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CMS Issues Final Rule Requiring Overpayments Within 60 Days

Tips on meeting this obligation without creating a “reverse” false claim

The Centers for Medicare and Medicaid Services (CMS) recently issued a final rule requiring Medicare Parts A and B health care providers and suppliers to report and return overpayments within 60 days from the date the overpayment was identified. This should not be confused with the final rule published in 2014 that addresses Medicare Parts C and D overpayments. There have been many occasions where the Office of Inspector General (OIG) reported the need for a rule that would force providers to report and repay overpayments in a timely manner. Now, CMS has clarified the requirements for reporting and returning of self-identified overpayments. CMS made it clear that failure to meet its standards may result in enforcement actions under the False Claims Act (FCA) liability, Civil Monetary Penalties Law (CMPL) liability, and exclusion from federal health care programs.

Under the Affordable Care Act, a person who has received an overpayment must report and return it within 60 days of the date the overpayment was identified and include written explanation for the overpayment. Any overpayment retained by a person after the deadline becomes an obligation and may be viewed as fraudulent. The CMS rule addresses (1) the meaning of overpayment identification, (2) the required look back period for overpayment identification, and (3) methods available for reporting and returning identified overpayments to CMS.

  1. Identification. The term “identification” is given particular meaning and clarification for the context of this final rule. The rule states that a person has identified an overpayment when the person has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. This high standard for identification provides needed clarity and consistency for health care providers and suppliers regarding the actions they need to take to comply with requirements for reporting and returning of self-identified overpayments.
  1. Lookback Period. The final rules creates a “lookback” period in which overpayments must be reported and returned if a person identifies the overpayment within six years of the date the overpayment was received.
  1. How to Report and Return Overpayments. Providers and suppliers must use an applicable claims adjustment, credit balance, self-reported refund, or another appropriate process to satisfy the obligation to report and return overpayments. This approach for returning overpayments provides an array of familiar options from which providers and suppliers can select.

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If a health care provider or supplier has reported a self-identified overpayment to either the Self-Referral Disclosure Protocol managed by CMS or the Self-Disclosure Protocol managed by the OIG, the provider or supplier is considered to be in compliance with the provisions of this rule as long as they are actively engaged in the respective protocol.

The 60 day window for repayment represents a serious problem for providers trying to determine when overpayments have actually been identified. Providers previously had a difficult time determining when the clock starts ticking because the word “identified” was not defined in the law. In 2012, CMS issued a proposed rule stating that a provider had “identified” an overpayment when it had “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” The proposed rule remained unclear as to how to determine when the clock began ticking and left interpretation to providers themselves. The ambiguity changed last summer when the U.S. District Court for the Southern District of New York made its decision in the case of Kane v. Healthfirst, Inc. et al. and U.S. v. Continuum Health Partners Inc. et al. The court ruled that an overpayment must be reported, explained, and returned within 60 days after the date it was “identified,” noting that the failure to timely return an overpayment constitutes a “reverse false claim.” The recent final rule by CMS compliments the court’s decision in establishing standards for providers and suppliers.

Dr. Cornelia Dorfschmid, Executive Vice President of Strategic Management and a leading expert on health care compliance, states that “now the burden is on providers to assess proactively significant overpayments and quickly resolve them with a refund and written explanation for how they came about.” She suggests this can be best done by phased auditing and expanding claims reviews with statistical samples and certified coding experts. “Samples can be expanded from probe samples to discovery samples, or even full samples, and used in deeper dives to confirm and identify with sufficient precision what overpayments occurred.”

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