Medicare Overpayment Cases
A. Regulatory Overview. The Secretary of Health and Human Services
administers the Health Insurance for the Aged and Disabled Program,
U.S.C. §§ 1395 - 1395aaa (Medicare Program), and has
that responsibility to the Health Care Financing Administration
HCFA contracts with private insurance companies to act as fiscal
intermediaries and reimburse participating health care providers
services provided to Medicare beneficiaries. 42 U.S.C. §
Part A of the Medicare Program pays for inpatient hospital,
health, and skilled nursing services provided to Medicare
Part B is a voluntary program which provides coverage for physician
services, outpatient hospital services, and other supplementary
insurance benefits. The providers of services must meet the
criteria and enter into Health Insurance Benefit Agreements
Agreements) with the Secretary, through HCFA, pursuant to 42 U.S.C.
§ 1395cc. HCFA may not reimburse a provider unless it executes
Under the provider agreements, Medicare providers are
for services on the basis of "reasonable costs" as defined in the
federal regulations. 42 C.F.R. § 413. 1 et seq. The fiscal
intermediary, such as Blue Cross and Blue Shield, determines
costs and makes payment. 42 U.S.C. § 1395h.
The fiscal intermediary makes estimated payments based on
historical levels of service. These payments are subsequently
with the actual reasonable costs incurred by means of an annual
report which the Medicare Provider is required to submit. 42 C.F.R.
§§ 413.20, 413.24. Based on the audited cost report, the
intermediary makes a final determination whether the facility was
overpaid or underpaid during the year. Id.
The intermediary adjusts the estimated payments if it receives
information that the compensation will be excessive based upon the
projected level of services, 42 C.F.R. § 413.64, or because the
provider refuses to furnish the required information to allow the
intermediary to determine the correct amount due to the provider,
C.F.R. § 1395g(a).
In addition, the intermediary reconciles the total payments
with actual reimbursement due based on annual cost reports filed by
provider after the end of each fiscal year. 42 C.F.R. § 413.20.
the provider was underpaid, the intermediary immediately remits the
difference. If the provider was overpaid, the intermediary notifies
provider of the overpayment, adjusts ongoing payments to reflect
fact that the provider was overpaid by the Medicare program,
funds owed the provider until the overpayment has been collected.
U.S.C. § 1395g(a); 42 C.F.R. § 405.1803(c).
A provider dissatisfied with the fiscal intermediary's
determination may appeal. Depending on the amount in controversy,
provider's appeal is disposed of through a hearing before the
intermediary or by appeal directly to the Provider Reimbursement
Board (PRRB). 42 U.S.C. § 1395oo(a). Board decisions are final,
U.S.C. § 1395oo(f), and may be appealed to the federal district
court, 42 U.S.C. § 405(g). The statutes require exhaustion of
administrative remedies before a federal court has jurisdiction
Medicare Program related matter. 42 U.S.C. § 405(h).
Medicare payments to suppliers may be suspended, in whole or
part, when overpayments are found or reasonably suspected. 42
§ 405.370(a) (1992). The suspension must protect the program
financial loss. 42 C.F.R. § 405.370(b) (1992). Generally,
requires prior notice. 42 C.F.R. § 405.371(a) (1992). However,
fraud or misrepresentation is suspected, notice may be provided
concurrently with the suspension. 42 C.F.R. § 405.371(b)
Amounts suspended are segregated. Once imposed, a suspension
effect until either the overpayment is returned, a liquidation
is reached with the supplier, or the agency determines that no
overpayment was made. 42 C.F.R. § 405.373 (1992).
The Medicare relationship is generally not considered a
one. Memorial Hospital v. Heckler, 706 F.2d 1130, 1136-37 (11th
1983) (Existence of the provider agreement "did not obligate the
Secretary to provide reimbursement for any particular expenses."),
denied, 465 U.S. 1023 (1984); The Germantown Hospital and Medical
v. Heckler, 590 F. Supp. 24, 30-31 (E.D. Pa. 1983), aff'd, 738 F.2d
(3d Cir. 1984) ("There is no contractual obligation requiring HHS
provide Medicare reimbursement."). Cf. Hollander v. Brezenoff, 787
834, 835-39 (2d Cir. 1986) ("Signing a provider agreement does not
convert statutory mandates into a contract claim;" "[a]lthough the
[Medicaid] relationship may be effectuated by means of a provider
contract, all rights to reimbursement arise under the applicable
statutes."). But see In re University Medical Ctr., 973 F.2d 1065
Cir. 1992) (holding that Medicare provider agreement is an
contract for bankruptcy purposes).
