Medicare Sets Standards for Overpayments Received by Physicians, Healthcare Providers

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In February 2016, the Centers for Medicare & Medicaid Services (CMS) published the final rule on Medicare Reporting and Returning of Self-Identified Overpayments. This final rule from CMS has now established official policy for timely reporting and returning of Medicare overpayments received by healthcare providers, with a goal to provide clear requirements for reporting and returning overpayments.

Since the enactment of the Affordable Care Act in 2010, providers have been subjected to a statutory 60-day timeline for reporting and returning any and all Medicare overpayments. If providers fail to comply with the 60-day rule, they face liability under the False Claims Act, the Civil Monetary Penalties Law, and the Medicare exclusion authorities for failure to meet the statutory deadline. The final rule was preceded by CMS’s proposed rule published on Feb. 16, 2012, and brings some clarity to issues, such as when an overpayment is considered to be “identified” for purposes of the 60-day deadline, as well as how far providers must look back when identifying overpayments subject to the reporting and returning requirement.

Basic Rule Standards

Under the final rule, a provider or other non-physician provider who has received an “overpayment” must report and return the overpayment by:

1. The date that is 60 days after the date on which the overpayment was “identified”; or
2. The date any corresponding cost report is due, if applicable.

In the final rule, “overpayment” means any funds that a provider received under Medicare Part A or B to which the person, after applicable reconciliation, is not entitled.

An overpayment is identified when a provider has, or should have through reasonable diligence, determined that they received an overpayment and calculated the amount of the overpayment. With this definition, CMS acknowledges that “identification” of an overpayment involves quantifying the amount, which requires time for a reasonably diligent investigation.

According to CMS, “reasonable diligence” includes:

• Proactive compliance activities conducted in good faith by qualified individuals to monitor the receipt of overpayments; and
• Investigations conducted in good faith and in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.

A six-month period as the benchmark is what CMS considers to be a timely investigation, absent extraordinary circumstances. According to CMS, they have calculated a total of eight months (six months for timely investigation and two months for reporting and returning) as a reasonable time, absent extraordinary circumstances. CMS stated that “extraordinary circumstances” may include unusually complex investigations that the provider reasonably anticipates will require more than six months to investigate, such as a Stark Law violation. Specific examples of other types of extraordinary circumstances cited by CMS include natural disasters or a state of emergency.

Look-Back Period

Prior to the new ruling, the guidelines on the look-back period were unclear as they relate to retaining any over­payments, because the Proposed Rule offered a 10-year look-back period to be consistent with the False Claims Act statute of limitations. CMS recognized that a 10-year period would be overly burdensome for providers in terms of retaining records and retrieving information.