The Centers for Medicare & Medicaid Services (CMS) issued a final rule clarifying the 60-day repayment requirement for Medicare Part A and B providers and suppliers to report and return any identified overpayment they receive on behalf of Medicare beneficiaries. The final rule relaxes some of the more burdensome provisions proposed in 2012 but still imposes significant obligations on health care providers to identify billing errors or compliance problems resulting in overpayments.

The Affordable Care Act requires providers to report and return overpayments received from Medicare within 60 days of identifying the overpayment, or by the due date of any corresponding cost report, if applicable. When this requirement was initially introduced, providers expressed confusion over what constituted “identifying” an overpayment. The proposed rule also contained a burdensome ten year lookback period and failed to address methods of repayment. CMS’s final rule provides much needed guidance and clarification in these areas.

Provisions

Identification

The final rule states a provider “has identified” an overpayment when the provider has, or should have through the exercise of reasonable diligence, determined that it received an overpayment.

The final rule comments provide multiple scenarios to illustrate what may constitute “identifying” an overpayment. These include the following:

• A provider of services or supplier reviews billing or payment records and learns it incorrectly coded some of its services, resulting in increased reimbursement.
• A provider or supplier of services learns that a patient death occurred prior to a service date on a claim submitted for payment.
• A provider or supplier learns that services were provided by an unlicensed or excluded individual on its behalf.
• A provider or supplier performs an internal audit and discovers that overpayments exist.

Scenarios where a provider should exercise reasonable diligence and initiate an investigation to determine if an overpayment was made are provided as follows:

• A provider of services or supplier experiences a significant increase in Medicare revenue and there is no apparent reason for the increase.
• A provider of services or supplier is informed by a governmental agency of an audit that discovered a potential overpayment.

These scenarios are not an exhaustive list of all potential sources of overpayments but are meant to illustrate facts that may lead an organization to determine it received an overpayment.

CMS has recognized that exercising due diligence to identify overpayments and calculate the amount of an overpayment may take a significant amount of time and resources. In its guidance to the final rule, CMS states that providers have up to six months to identify and quantify an overpayment after receipt of credible information that an overpayment may have been remitted. This time limit may be extended in extraordinary circumstances. Determining whether information is “credible” is a fact-specific inquiry that will be reviewed on a case-by-case basis. Regular communication with the relevant authority can show that a well-intentioned provider is investigating and quantifying a potential overpayment.[1]

Lookback Period

Identified overpayments must be reported and returned only if the provider identifies the overpayment within six years of when the overpayment was actually received. This is a welcome change from CMS’s original proposal of a ten year look back period and now mirrors CMS’s look back period for Medicare Parts C and D. Further, overpayments reported before March 13, 2016, the effective date of the final rule, are only subject to a 4 year look back period, per prior CMS guidance.

Reporting and Returning Overpayments

Once the provider has identified the overpayment, the provider must report and return the overpayment using an applicable claims adjustment, credit balance, self-report fund, or other similar process. The overpayment must be reported in writing and must include a description of any statistically valid sample or extrapolation used to calculate the overpayment. Providers in this region may report to Palmetto GBA, which advises providers to use its Voluntary Refund Overpayment form. Providers may submit this form and payment electronically via Palmetto’s eServices portal or by mail.

Suggested Compliance Measures

• Have a proactive compliance plan in place that includes periodic audits to ensure that appropriate and effective measures are in place to prevent overpayments and identify overpayments if they occur;
• Timely review any information regarding overpayments to determine the credibility of the information. Although guidance to the final rule provides up to six months following the receipt of credible information suggesting an overpayment may have occurred to identify and quantify overpayments, that process is often time-consuming and providers should begin their review as soon as practicable once possible overpayments are identifiable;
• Document all work done to determine the credibility of the information received and, if information is determined not credible, document the reasoning behind the determination. If the information is determined credible, begin an inquiry regarding the overpayment and carefully document all due diligence performed, the scope of the inquiry made, and the methodology used to quantify the overpayment, if one is identified; and
• Employ an outside consultant or attorney to conduct a neutral analysis of the inquiry to ensure compliance.

Providers should carefully follow the requirements of the rule and consider how best to establish programs within their organizations to quickly and effectively identify overpayments. Failure to remit overpayments from Medicare in compliance with the requirements above may lead to significant monetary penalties, exclusion from the Medicare program, and/or liability under the False Claims Act. Should you or your organization have any questions about the application of the 60-day rule to your operations or require help with compliance, please contact Goodman Allen Donnelly.

This Client Advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up to date and fact specific advice.

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Kane ex rel. U.S. v. Healthfirst, Inc., 120 F. Supp. 3d 370 (S.D.N.Y. 2015).