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*Much of this article appears in Chapter 157 in Norton Bankruptcy Law and Practice 2d
published by the West Group and appears with their permission.
case-mix groups ("CMGs") defined by types of treatment episodes. Capital costs are included in cost allocations to each CMG. Medicare purchases home health services in units of 60-day episodes with special treatment for cases treated in fewer than five visits. Services are assigned one of 80 home health resource groups based on clinical, functional and service factors. Long term care hospital services are reimbursed based on special DRGs related
specifically to long term care ("LTC-DRGs"). Inpatient psychiatric care providers received predetermined per-diem rates based primarily on the patient's condition, facility characteristics, and area wages. Very helpful and readable information on payment systems for different kinds of health care providers can be found at www.medpac.gov under publications/other.
Generally, hospitals receive payment for services provided to patients following the patient's discharge. However, some providers are eligible for interim reimbursement.
Hospitals and other providers submit a cost report at the end of the provider's cost reporting period that covers all services rendered during the year. The report compares the amount of reimbursement due to the provider for the given year to the amount of payments received by the provider. If the report indicates an overpayment, the provider must remit the overpayment with the report. The intermediary initially conducts a desk review of the report to determine that it is complete and to flag issues for further review. If the report shows an amount owed to the provider, the intermediary may agree that a portion of that amount should be paid before the cost report is settled. A report is settled, typically after an audit, by the issuance of a Notice of Amount of Medicare Program Reimbursement (NPR). This process may take two years. If a provider is dissatisfied with the intermediary's determinations and the amount in controversy is greater than $1,000 but less than $10,000, the provider may appeal the NPR and request an intermediary hearing. The intermediary's decision may be reviewed by CMS, whose decision is final. If the amount in controversy is $10,000 or greater, the provider may request a hearing before the Provider Reimbursement Review Board (PRRB). A decision of the PRRB is final unless the Secretary alters the PRRB decision. Both parties have 60 days to appeal the final decision to a federal district court. When the NPR indicates a provider has been overpaid (a frequent occurrence), the provider must repay the program in a lump sum or, more typically, through adjustments to future payments. The Secretary is clearly authorized to deduct past overpayments from future payments. As discussed below, the nature of Medicare's entitlement to reimbursement for overpayments is often an issue in provider bankruptcies.
If a hospital is overpaid by Medicaid, the state must refund the federal share of the overpayment to CMS within sixty (60) days unless the provider is bankrupt or the overpayment is otherwise uncollectible. The state is exempt from refunding if it files a claim in the provider's bankruptcy and if the bankruptcy petition was filed prior to or within sixty (60) days following the state's discovery of the overpayment.
B. Antikickback and Anti-Referral Laws
Since 1977, federal law has prohibited the knowing or willful offer or payment of remuneration, or "kickbacks" to induce a person to refer another person or to arrange or make recommendations regarding the ordering, leasing, or purchasing of any item or service for which payment is made, in whole or in part, under Medicare or a state health care (i.e. Medicaid program). The remuneration may be paid overtly, covertly, in cash or in kind. Violations are classified as felonies punishable by up to five years' imprisonment and/ or fines of up to $25,000 per incident and violators may be excluded from participation in Medicare and state health programs. The exclusion can apply regardless of whether a criminal conviction is obtained. Therefore, the enforcement of this statute could have a significant impact on a provider's reorganization.
In conjunction with the enactment of the Medicare and Medicaid Patient and Program Protection Act of 1987, Congress required the U.S. Department of Health and Human Services ("HHS") to issue regulations clearly exempting certain business practices from civil and criminal liability ("safe harbors"). Over the years a number of
