Published today in the Federal Register was a long-awaited Final Rule implementing a requirement from the 2010 Affordable Care Act requiring Medicare Part A and B providers and suppliers to report and return overpayments to Medicare by the later of 60 days after the date an overpayment was identified, or the due date of any corresponding cost report, if applicable (Overpayment Rule). The Proposed Rule was previously published on February 16, 2012. Additionally, the final rule implementing overpayments in Medicare Parts C and D was previously published in May 2014. Case law interpreting the Overpayment Rule has been limited to date.

The Final Rule includes several significant clarifications, including the following:

  • The Final Rule states that an overpayment has been identified when the provider or supplier “has or should have, through the exercise of reasonable diligence, determined” that (i) an overpayment was received; and (ii) quantified the amount of the overpayment. According to CMS, this revised standard provides clarity and consistency for providers and suppliers regarding the actions that need to be taken in order to comply with the requirements for reporting and returning overpayments.
  • The look-back period was reduced from 10 years in the Proposed Rule to 6 years in the Final Rule, consistent with the statute of limitations for the False Claims Act. According to CMS, this period is appropriate without creating unreasonable burden or cost on providers and suppliers.
  • In the Proposed Rule, providers and suppliers were instructed to conduct investigations with “all deliberate speed.” The Final Rule states that providers and suppliers generally have six months to investigate information about possible overpayments before the 60-day clock is triggered, providing definitive, consistent guidance to the industry on investigation expectations.
  • CMS specifically stated in the Final that reasonable diligence also requires “proactive compliance activities … to monitor for the receipt of overpayments.” Thus, providers and suppliers must implement and maintain effective compliance programs that, among other things, seeks to identify to overpayments and promptly investigates and potential issues that are identified.

This is a significant development for providers and suppliers that should be carefully evaluated. Providers and suppliers should consider how they will implement compliance, including monitoring, auditing, investigating, reporting, and document retention.