Fourth Circuit rules on Medicare overpayment issue

In MACKENZIE MEDICAL SUPPLY v. LEAVITT, MacKenzie sought to reverse the Secretary of the United States Department of Health and Human Services’ (the Secretary) determination that it overpaid MacKenzie $508,747.57 in Medicare reimbursement payments for135 power wheelchairs that MacKenzie provided to Medicare recipients. The Secretary argued that MacKenzie was liable for the overpayment because a post-payment audit revealed that insufficient medical documentation existed to establish the medical necessity of providing each power wheelchair at issue. In its defense, MacKenzie argued that the documentation that it submitted for reimbursement, in the form of certificates of medical necessity (CMN) , sufficed to qualify for reimbursement.

MacKenzie went through various levels of appeal, but it was found that MacKenzie had ignored various regulations and statements from HHS "which advised suppliers that if clinical records were not available to support a CMN, payment could be denied." MacKenzie was not without fault, and,therefore, was not entitled to a waiver of liability under Medicare Part B’s safe harbor provision. In other words, MacKenzie was required to pay back the entire amount.

The appeal eventually reached the Fourth Circuit and the Court began by noting that a CMN is not sufficient it and of itself to establish medical necessity under the regulations. Even if a supplier has a physician order on file, failure of the patient’s medical records to substantiate the condition for which Medicare approves reimbursement may nonetheless subject the supplier to liability for repayment of that reimbursement to the Medicare program, and possibly to civil and criminal penalties.

Hence, the Fourth Circuit affirmed the dertermination below.