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Federal Judge Presses Pause of Recoupment

On June 28, 2018, a federal judge in Texas held that the Centers for Medicare & Medicaid Services (“CMS”) was not permitted to recoup 7.6 million dollars in alleged Medicare overpayments from a home health care agency who feared bankruptcy while waiting for an administrative appeal.

Due to an ‘extreme backlog’ of pending Medicare appeals cases, CMS was enjoined from withholding Medicare payments to Family Rehabilitation, Inc., while it awaited its hearing before an Administrative Law Judge (“ALJ”). Family Rehab. was challenging a determination made by CMS whereby Family Rehab. was allegedly overpaid by more than $7 million for prior services.

A Medicare overpayment is a payment a provider receives in excess of amounts that are properly payable under Medicare statutes and regulations. After CMS identifies an overpayment, the overpayment in turn becomes a debt owed to the United States government. Once an initial overpayment determination is made, beneficiaries, providers, and suppliers have the right to appeal the determination. Physicians and other suppliers who do not obtain assignment on claims are restricted in their appeal rights, which is why a complete assignment of benefits is imperative.

Generally, there is a four-level appeals process for providers to challenge alleged Medicare overpayments prior to filing a claim in Federal court. First, the provider may file a claim for redetermination of the overpayment with the Medicare Administrative Contractor (“MAC”). Second, a request may be made for a reconsideration from a Qualified Independent Contractor (“QIC”). Should the QIC uphold the MAC’s determination, the MAC may commence recouping the overpayment by deducting future reimbursements otherwise owed to the provider. Third, the provider may request a hearing before an ALJ. Finally, the provider may appeal to the Medicare Appeals Council.

The recent decision by a Texas federal court judge could pave the way for Medicare providers to seek injunctions against the recoupment of alleged overpayments until an ALJ reviews the case. In the current case, Family Rehab. asserted that that if recoupment continued before an ALJ hearing, it would go out of business. U.S. District Judge Ed Kinkeade agreed with the Family Rehab. and stated, “… it is unreasonable to expect a healthcare agency to scrape by for three to five years waiting for a hearing and decision while CMS recoups the alleged overpayments.”

An escalation process is available to a provider whereby the provider retains the right to escalate the request for a hearing. The process is available if 90 calendar days have passed since filing the complete request for a hearing and the appeal remains pending with the Office of Medicare Hearings and Appeals (“OMHA”). Although CMS argued Family Rehab. could utilize this constitutional remedy, the judge held escalating the appeal did not satisfy Family Rehab’s due process rights. By escalating the appeal, Family Rehab. would be unable to present witnesses at an evidentiary hearing, thus the case would be decided based solely on the existing record.

Family Rehab. argued that approximately 72 percent of cases are overturned at the ALJ hearing stage, which would give them a more favorable outcome at an evidentiary hearing. The impact of recoupments could continuously and significantly harm providers with the ‘extreme backlog’ of pending cases.

If you are a health care provider who believes you have been improperly accused of receiving overpayments, contact the experienced health care attorneys at Buttaci Leardi & Werner, LLC to learn about the steps to take to enforce your rights and prevent recoupment.


  • Posted on: Jul 11 2018