CMS issues Final 60-day Rule regarding return of overpayments made to providers and suppliers

In brief:

On February 12, 2016, CMS issued its long-awaited 60-day overpayment “final rule” requiring that “providers and suppliers receiving funds under the Medicare program to report and return overpayments by the later of the date that is 60 days after (1) the date on which the overpayment was identified; or (2) the date any corresponding cost report is due, if applicable”^[i] in comportment with § 1128J(d) of the Social Security Act pursuant to § 6402(d) of the Affordable Care Act.

The Rule defines “overpayment” as “any funds that a person has received or retained under title XVIII of the Act to which the person, after applicable reconciliation, is not entitled under such title.” Examples and instances of overpayment may include, among others:

• Medicare payments for noncovered services^[ii]; 
• Medicare payments in excess of the allowable amount for an identified covered service^[iii]; 
• reimbursement errors and duplicate payments^[iv]; 
• or when 
  • a provider or supplier of services reviews billing or payment records and learns that it incorrectly coded certain service, resulting in increased reimbursement^[v]; 
  • a provider or supplier of services learns that services were provided by an unlicensed or excluded individual on its behalf^[vi]; 
  • a provider or supplier of services performs an internal audit and discovers that overpayments exist^[vii];
• and when services have been “upcoded” intentionally or unintentionally^[viii]; and 
  • in instances where there may be “insufficient documentation” or a lack of “medical necessity.^[ix]”

Providers and suppliers must use “reasonable diligence” to identify actual and potential overpayments.^[x] While the statute at § 1128J(d) of the SSA suggests that that overpayments have been “knowing” or “knowingly” made, in terms with the same meaning under the False Claims Act, CMS states that the final rule indicates “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. A person should have determined that the person received an overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment. ‘Reasonable diligence’ includes both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments and investigations conducted in good faith and in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.”^[xi]

Providers and suppliers who receive “overpayments” must reconcile and make appropriate restitution using “an applicable claims adjustment, credit balance, self-reported refund, or other reporting process” as required by the “applicable Medicare contractor.”^[xii] Any overpayment retained and not returned by a provider after the deadline for reporting and making restitution expires, becomes “an obligation” subjecting the individual to civil penalties under the False Claims Act at 31 USC 3729.^[xiii]

*N.B.: For the purposes of this regulation, a person means a “provider” or a “supplier” defined in Federal regulations at 42 CFR 200.202 pertaining to Medicare. For the purposes of this regulation, a “supplier” “means a physician or other practitioner, or an entity other than a provider, that furnishes health care services under Medicare.”

See attachments.

[i]. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Centers for Medicare & Medicaid Services, 42 CFR Parts 401 and 405 [CMS–6037–F], RIN 0938–AQ58, Medicare Program; Reporting and Returning of Overpayments. Federal Register 2016 February 12; 81 (29): 7654.

[ii]. 81 FR 7656.

[iii]. 81 FR 7656.

[iv]. 81 FR 7656.

[v]. 81 FR 7659.

[vi]. 81 FR 7659.

[vii]. 81 FR 7659.

[viii]. 81 FR 7657.

[ix]. 81 FR 7658.

[x]. 42 CFR § 401.305 “Requirements for reporting and returning of overpayments, (2). 81 FR 7683. '

[xi]. 81 CFR 7661

[xii]. 42 CFR § 401.305 “Requirements for reporting and returning overpayments, (d) Reporting. 81 FR 7683.

[xiii]. 31 U.S.C § 3729 – False Claims, provides, in part:

§ 3729. False claims

1. LIABILITY FOR CERTAIN ACTS.—
   1. IN GENERAL.—Subject to paragraph (2), any person who—
      1. knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; 
      2. knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; 
      3. conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G); 
      4. has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property; 
      5. is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true; 
      6. knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or 
      7. knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government, 
   2. is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104–410 1), plus 3 times the amount of damages which the Government sustains because of the act of that person.