CMS Publishes Final Rule Regarding Medicare Overpayments

On February 12, 2016, the Centers for Medicare & Medicaid Services published a final rule regarding the reporting and returning of Medicare Part A and B overpayments (the “Final Rule”).[1]  The publication of the Final Rule clarifies the requirements of Social Security Act section 1128J(d) (the “60-Day Rule”), mandating the reporting and returning of any Medicare overpayment within the later of 60-days of identification or the date any corresponding cost report is due.  Failure to timely report and return an overpayment in conformance with the 60-Day Rule is a violation of the False Claims Act.[2]

The Final Rule makes two main clarifications to the 60-day repayment requirements.  The first involves the look-back period and the second elucidates the meaning of identification of an overpayment.

Look-back Period

The repayment statute is ambiguous as to the look-back period for any retained overpayments – in other words, the amount of time after which an overpayment was so dated that any repayment obligation had expired.  While the Proposed Rule contained a 10-year look-back period, based on the False Claims Act’s 10-year statute of limitations, the Final Rule compromises with a 6-year look-back period.  The six-year look-back is not retroactive and becomes effective on March 14, 2016.[3]

“Identify”

Many disputes regarding the application of the 60-day rule focus on the meaning of “identify” in the context of an overpayment.  The term “identify” is not defined in the 60-Day Rule statute, so it was often unclear whether the moment of identification of any particular overpayment was, for example, the receipt of a compliance hotline allegation, the verification of the allegation, or the time of final calculation of the overpayment after an investigation.

The Final Rule states that providers have an obligation to exercise “reasonable diligence” through “timely, good faith investigation of credible information”[4] and clarifies that this implies periodic proactive reviews of Medicare billing by providers.[5]  Auditing reactively based solely on potential violations raised by, for example, hotline calls or staff concerns is not sufficient. 

Additionally, the 60-day clock starts running only after the reasonable diligence period has concluded, which may take “at most 6 months from receipt of credible information, absent extraordinary circumstances.”[6]  Additionally, an overpayment is not deemed fully identified until the amount of the refund has been “quantified.”[7]     

Failing to make reasonable diligence efforts, including failure to conduct timely diligence after suspicion of an overpayment has arisen, may result in a provider knowingly retaining an overpayment because it acted in reckless disregard or deliberate ignorance of whether it received such overpayment.[8]    

Last, although CMS has advised that the Final Rule is not retroactive, all providers reporting and returning overpayments on or after the rule’s March 14, 2016 effective date must comply with the modified requirements, even if the overpayments themselves were received prior this date.

[1] 81 Fed. Reg. 7654-7684

[2]  31 U.S.C. § 3729(a)(1)(G)

[3] 81 Fed. Reg. at 7671

[4] 81 Fed. Reg. at 7662

[5] Id. at 7664

[6] 81 Fed. Reg. at 7662

[7] Id. at 7661

[8] Id. at 7659