On February 12, 2016, the Centers for Medicare & Medicaid Services (CMS) published a long-awaited final rule (Final Rule) implementing the Affordable Care Act’s (ACA’s) statutory requirement that certain overpayments be reported and returned within 60 days of being identified. The Final Rule will take effect on March 14, 2016. The following critical analysis describes the Final Rule in the context of the ACA’s underlying statutory requirement, contemplates legal issues implicated by the Final Rule, and raises considerations for providers and suppliers that revisit their compliance functions after the Final Rule.

The Affordable Care Act’s 60-Day Rule

As the Final Rule purports to implement the ACA’s statutory requirement, an analysis of the Final Rule necessarily starts with the statutory requirement, codified at 42 U.S.C. § 1320a-7k(d) (60-Day Rule). In pertinent part, the 60-Day Rule provides that “[i]f a person has received an overpayment, the person shall (A) report and return the overpayment…; and (B) notify the [entity] to whom the overpayment was returned in writing of the reason for the overpayment.” The 60-Day Rule further states that “[a]n overpayment must be reported and returned… by the later of (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable.” By the 60-Day Rule’s plain terms, then, a person need not (indeed, cannot) report and return an overpayment that is neither identified nor corresponsive to a cost report.

Compliance with the 60-Day Rule is critically important to providers and suppliers because it explicitly connects its requirements to liability under the civil False Claims Act (FCA): “[a]ny overpayment retained by a person after the deadline for reporting and returning the overpayment… is an obligation (as defined [by the FCA]) for purposes of the [FCA].” The “reverse false claims” provision of the FCA, in its simplest terms, imposes liability upon “any person who… knowingly and improperly avoids or decreases an obligation to pay or transmit money… the Government.” 31 U.S.C. § 3729(a)(1)(G).

The 60-Day Rule defines only three terms: (1) “overpayment,” to mean “any funds that a person receives or retains under [Medicare or Medicaid] to which the person, after applicable reconciliation, is not entitled…”; (2) “person,” to mean “a provider of services, supplier, Medicaid managed care organization… Medicare Advantage organization…, or PDP sponsor…; and (3) “knowing” and “knowingly,” to have the same meaning given by the FCA. The definition of “knowing” and “knowingly”, however, appears to be superfluous, as the 60-Day Rule does not utilize these terms. In fact, this definition comes at the expense of a definition of “identified,” perhaps the most critical term of the 60-Day Rule. This definitional trade is likely the result of Congress’ last-minute decision to connect FCA liability not to the retention of “known” overpayments (as originally stated in H.R. 3962, the predecessor to the ACA), but rather to the retention of “identified” overpayments.1

CMS’ Final Rule – Regulatory Text

The regulatory text of the Final Rule, to be codified at 42 C.F.R. § 401.301, et seq., contains several important implementing provisions:

Scope of Final Rule

The Final Rule is more limited in scope than the 60-Day Rule itself, in that the Final Rule applies only to providers and suppliers (not to Medicaid MCOs, MAOs, or PDP sponsors). See 42 C.F.R. § 401.301. Further, the Final Rule applies only to overpayments from Medicare Parts A and B (not to overpayments under Medicare Parts C and D, or from Medicaid).2 See id. at § 401.303 (definitions of “Overpayment” and “Person”). In 2014, CMS published a final rule implementing the 60-Day Rule with respect to certain overpayments from Medicare Part C and Part D. See 79 Fed. Reg. 29844 (May 23, 2014) (Parts C and D Final Rule).

Report and Return Obligation; Deadline

The Final Rule states that “[a] person that has received an overpayment must report and return the overpayment in the form and manner set forth in this section.” Id. at § 401.305(a)(1). Nearly parroting the 60-Day Rule, the Final Rule requires that “[a] person who has received an overpayment report and return the overpayment by the later of either of the following: (i) the date which is 60 days after the date on which the overpayment was identified [or] (ii) the date any corresponding cost report is due, if applicable.” Id. at § 401.305(b)(1) (emphasis added). This 60-day deadline is suspended when either the OIG or CMS acknowledges receipt of a submission into their voluntary self-disclosure protocols, or when the person requests an extended repayment schedule that is neither rejected nor complied with. See id. at § 401.305(b)(2).

Link to False Claims Act

Similar to the 60-Day Rule, the Final Rule states that “[a]ny overpayment retained by a person after the deadline for reporting and returning the overpayment… is an obligation for purposes of the [FCA].” Id. at § 401.305(e). As previously stated and as further discussed below, the knowing avoidance of an obligation is actionable under the reverse false claims provision of the FCA.