On Friday, February 13, 2015, CMS announced that it needs at least one more year to finalize regulations governing the report and return of “identified” overpayments by Part A/B providers under section 6402 of the Patient Protection and Affordable Care Act (“PPACA”). As we previously reported, CMS published a proposed rule in February 2012 for Medicare Part A and B, but, despite subsequently finalizing overpayment regulations for Medicare Advantage (“MA”) organizations and Part D sponsors, has not yet finalized a version of its 2012 proposal.

Although agencies are generally expected to publish final rules within three years of the publication of a proposed rule, they can invoke “exceptional circumstances” and elect to file a notice of continuation. CMS described the exceptional circumstances at play here as the need to both resolve the “significant policy and operational issues” raised by stakeholders and to gather input from DOJ and OIG. In the notice, CMS states that notwithstanding the delay, it wants “to remind all stakeholders that even without a final regulation they are subject to the statutory requirements found in section 1128J(d) of the Act and could face potential False Claims Act liability, Civil Monetary Penalties Law liability, and exclusion from Federal health care programs for failure to report and return an overpayment.”

The fact that CMS has delayed the guidance for Medicare Part A and B, despite having previously finalized guidance for Medicare Part C and D, suggests that CMS does not necessarily intend to adopt a one-size-fits-all approach to the overpayment rules. The extent to which the Part C/D guidance should be applied to Part A/B is being argued in United States v. Continuum Health Partners (as reported here), in which DOJ is seeking to recover Medicaid overpayments. In its briefing, DOJ has argued that critical provisions from the MA/Part D final rule, such as when a payment has been “identified,” should be considered equally applicable in other contexts. CMS’s delay in finalizing regulations for Part A/B arguably undercuts that contention. Further, CMS’s notice of continuation likely reflects significant negotiations between various agency stakeholders as to how restrictive the regulations should be, since the extent of the flexibility given to providers will significantly impact the viability of future qui tam suits, including those that have already been filed but remain under seal. The delay heightens the consequences of the Southern District of New York’s ruling in Continuum, as CMS will likely have an opportunity to respond to the court’s approach in its final rule.

A copy of the text of CMS’s Federal Register notice can be found here.