The Medicare statute, 42 U.S.C. § 405(h), bars judicial
until a party exhausts administrative remedies. See, e.g., Heckler
Ringer, 466 U.S. 602 (1984); Weinberger v. Salfi, 422 U.S. 749
American Fed'n of Home Health Agencies, Inc. v. Heckler, 754 F.2d
897-98 (11th Cir. 1984). Thus, unless a provider exhausts its
administrative remedies, federal courts do not have jurisdiction
claims arising under the Medicare Program for reimbursement. 42
§§ 1395oo(f), 405(h), 1395ii; see, e.g., Westchester
Corp. v. U.S. Dept. of Health and Human Services, 948 F.2d 279, 282
Cir. 1991), cert. denied, 504 U.S. 909 (1992); Bodimetric Health
Services, Inc. v. Aetna Life & Casualty, 903 F.2d 480, 483-84 (7th
Cir.), cert. denied, 498 U.S. 1012 (1990); Charter Medical Corp. v.
Bowen, 788 F.2d 728 (11th Cir. 1986). But see In re University Med.
Ctr., supra (exhaustion of administrative remedies not required
adversary proceeding is based on Bankruptcy Code and does not
issue inextricably intertwined with any dispute within agency's
review process); In re Town & Country Home Nursing Services, Inc.,
B.R. 329 (Bankr. 9th Cir. 1990), aff'd, 963 F.2d 1146 (9th Cir.
Fiscal intermediaries are merely conduits between the
and the Medicare providers. 42 U.S.C. § 1395(h). Thus, while a
fiscal intermediary determines amounts to be paid on claims and
disburses funds provided by the government, the United States is
real party in interest in Medicare litigation, and the claims
the fiscal intermediaries should be dismissed. Bodimetric Health
Inc. v. Aetna Life & Casualty, 487-488 supra; Matranga v. Travelers
Co., 563 F.2d 677 (5th Cir. 1977); Peterson v. Weinberger, 508 F.2d
51-52 (5th Cir.), cert. denied, 423 U.S. 830 (1975); Pine View
Inc. v. Mutual of Omaha Ins. Co., 485 F.2d 1073, 1075 (D.C. Cir.
B. Medicare Overpayment Cases. Providers of Medicare services,
nursing homes, are advanced funds by HHS for medically necessary
services based on estimates of costs. If data furnished annually by
provider shows the provider was paid more than its reasonable costs
medically necessary services, the fiscal intermediary sends the
a notice of provider reimbursement explaining the overpayment and
demanding reimbursement. If the provider fails to repay the amount
HHS collects by offset. See Mt. Sinai Hospital of Greater Miami v.
Weinberger, supra; but see In re University Medical Ctr., supra
(Medicare offset not permissible in bankruptcy proceedings). [See
banksetf.out]. A provider no longer in the Medicare Program may be
to recover the overpayments. If the provider fails to submit
accurate cost reports within the designated time there is a
that all Medicare payments during the relevant time period were
overpayments. See United States v. Upper Valley Clinic Hospital,
615 F.2d 302, 306 n.8 (5th Cir. 1980). Administrative review of
overpayment determinations is permitted for accounting periods
or after December 31, 1971, and before June 30, 1973, see 20 C.F.R.
§§ 405.1801-1833, formerly 20 C.F.R. §§
405.490-405.49(I). For accounting periods ending on or after June
1973, see 42 U.S.C. § 11395oo, 20 §§ 405.1801-1889. The
provider should be encouraged to seek administrative review of the
overpayment claims against it even for earlier periods.
The statute of limitations is a serious factor in many of
cases. Thus, the government should obtain a waiver of the statute
limitations from the provider if administrative consideration of
overpayment determination is delayed.
C. Medicare Fraud Cases. Although Medicare's right to suspend
where fraud is suspected is respected, Visiting Nurse Ass'n of
Tift County, Inc. v. Heckler, 711 F.2d 1020, 1031-1035 (11th Cir.
some courts in bankruptcy proceedings hold that Medicare's
barred by the bankruptcy filing or have restrained HCFA from
payments postpetition. Compare In re Medicar Ambulance Co., Inc.,
B.R. 918, 926-27 (Bankr. N.D. Cal. 1994) (HHS fraud suspension
the stay) with In re Orthotic Center, Inc., 193 B.R. 832 (N.D. Ohio
1996) (HHS suspension for fraud does not violate the stay).
Consult with HHS with respect to all compromise proposals and
HHS apprised of developments in these cases. USA should contact the
Regional Counsel if support from HHS is requested.
[cited in USAM 4-4.480]