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CMS Issues Demand Letters to Providers and Suppliers with Claims for Services Provided to Allegedly Incarcerated Beneficiaries

The Centers for Medicare & Medicaid Services (CMS) is issuing demand letters seeking recoupment of reimbursement from medical providers and suppliers for Medicare beneficiaries that, according to data from the Social Security Administration (SSA), were allegedly “incarcerated” at the time services were provided. According to the Code of Federal Regulations (42 CFR 411.4) and Section 1862(a)(2) of the Social Security Act, with limited exceptions, Medicare does not make payments under Medicare Part A or Part B for incarcerated beneficiaries’ medical services. The SSA uses the Prisoner Update Processing System (PUPS) to notify CMS contractors to stop Medicare payment for patients in custody of penal authorities.

CMS considers a beneficiary “incarcerated” in circumstances that do not only involve physical confinement. Commentary on 42 CFR 411.4 explains that this definition of “custody” is consistent with the Federal courts’ definition of custody for the purpose of habeas corpus protections of the Constitution. According to commentary on 42 CFR 411.4, as well as the related CMS bulletin, individuals in “custody” include those who are:

• Under arrest
• Incarcerated
• Imprisoned
• Escaped from confinement
• Under supervised release
• On medical furlough,
• Required to reside in mental health facilities
• Required to reside in halfway house
• Required to live under home detention, or
• Confined completely or partially in any way under a penal statute or rule

With the recent release of demand letters and recoupment of previously paid claims, CMS is identifying previously paid claims with dates of service that encompass a full time period or merely partially overlap a time period when a beneficiary was in “custody of penal authorities,” as defined above. The issuance of the demand letters and recoupment of funds are burdensome for Medicare providers as the definition of custody is very broad and includes individuals not under physical confinement. Specifically it is problematic for providers because if a patient is not under physical confinement, providers may not know whether a patient is under custody of penal authorities and it is unlikely that such an individual would identify him or herself. It may be impossible for a provider to know whether a patient is on parole, probation, bail, or under supervised release. In addition, prison records may be protected under Federal, State, or local privacy laws.

CMS has already identified alleged overpayments and issued demand letters to providers with special instructions to not yet file appeals. The instructions read, “At this time, CMS asks that providers do not file appeal requests… There may be instances where providers believe that the beneficiary was not incarcerated when the service was provided. Providers should research their own internal records and contact the beneficiary to gather as much information as possible.” Although CMS suggests that providers may contact patients to obtain more information regarding the alleged incarceration on the dates of service, beneficiaries may be unwilling to provide such information and have little incentive to cooperate. In addition, if data from the SSA is outdated when a PUP determination is made, providers are responsible for contacting CMS to make any corrections. This may increase administrative burdens and costs on Medicare providers throughout the country.

CMS advises providers to contact their local CMS Regional Office if they believe that the patient was indeed not under custody of penal authorities on the given dates of service. Providers contacting their CMS Regional Office must either provide a reason why the dates provided by the SSA are incorrect or why their patient was not in “custody” for Medicare payment purposes under the Federal court definition of “custody.” CMS Regional Office contact information may be found here.

Interestingly, under 42 CFR 411.4 and as listed on the CMS notice, there are three regulatory conditions under which Medicare payments may be made for incarcerated individuals. First, “State or Local law must require the prisoner (or the patient under the government agency’s custody) to repay the cost of medical services they receive while in custody. This must apply to all individuals and not be limited to those individuals with Medicare.” Second, “The State or Local government entity must enforce the requirement to pay by billing all prisoners (or all patients under the government agency’s custody) whether covered by Medicare or any other health insurance.” Lastly, “The State or Local entity must have documentary evidence to support their billing and collection efforts.” If all three of these requirements are not met and Medicare denies payment, then Medicare providers are instructed to seek payment from the State or local government. We encourage providers to investigate this possibility of reimbursement and to contact us if they need assistance reviewing current state laws to determine whether reimbursement may be a possibility.

Wachler & Associates will continue to investigate CMS’ efforts to recoup reimbursement for services provided to “incarcerated” beneficiaries. Wachler & Associates health care attorneys regularly counsel Medicare providers in both prevention and defense against overpayment allegations from CMS contractors and other payors. If you or your health care entity need assistance in disputing the accuracy of an incarceration record in response to a CMS issued demand letter, please contact our experienced health care attorneys at 248-544-0888.