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What happens when the feds send a Medicare overpayment demand letter?

If the federal government believes that they sent a wrongful Medicare payment, they will expect the business to return the funds. This generally begins with an Initial Demand Letter. This first communication from the United States Centers for Medicare and Medicaid Services (CMS) will have information about the alleged overpayment and the expectation that the recipient returns the funds. The next step, if funds are not returned, is the Intent to Refer Letter. This informs the recipient that the feds are moving forward with a debt collection process.

Those who receive these letters have options. They can submit a rebuttal or request an appeal. But it is important to note that the government is aggressive in these actions. In a recent example, they have taken a step further — moving beyond a demand for repayment and filing a lawsuit against major insurer Cigna.

How can an overpayment demand turn into a lawsuit?

In this case it appears the government is claiming the insurer intentionally worked to defraud the government. This is not uncommon and can trigger allegations of violation of federal regulations like the False Claims Act (FCA).

The case began when a whistleblower, a former worker with Cigna, initiated the suit claiming the insurer encouraged those conducting home visits to make diagnosis that were not supported by medical evidence solely to increase reimbursement amounts. The government joined the lawsuit and Cigna claims it will fight the allegations.

What are the lessons from this case?

Although not yet decided, the case still provides some valuable information for others in the field. The government has made it clear that will continue to aggressively pursue allegations of false claims. Two additional lessons from this case include:

  • Home health services likely a target. The case focused on services provided in home health settings. The Office of Inspector General has flagged these home assessments as a likely point of overpayment. Thus, those who provide these services will likely receive increased federal scrutiny.
  • Repayment is only one concern. Although not a new lesson, it bears repeating. The odds that the government will request repayment are high, but it may not end there. As this case highlights, depending on the details of the allegations they may also move forward with claims of criminal wrongdoing.

Any business or individual that receives an initial demand letter or notice of an investigation is wise to take the matter seriously. Defenses are available. Contact an attorney to discuss your options.

Attorney John Rivas is responsible for this communication