CMS Finalizes 60-Day Overpayment Rules

October 3, 2016 | Bulletin No. 1274004.1

On February 12, 2016, CMS published its final rule concerning the responsibility of provider organizations to report and return “overpayments” received under the Medicare program. Federal law has required provider organizations to report and return overpayments under several federal payment programs (including Medicaid) since the adoption of the Affordable Care Act on March 23, 2010. While the final rule has specific application to Medicare overpayments, it provides insights and instruction for the identification, disclosure and refunding of overpayments received from the Medicaid program until the final rule for Medicaid is published in the future.

The Act requires providers and suppliers to report and return Medicare and Medicaid overpayments by the later of: (i) the date which is 60 days after the date on which the overpayment was identified; or (ii) the date any corresponding cost report is due, if applicable. If a provider or supplier fails to properly report and return overpayments, they may be subject to significant monetary penalties and liability under the False Claims Act.

The CMS final rule provides more specific guidance which explains how providers and suppliers must report and return overpayments. The major highlights of these final rule are:

  • Duty to Identify Overpayments. The "identification" of an overpayment does not require actual knowledge of the overpayment. The obligation to report and return an overpayment begins when the provider should have known about the overpayment by exercising reasonable diligence.
  • Self-Investigation. Upon learning of an overpayment, providers should conduct an investigation as to the amount of the overpayment and whether any other similar overpayments have been made. The 60-day period to report and return the overpayment does not begin until this investigation has been completed. However, the investigation should be conducted in a prompt manner and it ordinarily should not take more than 6 months.
  • Lookback Period. The "lookback" period is 6 years. In other words, providers are not responsible for returning overpayments that were issued more than 6 years ago.
  • Duty to Refund Overpayment. To return an overpayment, providers and suppliers must use an applicable claims adjustment, credit balance, self-reported refund, or another appropriate process.
  • Other Self-Disclosure Programs. The 60-day deadline to report and return an overpayment can be extended by CMS and the Office of Inspector General, in certain circumstances.

Providers and suppliers should adopt and implement compliance policies necessary to observe the final rule. Failure to follow these rules can be very costly. False Claims Act violations can result in civil penalties of between $5,500 and $11,000, per violation, plus treble damages. The final rule creates a strong incentive for health care provider organizations to pro-actively audit and review their billing and collection practices and payments received from the Medicare and Medicaid programs so that they can limit their repayment obligations to the amount of the “overpayment” itself and not be exposed to the significant payment and penalties under the False Claims Act.

Kronick can assist providers and suppliers in establishing necessary compliance policies and implement the policies into their Corporate Compliance Programs. To learn more, contact us.

Lawrence Garcia 
lgarcia@kmtg.com | 916.321.4226