When a Medicare-enrolled provider or supplier receives a demand to repay an alleged overpayment, especially a massive and statistically extrapolated overpayment that dwarfs the company’s revenue and which the company can never hope to pay back, it often raises the question: who is liable for this alleged debt if the company cannot pay it back? While every company and set of circumstances are different, this question can have a significant impact on how to defend an alleged Medicare overpayment.
Whether the owner, members, or shareholders of the entity that received the alleged overpayment are personally liable generally turns on the corporate nature of the entity. Individually enrolled providers, sole proprietors, and partners in a partnership may generally share liability with the entity that received the overpayment, or may actually be the entity in the case of some individuals. Corporations, LLCs, and other corporate entities may offer more protection for their owners, members, or shareholders, who are generally not liable for the debts of the entity under the principle of “limited liability.” There are exceptions to limited liability which CMS (and other creditors) can attempt to use to collect from owners, but CMS rarely attempts to use these exceptions.
However, owners, members, and shareholders of entities with an alleged Medicare debt should be aware that there may be other impacts. CMS may refer the owner of an entity with an alleged Medicare debt to the OIG for placement on the OIG Exclusion List. CMS may also revoke the current enrollment or deny future enrollment applications of entities affiliated with the owner of an entity with outstanding Medicare debt. Perhaps most importantly, the owner or controller of an entity that knowingly causes the entity to fail to return a Medicare overpayment may create individual liability for themselves under the 60-Day Rule, Civil Monetary Penalties, and – importantly – the False Claims Act. CMS will generally also refer a debt to the US Department of Treasury for collections efforts.