Who is Liable for a Medicare Overpayment?

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.

This broad and severe list of potential consequences from failure to pay an outstanding Medicare debt emphasizes the importance of appealing the claim denials and initial determinations that underpin the alleged Medicare debt. Most of the implications of a Medicare overpayment are tolled or delayed while the matter is in the Medicare appeals process because the overpayment determination is not yet final and the provider has certain due process rights to challenge the determination. Further, there may be arguments available on appeal that, even though an overpayment exists, the entity is not liable for it, such as Provider Without Fault and Waiver of Liability. Experienced healthcare counsel can help your company navigate its response to and defense of an alleged Medicare overpayment.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to Medicare overpayments or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.