Centers for Medicare and Medicaid Services Releases Proposed Rule on Reporting and Returning of Overpayments

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The U.S. Centers for Medicare and Medicaid Services (CMS) released a long-anticipated proposed rule on reporting and returning of overpayments on February 16, 2012. The proposed rule is part of CMS's recent effort to respond to increased Medicare spending through expanded efforts to reduce fraud, waste and abuse. It implements the Patient Protection and Affordable Care Act's (the "Affordable Care Act") new section on returning and reporting overpayments. This new section requires any person who has received an overpayment to report and return the overpayment, to provide written notification of the reason for the overpayment, and to do so within 60 days after the date on which the overpayment was identified or the date any corresponding cost reports are due.

The procedure for reporting and returning overpayments will take the same form as the existing voluntary refund process, but with the new name of "self-reported overpayment refund process." This process requires providers to submit a form identifying the affected claims; how the error was discovered; corrective action plans implemented to prevent future errors; the reason for the refund; whether a corporate integrity agreement is in place; the time frame and total refund for the period in which the error occurred; certain claim-identifying information; and a description of statistical sampling methodology used to identify the overpayment, if any.

Providers and suppliers also need to be aware of when their responsibility to report and return an overpayment has been triggered. The proposed rule states that a person has "identified" an overpayment if the person has actual knowledge of or acts in reckless disregard or deliberate ignorance of the overpayment. This also means that if a provider or supplier receives information about a potential overpayment, it may have an obligation to reasonably inquire about the existence of an overpayment. Failure to make that reasonable inquiry could be deemed reckless disregard or deliberate ignorance of the overpayment. CMS's notice provides several examples of when a provider identifies an overpayment: reviewing a bill and realizing a service was incorrectly coded or that a patient's death occurred prior to the service date, learning that services were provided by an unlicensed or excluded individual, or a significant increase in Medicare revenue without any apparent reason. It is important to note that the "lookback period" for claims is 10 years, which means that reporting and returning of overpayments would have to be made if an overpayment is identified within 10 years of the date the overpayment was received.

This proposed rule will eventually have a significant impact on all Medicare providers and suppliers, as the failure to report and return overpayments can subject a provider or supplier to civil monetary penalties, potential liability under the False Claims Act or even exclusion from the Medicare program. In addition, a failure to report is a "continuing violation" for purposes of calculating the statute of limitations for potential criminal liability. Although CMS's notice states that this proposed rule is intended to only apply to Medicare Parts A and B providers and suppliers, CMS still intends to eventually address other stakeholders, such as managed care organizations; prescription drug plans; and Medicare advantage organizations. Moreover, CMS's notice reminds all stakeholders that even without a final regulation, all providers and suppliers are still subject to the new statutory requirements under the Affordable Care Act. Therefore, all providers and suppliers may want to ensure that their compliance procedures are consistent with the 60-day reporting time line, and that all persons responsible for monitoring Medicare payments are aware of the need to promptly identify overpayments and commence the returning and reporting procedures. Comments on the proposed rule must be received by CMS no later than 5 p.m. on April 16, 2012.

For Further Information

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