The Centers for Medicare and Medicaid Services (CMS) released its final rule implementing Section 6402(a) of the Affordable Care Act that requires Medicare providers and suppliers to report and return overpayments within 60 days after the date on which the overpayment was identified in most instances. Failure to report and return overpayments in accordance with this provision could expose a provider to False Claims Act liability, civil monetary penalties, or exclusion. CMS spent nearly four years considering significant concerns to the proposed rule that were raised by stakeholders and has made a number of changes in the final regulation. There are two changes in the final rule that are particularly important to providers and suppliers as they conduct internal reviews of potential overpayments.

The first issue is the definition of “identified.” The date an overpayment is “identified” is vitally important under the statute because it starts the clock on the 60-day deadline to report and return an overpayment. CMS originally proposed that a person has identified an overpayment “if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” As we described in our comment to the proposed rule, this proposed definition was not supported by legislative history, raised significant practical concerns, and failed to recognize the operational and practical realities involved in investigation and quantification of an overpayment. The final rule is much improved and provides that a person will be deemed to have “identified an overpayment when the person has, or should have through the exercise of reasonable diligence, determined that the person received an overpayment and quantified the amount of the overpayment.” Of note, “reasonable diligence” is being interpreted by CMS as the timely, good faith investigation of credible information, which is at most six months from receipt of the credible information, except in extraordinary circumstances.

The second major change in the final rule is the length of the lookback period. CMS originally proposed a 10-year lookback period to correspond with the outer limit of the False Claims Act statute of limitations. Many comments to the proposal pointed out that a 10-year lookback period would be inconsistent with longstanding CMS policies regarding reopening and administrative finality, and would exceed record-retention requirements. The final rule adopts a reduced lookback period of six years. Of note with this change are comments by CMS that providers and suppliers reporting overpayments through the CMS Self-Referral Disclosure Protocol on or after the effective date of the rule are subject to the six-year lookback period as opposed to the four-year reopening period that is currently considered by CMS, although there are certain nuances of how that would operate. Also, CMS confirmed that recovery audit contractor (RAC) findings are credible information of potential overpayments and can trigger obligations to conduct further review.