On Feb. 11, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule implementing section 1128(J) of the Affordable Care Act, which requires health-care providers and suppliers to repay an overpayment and notify various entities of the overpayment by the later of 60 days of identifying an overpayment or the date any corresponding cost report is due. In a previous law update, we reported on the initial version of this rule as proposed by CMS. The final rule clarifies the requirements to report and return self-identified overpayments, and it relaxes certain provisions in the proposed rule.

  1. “Identification”

The final rule clarifies that a provider or supplier has identified an overpayment when it has, or should have through the exercise of reasonable diligence, determined that it received an overpayment and when it has quantified the amount of the overpayment. This is an improvement over the proposed rule, which contemplated that the 60-day clock starts running regardless of whether and when the provider has its arms around the amount of the overpayment. It is also a more moderate approach than the one recently taken by the United States District Court for the Southern District of New York in Kane v. Healthfirst, Inc. et al. The final rule also specifically permits a provider or supplier to use statistical sampling methodology to calculate the amount of the overpayment.  

  1. Lookback Period

The final rule states that an overpayment need only be reported and returned if a provider or supplier identifies the overpayment within six years of receiving the payment. This is consistent with the more common six-year statute of limitations under the Federal False Claims Act, and it represents a concession by CMS over the 10-year lookback period in the proposed rule.   

  1. Reporting Overpayments

The final rule states that if a provider or supplier identifies an overpayment, it must use an applicable claims adjustment, credit balance, self-reported refund or other reporting process to satisfy its obligation to report and return overpayments. The provider or supplier may also satisfy the reporting obligation by making a disclosure under the OIG’s Self-Disclosure Protocol or the CMS Voluntary Self-Referral Disclosure Protocol, resulting in a settlement agreement using the process described in the respective protocol.

The final rule goes into effect on March 14, 2016.