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March 2015 Archives

Capitated Insurance Contracts: High Risk. Low Returns.

Some medical providers receive payment for their services via capitated insurance contracts. Capitation is a risk-based payment system. Under a capitated insurance plan, the medical provider (physician, physical therapist, chiropractor, etc.) agrees to accept a predetermined dollar amount each month for each capitated insurance plan enrollee (the "Member") that is assigned to the provider for medical care. The predetermined dollar amount is termed a "PMPM," meaning "Per Member, Per Month." The monthly capitation payment is calculated by multiplying the number of plan Members that are assigned to the medical provider by the PMPM amount. The provider's monthly capitation check is independent of the Members' utilization of the providers' services. The PMPM is the same if every Member utilizes the provider's services or if no Member utilizes them. Healthy patient populations are generally expected to result in low utilization, with the capitation payment going straight to the medical provider's bottom line. High utilization is a different story.

Medicare Overpayments

Medical providers who participate with Medicare should be aware of the federal False Claims Act (FCA) and the potential consequences for failing to follow its mandates. The FCA subjects a person or entity to liability for knowingly presenting, or causing the presentation of a false claim to the United States Government for payment. A "traditional" false claim involves the medical provider's receipt of a Government payment as a result of the submission of a claim that was "knowingly" false. Medicare's payments to medical providers are conditioned on the medical provider's certification of compliance with Medicare's regulations. If payment is obtained based on the provider's false certification of compliance with Medicare's regulations, FCA liability is created. There are, however, other situations that may create liability under the FCA. In contrast to the "traditional" false claim, a "reverse" false claim involves avoiding repayment to the Government. The Fraud Enforcement and Recovery Act, enacted in 2009, amended the False Claims Act, by expanding liability for "reverse" false claims. As amended, the False Claims Act now imposes liability for knowingly concealing or knowingly and improperly avoiding or reducing an obligation to pay or transfer money back to the Government. The language "avoiding an obligation" to pay money to the government means that the provider has not returned an overpayment. Essentially, the provider has wrongfully retained funds that must be returned to the government. The amended statute specifically encompasses "retention of an overpayment" within the term "obligation." Some examples of overpayments include Medicare's duplicate payment for a covered service, Medicare's incorrect application of a deductible or copayment, or Medicare erroneously pays the incorrect provider. The Patient Protection and Affordable Care Act (PPACA) of 2010 further clarified reverse false claims. The term "overpayment" means any funds that a person or entity receives under the Medicare program to which that person or entity, after performing an applicable reconciliation, is not entitled. Section 6402(d) of the PPACA classifies overpayments as an "obligation" under the False Claims Act. Providers that receive Medicare overpayments must report the overpayment to the appropriate federal or state agency, intermediary, carrier or contractor. The medical provider must also return the overpayment and provide an explanation of the reason for the overpayment. Medical providers are required to report and return overpayments within 60 days of an overpayment discovery. The PPACA expressly states that "[a]ny overpayment retained by a person [or entity] after the deadline for reporting and returning the overpayment. . . is an obligation [under the False Claims Act]." False claims liability is not solely conditioned upon fraudulently receiving payment from the Government. It can also arise by failing to repay the government, even if the claim that triggered the government payment was itself not fraudulent. The FCA allows private parties, known as "whistleblowers" to bring a "qui tam" action on behalf of herself/himself and the Government. Medical providers would be wise to implement internal controls and systems to identify and avoid the risks that are associated with fraud and abuse under the FCA and PPACA. Because the FCA encompasses Medicare claims submissions which are made with reckless disregard for the truth (or falsity) of the information contained in the claim, medical providers should be vigilant, and pay close attention to how claims are submitted, and paid, or repaid, if necessary. 

Retroactive Adverse Benefit Determinations

One of the most frustrating experiences for a medical practice's billing staff is an insurer's denial of previously authorized benefits. This is especially problematic when the patient's benefit is retroactively denied after the insurance company has already made payment. From the insurer's perspective, a retroactive denial payment results in an overpayment to the provider, which must be repaid. To recoup these "overpayments," some insurers use "negative remittances." Negative remittances are where an insurer takes back a benefit payment by offsetting other compensable claims. For patients covered under an ERISA plan, these benefit denials require notice and have appeal rights.

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