In celebration of Valentine's Day, the Centers for Medicare and Medicaid Services (CMS) issued an advance copy of proposed regulations concerning providers' obligations to report and return identified Medicare and Medicaid overpayments, pursuant to section 6402 of the Patient Protection and Affordable Care Act (PPACA).
Some of the key provisions of the proposed rule include:
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Definition of "Identified" — A provider will be deemed to have "identified" an overpayment when the provider has "actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment." CMS indicated that this standard was adopted from the federal False Claims Act. CMS expressed the concern that a narrower definition of "identified" would create an incentive for providers to deliberately avoid activities that would allow them to detect overpayments. The implications of this definition are significant, as the duty to refund would exist even when a provider is not actually aware of an overpayment.
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When the 60-Day Clock Begins to Run — The proposed rule indicates that when a provider receives information concerning a potential overpayment, it has a duty to promptly and diligently investigate. If after reasonable inquiry, the provider determines an overpayment exists, it then has 60 days to report and return the overpayment. This clarification is significant, as it would allow providers to first assess the veracity of an allegation or actually determine that an overpayment occurred, before any time in the 60-day window begins to run. CMS did make clear that a provider must conduct its inquiry with "all deliberate speed" and avoid delays.
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Affirmative Obligation to Investigate — As part of the explanation accompanying the proposed rule, CMS gave specific examples of a provider's obligations and the timeliness of reporting and returning overpayments. In one such example, CMS asserted that a provider who experiences a significant increase in Medicare revenue for no apparent reason, has an affirmative obligation to inquire about the increase. Failure to do so according to CMS is tantamount to not investigating a suspected overpayment, and then acting in reckless disregard or deliberate ignorance of its existence.
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Look-Back Period for Overpayments — CMS has proposed a 10 year look-back for overpayments from the date on which payment was initially made. CMS explained that a 10 year look-back came from the outer limits of the statute of limitations for the federal False Claims Act. CMS also indicated that it would seek to amend the Medicare claims reopening rules to account for this. It is notable that this proposed rule directly conflicts with the current CMS reopening rules, which allow Medicare claims to be reopened within one year of payment for any reason, or within four years of payment "good cause" shown. This proposed rule substantively expands provider liability and should not be seen merely as implementing PPACA's refund obligations.
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Process for Reporting and Returning Overpayments — Under the proposed rule, CMS would require providers to use the existing "self-reported overpayment refund process" which is outlined in the Chapter 4 of the Medicare Financial Management Manual. CMS specifically mentioned that currently many Medicare contractors have different forms, and the proposed rule intended to ensure consistency.
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Scope of the Proposed Rule — The proposed rule states that the mandatory refund obligation does not apply to overpayments made to Medicare Advantage Organizations and Medicaid Managed Care Organizations.
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Report and Return Deadline — In the proposed rule CMS confirmed much of what PPACA has already outlined regarding the timeframe for reporting and returning overpayments. CMS notes that for "claims related" overpayments, a provider has 60 days from identification to report and return. However, for providers that submit cost reports, if the overpayment at issue is the kind that would generally be reconciled on the cost report, the provider must report and return the overpayment either within 60 days of identification, or on the cost report, whichever is later. CMS specifically mentioned that providers must avoid situations where claims-based overpayments are delayed until a cost report is submitted if the overpayment would not ordinarily be reconciled on the cost report.
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Applicable Reconciliation — While CMS mentioned interim payments in the proposed rule, it noted that submission of a cost report, including an initial cost report could subject a provider to overpayment liability, with two exceptions (1) the receipt of a more recent CMS information on the Supplemental Security Income ratio for the calculation of disproportionate share hospital payment adjustments, or (2) outlier reconciliation, where the provider knows a reconciliation will be performed.
What You Should Do Now
The duty to promptly refund Medicare and Medicaid overpayments is a significant one. CMS' proposed rule provides potential clarity, but it also presents some implementation difficulties for providers. Providers and interested parties will have 60 days from the proposed rule's publication in the Federal Register to submit comments in response. To access the proposed rule, click [here].
For More Information
If you have questions about the proposed rule, please feel free to contact:
