayments” - Adherence to New Regulations Essential

September 08, 2010

"Overpayments," which occur when healthcare providers receive "too much" funding from government programs, are a significant issue frequently faced by many organizations.  How these overpayments are managed and reported could mean the difference between the business running smoothly or facing potentially large fines and penalties.

What causes an overpayment situation is not always clear.  Sometimes it is nothing but a misapplication of the payment to a different account.  However, there are other times where itis a true overpayment, and in those instances the funding must be returned.  Historically, these overpayments are often squared away over time through audits, which were undertaken by the program fiscal intermediary or by repayments by the organization to the appropriate reimbursement agency.

The Federal False Claims Act historically considered these situations to be a false claim, and the results can be very costly.  Any person who has possession, custody or control of property or money used or to be used by the government, who knowingly delivers or causes to be delivered less than 100% of that money or property, can be held liable for damages, even if no false claim was ever filed with the government agency.  This act carries with it a civil penalty of not less than $5,000 and not more than $10,000, plus three times the damages that the government sustains.

What's more, the Fraud Enforcement Recovery Act of 2009 expanded the False Claims Act.  It now includes instances of knowingly concealing or knowingly avoiding an obligation to pay or transmit money or property to the government, whether or not the person uses a false record or statement to do so.

The False Claims Act and the Fraud Recovery Act of 2009 have strengthened the Health Care Reform Act, requiring that overpayments be repaid to the government contractor, state, carrier, intermediary or the Secretary of the Department of Human Services within 60 days.  The clock starts ticking on either the date the overpayment is identified or the date the cost report is due, whichever is later.

The consequences for not complying with regulations regarding overpayments can be severe.  The Department of Human Services has the right to recoup these overpayments from the provider, and state Medicaid programs are instructed to exclude providers that retain these overpayments from participation in the Medicaid Program. 

In order to avoid potentially costly ramifications, all healthcare organizations should review any potential overpayments on a timely basis.  Those that are identified as true overpayments from government payors should be repaid in accordance with the guidelines in the Act.  A compliance audit should also be considered in this area to make sure that the organization does not unwittingly run afoul of this revised regulation.

George W. Thomas, CPA, is a Director at BlumShapiro, specializing in hospitals and long-term care.  BlumShapiro is New England's largest regional accounting, tax and business consulting firm based in Connecticut with offices in West Hartford, Shelton, Westport and Waterbury.  The firm serves as business advisors for today's leading middle market companies, non-profit organizations and government entities, working to strategically tailor and consistently deliver tested solutions for unlocking an organization's full potential.  For more information about BlumShapiro, visit 


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