Medicare’s New ‘Self-Audit’ Requests: What’s Required and How to Respond

We’re seeing a new tactic from CMS and Medicare: the “self-audit” request. These requests stem from recent Office of Inspector General (OIG) reports on the ambulance industry that found several issues that have caused improper payments to ambulance service suppliers and providers (see our previous articles about that here).

If you are targeted, your self-audit request will probably come from your MAC. But the letter might be confusing, as it will reference the OIG report. Pay close attention to whom the letter is from and exactly what it asks you to do. Usually the letter will explain what the payment error may be by identifying the OIG report that explains the error and providing a sample of your claims that may represent overpayments for it. The letter typically then cites 42 CFR 401.305, which requires identified overpayments to be returned in 60 days. However, the letter also usually references a 180-day period to investigate in addition to the 60 days to refund “identified” overpayments. While the MAC expects a response within a total of 240 days, this is the outside limit; if you identify an overpayment sooner, the 60-day interval to refund may kick in sooner as well. Note that your response is due to the MAC, not the OIG.

The request typically requires you not only to review the claims it identifies for you but also if “any similar overpayments exist within the six-year lookback period.” To determine if there are similar overpayments, you have to dig into your data. Finding incorrect HCPCS codes or modifiers will likely require putting together a claims universe that includes all potentially problematic claims. For the SNF overpayments (see Part 3 of the article series above for details on this report), we have no idea how they expect us to know if a patient was in a Part A stay six years ago, but the requirement to “self-audit” will apply nonetheless. So this all raises some questions.

Things We Need to Know

What about the time limits to reopen claims?

If there is a four-year time limit to reopen and revise Medicare claims, why do you have to go back six years? The six-year lookback is based on the statute of limitations for the False Claims Act. While the OIG reports do not call these overpaid claims “fraudulent” or “false,” the act may still apply if you keep money after knowing it may have been paid in error. The legal theory is that because of the letter, the ambulance service is on notice of potential overpayment and therefore has a duty to investigate further. If it fails to investigate or identifies overpayments but fails to refund them, the “reverse False Claims Act” may come into play. A reverse False Claims Act violation can result in liability under the act’s treble damage and/or civil monetary penalty provisions. These penalties can increase the amount you owe to the government to more than four times the amount of the actual overpayment.

What about providers without fault or waiver of liability?

When it comes to the self-audit, there do not seem to be any considerations for either of these statutory defenses to overpayments. While either may be something to raise in your response to the self-audit request, the OIG may not give these arguments much weight. This is concerning, because what better example of a provider without fault can there be than an ambulance supplier or provider who billed Part B and was paid by Medicare for things like noncovered destinations, impossible emergency HCPCS and modifier combinations, or transports that should have been the liability of the SNF due to Part A status only the SNF and Medicare knew about? In all cases the MAC should have had edits in place to detect these issues and deny the payment. That Medicare paid could be a viable defense.

What do you do now?

The self-audit request gives you some time to research and repay, but don’t wait until the last minute—it may take some time to conduct your audit. Also, don’t fail to respond, even if you think you don’t have an overpayment. Although the letter might seem to indicate a response is voluntary, it is wise to send a response indicating that you disagree with the findings and/or have otherwise investigated the transports at issue, explaining the process and methodology you used to conduct your investigation, and found no refund was due (if in fact that was your finding). Failure to respond at all could trigger further government investigations, including reverse False Claims Act exposure.

Finally, if you have questions on how to structure the self-audit or respond in general, get help! This is a new tactic for Medicare, so you will not be familiar with this process and may not be comfortable doing it on your own. There may also be legal or equitable defenses you should raise even if you find a refund may be due. The risks of not responding appropriately can be huge; make sure you do it right.

Dan Pedersen and G. Christopher Kelly are lawyers with Page, Wolfberg, & Wirth LLC who focus on regulatory healthcare law as it relates to the EMS and ambulance industry. This article is not intended as legal advice. For more information or assistance, reach them at 717/691-0100 or by e-mail at dpedersen@pwwemslaw.com or ckelly@pwwemslaw.com.