The ATRA significantly alters provider rights related to overpayment recoupment, refunds, audits and claims appeals. A provision entitled "Removing obstacles to collection of overpayments" increases the statute of limitations related to without fault provisions from three to five years, based on recommendations from the Office of Inspector General (OIG) at the U.S. Department of Health and Human Services (HHS). In labeling the without fault provision -- a critical protection for providers arguing against unfair collection of potential overpayments -- as an "obstacle," HHS simultaneously weakened a provider defense and exposed providers to a greater period of vulnerability.

The without fault provisions state that a provider will not be liable for an overpayment if the provider acted without fault. Generally, a provider is without fault if it exercised reasonable care in billing for, and accepting, the payment. Moreover, the statute provided that the adjustment or recovery of an incorrect payment is deemed to be against equity and good conscience if the determination that such payment was incorrect is made more than three years after the payment was made. Thus, many possible overpayments may involve circumstances under which a provider did not know, and could not reasonably be expected to know, that it improperly billed for the subject of the overpayment. Previously, absent evidence to the contrary, providers may have had a "without fault" defense against refunding certain overpayments when those amounts were identified after the third year in which the payment was made. Now that period has been extended to the fifth year. The limitation of liability provisions are an integral part of the Medicare claims appeal process relating to overpayments. There are numerous decisions where a provider was not held liable for an overpayment based on these provisions because the claim at issue was beyond the three-year window. That window now has been extended, leaving providers vulnerable for a greater period of time and increasing amounts that may be collectable.

Without fault provisions were important issues raised in the Recovery Audit Contractor (RAC) Program demonstration project. RAC reviews are statutorily limited to a four-year lookback period, but currently function under a three-year lookback period. Some believe the three-year limit is based on the without fault provision; thus the extension of the without fault provision may allow for an increase in the RAC lookback period.

This amendment is the latest in a series of actions attempting to extend HHS's reach into previous payments made to providers. In February of 2012, CMS proposed to amend the claims reopening rules to allow the agency to reopen claims for a period of ten years. We disagreed with the ten-year lookback period, arguing in part, that a ten-year period was inconsistent with statutory provisions related to the three-year "without fault" provision limitation. The without fault amendment may be an ominous indication that HHS is making preparations to increase the lookback period under the proposed rule.

For more information, please contact B. Scott McBride, smcbride@bakerlaw.com or 713.646.1390, or Ameena N. Ashfaq, aashfaq@bakerlaw.com or 713.646.1329.