By Andy Liu, Robert Rhoad, and Haaleh Katouzian
August 16, 2021
A unanimous D.C. Circuit, in UnitedHealthcare Ins. Co. v. Becerra,[1] reversed a district court’s ruling, holding “that the Overpayment Rule does not violate the Medicare statute’s actuarial equivalence and same methodology requirements and is not arbitrary and capricious as an unexplained departure from prior policy.” (internal quotations omitted).
The Overpayment Rule, issued by the Centers for Medicare and Medicaid Services (“CMS”) in 2014 “to implement the statutory requirement to report and return overpayments,” requires Medicare Advantage insurers to report and correct overpayments to CMS within 60 days. The Rule, as explained by the D.C. Circuit, was imposed to control overpayments when “there is no basis for that payment in the underlying medical records” or if the “payment increment . . . lacks support in their beneficiaries’ medical records.”
UnitedHealthcare (“United”) argued that the Overpayment Rule must comply with actuarial equivalence, which requires payments made to providers participating under Medicare Advantage be equivalent to payments made under traditional “fee-for-service” Medicare, and that the Rule had failed to do so. In 2018, the D.C. District Court agreed with United’s argument,[2] holding that the Overpayment Rule violated actuarial equivalence because “payments for care under traditional Medicare and Medicare Advantage are both set annually based on costs from unaudited traditional Medicare records, but the 2014 Overpayment Rule systemically devalues payments to Medicare Advantage insurers by measuring overpayments based on audited patient records.” (internal quotations omitted). Ultimately, the district court vacated the Overpayment Rule – a relief for Medicare Advantage providers.
The D.C. Circuit, however, reversed and concluded that the actuarial-equivalence requirement does not apply to the Overpayment Rule, but instead, “appl[ies] to different actors, target[s] distinct issues arising at different times, and work[s] at different levels of generality.” In so doing, it effectively eliminated the centerpiece of United’s defense that its application of actuarial equivalence was reasonable and negated its “report and return” obligation under the Overpayment Rule. The Court suggested that United’s argument connecting these two concepts — and the district court’s decision incorporating it – wrongly conflated and applied them.
Additionally, the Court held that the 1) Overpayment Rule does not violate Medicare’s “same methodology” requirement; and 2) Overpayment Rule was not arbitrary and capricious because CMS acted within its discretion when it applied an “adjuster” in connection with certain Medicare Advantage audits but did not do so in the context of the Overpayment Rule (even though it observed that CMS later changed the adjustment).
The same methodology requirement “merely clarifies that, in computing the data it publishes, CMS must use the same risk-adjustment model that it already uses to set monthly payments to Medicare Advantage insurers . . . .” Because actuarial-equivalence does not apply to the Overpayment Rule, the same methodology rule is not implicated nor would the same methodology requirement have anything to do with determining whether insurers were overpaid. Similarly, because the Overpayment Rule “does not violate, or even implicate, actuarial equivalence,” the Court held that CMS was not obligated to use an “FFS Adjuster” (or explain its refusal to do so).
At first glance, the D.C. Circuit’s decision appears to be a significant blow to Medicare providers. While it may have been to the case-specific facts presented, Medicare providers still have several other potential defenses they can raise in the FCA overpayment context: room to demonstrate when credible information is received; when a potential overpayment was identified; when reasonable diligence is complete; and what reasonable diligence was undertaken.
Compliance is prospective; enforcement is retrospective. Medicare Advantage providers should heed this by having robust compliance measure in place and by viewing circumstances in real time through the lens of what they are doing and how it might be looked back upon in the future by government enforcers and qui tam relators. Keeping careful contemporaneous records of what is learned; when it is learned; what is done to investigate and make determinations; and, if necessary, to report or disclose any adverse determination, remain the key concepts to be employed in mitigating exposure under the False Claims Act.
[1] https://www.cadc.uscourts.gov/internet/opinions.nsf/BC04AB134EEF09A285258730004EFDC4/$file/18-5326-1910101.pdf.
[2] ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2016cv0157-74
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