On February 11, 2016, the Centers for Medicare & Medicaid Services (“CMS”) issued its long-awaited Final Rule on Reporting and Returning of Overpayments (the “Final Rule”). The Final Rule, which will become effective on March 14, 2016, implements section 1128J(d) of the Affordable Care Act (“ACA”). This Section of the ACA requires that Medicare providers report and return Medicare overpayments by the later of (A) the date that is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable (the “60-day rule”). According to CMS, the purpose of the Final Rule is to provide “needed clarity and consistency in the reporting and returning of self-identified overpayments.”
CMS issued a Proposed Rule on Reporting and Returning of Overpayments (the “Proposed Rule”) on February 16, 2012. The Final Rule includes some important changes to the provisions of the Proposed Rule. A summary of the major provisions of the Final Rule appears below.
SIX-YEAR LOOKBACK PERIOD
The Final Rule provides that overpayments must be reported and returned only if a person identifies the overpayment within six years of the date the overpayment was received. CMS initially proposed a ten-year lookback period to be consistent with the outer limit of the False Claims Act (“FCA”) statute of limitations. Many commenters objected to the ten-year lookback period as unnecessary and overly burdensome, noting that it would significantly burden providers’ existing record retention practices. CMS ultimately agreed, and concluded that a six-year lookback period would be more appropriate.
MEANING OF “IDENTIFICATION”
The ACA does not specify when an overpayment becomes “identified” for purposes of the 60-day rule. The Final Rule states that a person has "identified" an overpayment when the person “has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.” CMS notes that “reasonable diligence” includes both “proactive compliance duties” and “reactive investigative duties” in response to receiving credible information regarding a potential overpayment. The Final Rule eliminates the Proposed Rule’s “reckless disregard” and “deliberate ignorance” standards for identification in response to comments that those standards were ambiguous.
CMS further clarifies that when a person receives credible information regarding a potential overpayment, the person must exercise reasonable diligence to determine whether an overpayment exists and, if so, the amount of the overpayment. The 60-day clock begins to run when either (1) the reasonable diligence is completed, or (2) if the person failed to conduct reasonable diligence, on the day the person received credible information regarding the potential overpayment.
Accordingly, upon receiving credible information regarding a potential overpayment, a Medicare provider should promptly begin to investigate the potential overpayment in order to toll the running of the 60-day clock.
TIMELINE FOR INVESTIGATING A POTENTIAL OVERPAYMENT
The Proposed Rule stated that upon receiving information concerning a potential overpayment, a provider must make a reasonable inquiry with “all deliberate speed.” CMS eliminated the “all deliberate speed” standard in the Final Rule, and instead adopted the reasonable diligence standard. CMS states that the reasonable diligence standard is demonstrated through the “timely, good faith investigation of credible information, which is at most 6 months from receipt of the credible information, except in extraordinary circumstances.”
HOW TO RETURN OVERPAYMENTS
The Final Rule states that a Medicare provider must use an applicable claims adjustment, credit balance, self‑reported refund, or another appropriate process to satisfy the obligation to report and return overpayments.
In a recent article, the Daily Caller noted that the estimated cost of the Final Rule's process will be $161 million a year given that each response will require an "estimated six hours of labor at a rate of $53.72, with the total annual paperwork burden falling to around 3 million hours – costing taxpayers approximately $161 million a year.