CMS Proposes Increased Rewards for Reporting Fraud and Abuse

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The Centers for Medicare and Medicaid Services (CMS) recently published a proposed rule modifying certain provisions in their Incentive Reward Program (IRP) to sweeten the incentives for reporting sanctionable conduct. Revisions to the IRP increases the potential reward from 10 percent of the overpayments recovered in the case or $1,000, whichever is less, to 15 percent applied to the first $66 million for the sanctionable conduct. This means an individual could receive a reward of $9.9 million if CMS recovers $66 million or more.

The IRP was established as part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). In its current form, the IRP specifies that an individual may be eligible to receive a reward when the information reported relates to the activities of a specific individual or entity and must specify the time period of the alleged activities. Examples of specific activities include billing for services never rendered and billing for supplies not ordered. CMS does not give a reward for information that, at the time the information is provided, already is the subject of a review or investigation by CMS or law enforcement. CMS notes the reward program exists in parallel with the False Claims Act (FCA), but not as a supplement to it. The proposed rule provides a clarification that an individual is not eligible for an IRP reward if he or she has filed a whistleblower lawsuit under the federal or any state false claims act.

Since the current IRP was put into operation in July 1998, only 18 rewards have been paid, for a total of less than $16,000 and amounts collected of less than $3.5 million. Based upon experience under the Internal Revenue Service’s (IRS) reward program, CMS expects the higher reward likely will result in an upsurge of sanctionable conduct reporting, which would increase the collection of improper payments by the federal government. The IRS whistleblower program has resulted in recoveries of over $2 billion since 2003. CMS tentatively projects a net increase in recoveries of $24.5 million per year as a result of the proposed changes to the IRP.

We remain concerned for provider due process and provider rights in this era of increased use of “fraud bounty hunters,” including Recovery Audit Contractors, FCA relators and now the proposed bolstering of the IRP program. Comments to the proposed rule are due by June 28, 2013.