Medicare providers and suppliers finally have clarification of their statutory obligation to report and repay within 60 days any overpayments that may have been made by the Medicare program. On February 12, the Centers for Medicare & Medicaid Services (“CMS”) published in the Federal Register the long awaited final rule on overpayment refund requirements for Part A and B providers and suppliers (“Final Rule”). The Final Rule eases a number of the requirements originally proposed when CMS published its Notice of Proposed Rulemaking almost exactly four years ago.

Here are three things to know about the final rule:

  1. Medicare Parts A and B providers and suppliers are required by statute, Section 6402(a) of the Affordable Care Act, to report and return overpayments that have been “identified” either within 60 days after identification or the due date of any corresponding cost report, whichever is later (see 42 U.S.C. § 1320a-7k(d)). The statute, however, does not define when an overpayment is “identified.” The Final Rule now defines “identification” to be when a provider “has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of overpayment” (emphasis supplied). Including quantification of the amount of overpayment in the definition is favorable to providers since the 60-day clock does not begin to run until the provider has had time to make reasonably diligent efforts to determine not only the fact but also the scope and amount of the overpayment. The Final Rule’s definition of overpayment identification is in contrast with the much-discussed August 3, 2015 decision out of the Southern District of New York where the Court ruled that overpayment identification occurred when the provider was “put on notice of a potential overpayment rather than at the moment when an overpayment is conclusively ascertained.” (Kane ex rel. United States et al. v. Healthfirst et al., Case No. 1:11-cv-02325). Providers were concerned that the Kane interpretation would not allow them sufficient time to investigate the issue and determine the extent of the overpayment. Significantly, quantifying the overpayment amount in the final definition was not in the proposed rule and does not appear in the definition of identification that applies to Medicare Parts C and D overpayments, but was added by CMS in response to comments. Providers should also be aware that the Final Rule presumes that a “reasonably diligent” investigation should take no more than six months from receipt of credible information of a potential overpayment, and the 60-day clock starts at the latest six months after receipt of such information except in extraordinary circumstances. 
  2. The Final Rule limits the “look back period” for reporting and returning an identified overpayment to six (6) years of the date the overpayment was received. This is shorter than the originally proposed ten (10) year period, and is in line with the requirements that apply to Medicare Parts C and D. 
  3. The Final Rule clarifies how provider and suppliers are to report and return identified overpayments. It states that health care providers and suppliers must use an applicable claims adjustment, credit balance, self reported refund, or other appropriate process to satisfy the obligation to report and return overpayments. This approach for returning overpayments provides an array of familiar options from which providers and suppliers can select.

Health care providers and suppliers should take these reporting and repayment obligations seriously. Failure to comply could result in potential liability under the False Claims Act and the Civil Monetary Penalties Law, and exclusion from federal health care programs.