CMS Issues Final Rule For Reporting & Returning Overpayments

On February 12, 2016, The Centers for Medicare & Medicaid Services (CMS) issued its final rule regarding provider and supplier obligations for reporting and returning Medicare Part A & B overpayments. A copy of the Federal Register with the rule and commentary may be accessed HERE.

Providers will want to immediately update their current policies governing overpayments in order to comply with this new rule, which will take effect on March 14, 2016.

The new rule is significantly different than prior proposed rules on the subject, thanks to intensive efforts on the part of industry trade associations and others to explain the negative impact of the previously proposed rules. Many areas of those previously proposed rules have been loosened, and so providers who currently have in place protocols based on prior guidance need to pay very close attention to the new rule.

Significant takeaways from the rule are as follows:

  • Providers and suppliers are required to use reasonable diligence to investigate credible information regarding overpayments through both proactive compliance efforts and reactive investigations.
  • If an overpayment is identified, then it must be repaid within 60 days. An overpayment is identified when a person has or should have, through the exercise of reasonable diligence, determined that the person received an overpayment and quantified the amount.
  • Providers and suppliers have a maximum of 8 months to report and return overpayments – up to 6 months to investigate and quantify the overpayment (i.e., to identify it) and up to 60 days to report and return the overpayment.
  • Providers and suppliers are required to report and return all overpayments within a 6-year lookback period.
  • The cause and amount of the overpayment is irrelevant for the determination, e.g., it was due to a mistake, it was someone else’s fault, it is a minor amount. An overpayment is an overpayment and must be returned.
  • Providers and suppliers must make their own determination to which entity to report and return the overpayment, i.e., to the Medicare contractor or using the OIG Self Disclosure Protocol or the CMS Self Referral Disclosure Protocol.
  • Providers and suppliers may use the claims adjustment, credit balance, self-reported refund process, or another appropriate process to report and return overpayments. At this time, there is no standard refund form to use.
  • Failure to report and return an overpayment could subject the provider or supplier to False Claims Act liability, Civil Monetary Penalties Law liability, and exclusion from federal health care programs.

Throughout its guidance implementing the Rule, CMS dictates that many aspects of compliance will be fact-dependent and/or be left to the provider’s discretion, including what constitutes credible information regarding an overpayment, reasonable diligence to identify overpayments, how to calculate the overpayment, and how to report and return the overpayment. Given the newness of the Rule and lack of established guidance, it would be advisable for providers to consult with legal counsel both in determining appropriate proactive compliance efforts to identify overpayments and when presented potentially credible information regarding a potential overpayment.

To whom does the Rule apply?

Medicare Part A and Part B providers and suppliers. The Rule does not apply to Medicare beneficiaries.  Rules for reporting and returning of overpayments in Medicare Part C and D are published in 79 F.R. 29843 (May 23, 2014).

What is an overpayment?

Overpayments are broadly defined to include any funds that a person has received or retained under title XVIII of the Social Security Act (Medicare) to which the person, after applicable reconciliation, is not entitled. Some example of overpayments include payment for noncovered services, payments in excess of the allowable amount, duplicate payments, receipt of Medicare payment when another payer had the primary responsibility, receipt of payment for services that were not medically necessary, and payment for services provided in violation of the Anti-Kickback Statute.

What do providers need to do to comply with the Rule?

Exercise “reasonable diligence” to identify and quantify overpayments in response to “credible information.”

Although CMS declined to further define what is considered “reasonable diligence” in the Rule, it identified two primary duties for providers in the Rule’s accompanying guidance: (1) proactive compliance efforts, and (2) reactive investigations in response to credible information of a potential overpayment. This means that all providers should have some form of claims review and billing compliance auditing processes, as well as compliance processes in place to receive reports of potential overpayments and adequately investigate any credible information received. Both proactive and reactive duties should be carried out in good faith and by qualified individuals.

CMS similarly put the onus on the provider to determine whether information regarding a potential overpayment is “credible” and warrants investigation, noting that such a determination will be fact dependent. CMS is clear that providers are not required to investigate every single allegation of an overpayment, but only that information that supports a reasonable belief that an overpayment may have been received. For example, a vague complaint by a volunteer who has no knowledge of billing laws may not be considered credible enough to warrant investigation. On the other hand, a therapist who has a better understanding of Medicare billing requirements and makes a detailed allegation that she suspects another therapist was billing for minutes of therapy not provided, would likely require investigation.

The Rule gives providers some relief with respect to quantifying the amount of overpayments by allowing the use of statistical sampling and extrapolation to calculate an overpayment amount for issues involving lengthy claim periods.

What are the deadlines for reporting and returning overpayments?

Providers have no more than 8 months from the receipt of credible information regarding an overpayment to investigate and identify the overpayment and then report and return the overpayment. First, providers have 6 months (absent extraordinary circumstances) to conduct their reasonable diligence to investigate and quantify potential overpayments. Providers then have 60 days to report and return overpayments once they are identified. The 60-day deadline for reporting and returning the overpayment begins on the date the person either identifies the overpayment, or, if the person fails to undertake reasonable diligence, the date the person receives credible information regarding the overpayment.

For non-claims related overpayments that can be reported on a corresponding cost report, the deadline is the date the corresponding cost report is due.

How should providers report and return overpayments?

CMS leaves it up to the provider to determine which entity to report and return the overpayment. That is, the provider should determine whether it is most appropriate to report and return the overpayment directly to the Medicare contractor or using the OIG Self Disclosure Protocol or the CMS Self Referral Disclosure Protocol. For refunds made to the Medicare contractor, providers may use the claims adjustment or reversal, credit balance, self-reported refund process, or another appropriate process. Providers are also permitted to request a voluntary offset from the contractor rather than cutting a check for the overpayment.

There is currently no standard form for reporting and returning overpayments, though CMS may create one in the future. Providers should instead look to the specific contractor to obtain its form for reporting and returning overpayments.

What if I do not comply with the rule?

Any overpayment retained by a provider after the deadline for reporting and returning the overpayment becomes an “obligation” for purposes of 31 U.S.C. 3729, commonly known as the False Claims Act.  The False Claims Act prohibits any person from knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the government.  Violations of the False Claims Act come with significant civil penalties (between $5,500 and $11,000 for each false claim) and treble the amount of the government’s damages.  Additionally, whistleblowers have significant incentives to report violations of the duty to report and return overpayments, as the False Claims Act allows whistleblowers to file qui tam actions on behalf of the government and share in any recovery.  Furthermore, failure to return an overpayment can result in liability under the Civil Monetary Penalties Law and potential exclusion from participation in the Medicare and Medicaid program.

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