Clinical Research Billing: How far back do you need to audit?

Ryan Meade
Managing Director, Aegis Compliance & Ethics Center
December 4th, 2014

Note that this article refers to billing errors to federal healthcare programs such as Medicare, Medicaid, Tricare, and CHAMPUS, and addresses the length of time needed to resolve errors that are found to be repetitive in nature.

How far back do you need to audit? This is a very common question in clinical research billing. In short, the answer is usually six years if a provider discovers a systemic error or there is a significant error rate. However, newly proposed regulations may push that back to ten years in the near future. For the time being though, six is the rule of thumb.

When a provider discovers an error while doing a billing audit, you must determine if it’s an isolated error that can easily be fixed, or whether facts suggest it’s an error that has been repeated across other instances – in other words, some sort of systemic error. When the error is systemic, the provider may have exposure for at least six years or the date the error began, whichever is shorter.  For example, if the error started two years ago, you need to go back two years. However, if it began twelve years ago, or the origin is unknown, then the minimum amount of time to go back is six years.

So why six years?

Here’s the long answer:

When an erroneous claim is submitted to a federal healthcare program, whether it’s asking for money that a provider isn’t required to receive or that the provider shouldn’t receive, then a provider has potentially submitted a “false claim.” However, a false claim is not just an erroneous claim. A false claims that carries liability is a claim that has been submitted with actual knowledge of its falsity, or circumstances that might be characterized as “reckless disregard” of its truth or falsity, or someone acted “in ignorance of the truth” or falsity of the claim submitted (i.e., suspected a problem but didn’t want to check into it). When submitting an erroneous claim under one of these three circumstances generates money from federal health plans that the provider shouldn’t receive, it’s usually considered a “false claim” under the False Claims Act. Finding out you received money that you shouldn’t have received and not returning is also a problem and is called a “reverse false claim.”

A simple mistake is not necessarily a false claim for False Claims Act liability. If a provider makes a simple mistake and receives money that it shouldn’t, especially if isolated, a common approach is for the provider to simply repay it in the normal refund process that Medicare and Medicaid offer. But when all of the facts line up for a “false claim,” then penalties can be quite high.

Now back to the six years. The False Claims Act has a statute of limitations of six to ten years. The years are a sliding scale based on certain factors. Most providers stay with six years when voluntarily resolving the problem and figuring out the payback. In voluntary self-disclosures the government often accepts six years, but it is a good idea to seek legal advice on how to proceed when doing a retrospective audit that is relying on a statute of limitations.

Affordable Care Act

One more point to add on the legalities is in regards to the Affordable Care Act, which has established a 60-day report and return rule. If a provider receives an overpayment from the Medicare or Medicaid programs, whether by simple mistake or due to reckless disregard, the provider has 60 days from the date the overpayment is identified to return the money. If it does not get refunded, that’s what would trigger the False Claims Act. The U.S. Department of Health & Human Services issued proposed regulations for 60-day report and return rule, which has a ten year lookback period.  It’s not clear when the regulations will be finalized and whether the federal government will stay with the ten year lookback period or not, but this is important to watch. If the final regulations set out more than a six year lookback period, then approaches to retrospective audits and repayments will need to be adjusted to meet that rule.



Billing Compliance Compliance and Regulatory

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