Four long years after first publishing its proposed rule implementing the 60-day overpayment report and return standard imposed by the Patient Protection and Affordable Care Act (ACA), the Centers for Medicaid and Medicare Services (CMS) published its final rule on February 12, 2016. 81 Fed. Reg. 7654 (Feb. 12, 2016).[1] The regulations take effect March 14, 2016.
Under Section 6402(a) of the ACA, an overpayment must be reported and returned within 60 days after the overpayment is identified, or by the date that any corresponding cost report is due, whichever is later. Under the rule as proposed in 2012, CMS stated that an overpayment is “identified” when the provider “has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” 77 Fed. Reg. 9179 (Feb. 16, 2012). This language followed Congress’ definition of the term “knowing” in the federal False Claims Act (FCA). Accordingly, under CMS’ proposed rule, the 60-day period would not have begun until the investigation yielded actual knowledge that an overpayment occurred. The proposed rule did not address overpayments that had not yet been quantified. After several commenters expressed continued concerns over the proposed rule’s definition of “identified,” CMS has now offered further clarity in the final rule:
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.
42 C.F.R. § 401.305(a)(2) (emphasis added). With this new language, CMS has made it explicitly clear that so long as providers exercise reasonable diligence upon learning of a potential overpayment, the 60-day period does not begin until the amount of the overpayment is quantified. This is welcome relief for providers, since it often can be difficult to determine whether an overpayment occurred and quantify the amount to repay within 60 days of first learning of the possibility of an overpayment.
CMS advises that ‘‘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.” 81 Fed. Reg. 7661. “[T]he concept of ‘reasonableness’ is fact-dependent.” Id., at 7662. Accordingly, it is crucial to emphasize that providers must not sit on their hands upon learning of a potential overpayment because failing to act with “reasonable diligence” could cause the 60-day period to commence upon the provider’s initial notice of a possible overpayment. Determining when the clock begins to run is extremely important because retaining an overpayment beyond the reporting deadline creates liability exposure under the FCA.
CMS’ final rule also departs from the view taken by the Southern District of New York in Kane v. Healthfirst, Inc.,[2] which held that identification only requires a person to be put on notice of a potential overpayment. Kane found its expansive view of “identified” to be consistent with Congress’ intent “for FCA liability to attach in circumstances where . . . there is an established duty to pay money to the government, even if the precise amount has yet to be determined.”[3] CMS’ final rule clearly rejects that view, provided reasonable diligence is exercised to determine whether an overpayment was received and to quantify the overpayment.
Although CMS makes clear that the final rule applies only to Medicare Part A providers and Medicare Part B suppliers, CMS also emphasizes that all providers subject to the ACA -- which includes Medicaid providers -- are required to follow the edicts of the statute. There is no reason to expect that CMS would implement the ACA’s repayment standard differently in forthcoming regulations that directly address the Medicaid program.
Providers should continue to keep in mind the sensitive nature of investigations of suspected overpayments, and the potential for, individual and corporate liability. Moreover, the conduct of the investigation itself, like other aspects of the provider’s compliance program, may be subject to scrutiny by government agencies. At a minimum, there is an expectation on the part of CMS and State Medicaid agencies that the provider’s investigation will be timely, thorough and complete.
[1] A copy is available at https://www.gpo.gov/fdsys/pkg/FR-2016-02-12/pdf/2016-02789.pdf.
[2] 2015 WL 4619698 (S.D.N.Y. Aug. 3, 2015).
[3] Id., at *24.
