Alert: CMS Issues Final Rule Guidance on Reporting and Returning Medicare Overpayments

by Pullman & Comley, LLC

On February 12, 2016, the Centers for Medicare and Medicaid Services (CMS) issued its final rule on the reporting and returning of overpayments by Medicare Part A and Part B providers and suppliers.  (In May 2014 CMS had previously issued a final rule setting forth guidance addressing Medicare Parts C and D overpayments).  The long-awaited regulations provide much needed clarification as to when an overpayment is considered by the government to have been identified and how far a provider or supplier must look back  when identifying an overpayment.

For the full CMS announcement, visit the CMS website.  

When the Affordable Care Act (ACA) was passed in 2010, it required that a provider or supplier that has received an overpayment must report and return it within 60 days of the date the overpayment is identified or the date any corresponding cost report is due.  However, the ACA did not define when an overpayment is “identified.”  In response, in 2012, CMS issued a proposed rule stating that a person has identified an overpayment if the person acts in “reckless disregard” or “deliberate ignorance” of the overpayment.  The proposed rule also recommended an “all deliberate speed” standard in conducting an inquiry to determine whether an overpayment exists.  Further, the proposed rule adopted a 10 year overpayment lookback period for providers and suppliers to conduct their due diligence inquiry, which mirrored the outer limit of the False Claims Act statute of limitations.  The proposed rule met with widespread industry criticism due, in part, to its ambiguity and failure to clearly define when an overpayment is “identified,” as well as the burden and expense on providers and suppliers in maintaining claims data, electronic medical and billing records and the lengthy 10-year period required for conducting due diligence.

Final Rule Addresses Industry Concerns Voiced About Draft Rule 

The final rule is more favorable to providers and suppliers and softens the proposed rule.  It removes the terms “reckless disregard,” “deliberate ignorance,” and “all deliberate speed.”  It provides that a person has “identified” an overpayment when the person has or should have, through the exercise of “reasonable diligence,” determined that he has, in fact, received an overpayment and “quantified” the amount of the overpayment.  Thus, the 60-day identification/report/return date is triggered by either actual knowledge of an overpayment or constructive knowledge that the provider or supplier “through the exercise of reasonable diligence” should have determined it received an overpayment and quantified the amount.  CMS emphasizes in its comments to the final rule that the reasonable diligence standard avoids the “ostrich defense,” which is commonly referred to as “willful blindness,” or “conscious avoidance” (not taking action to obtain actual knowledge of an overpayment).  

In the final rule, the single term “reasonable diligence” encompasses multiple processes.  It covers both proactive conduct and effective compliance programs and reactive investigative activities undertaken in response to receiving “credible information” about a potential overpayment.  Credible information can be derived from a variety of sources: outside government or Medicare contractor audits (e.g., OIG, RAC, MAC); internal audits, hotline complaints, and unusual and excessive Medicare payments.  The 60-day clock to report and return the overpayment begins ticking when either the reasonable diligence is completed, or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence (and in fact received an overpayment).  CMS states in the comments that reasonable diligence and timely investigations provide “bright line” standards to providers and suppliers to comply in good faith with their obligation to report and return overpayments.  Upon the receipt of credible information, CMS also states in the comments that it should take, at most, six months to investigate and quantify the overpayment, followed by 60 days to report and repay (thus eight months in total), absent extraordinary circumstances extending the six-month benchmark for timely investigations; such circumstances may include unusually complex investigations, such as investigations involving physician self-referral under the Stark law or natural disasters.  

The final rule also clarifies that an overpayment is “identified” when it is “quantified.”  In other words, part of the identification process is quantifying the amount of the overpayment.  Both are precedent to the triggering the 60-day reporting/repayment time clock.  The quantification of the amount of the overpayment may be determined using statistical sampling, extrapolation methodologies and other methodologies as appropriate.  However, the comments state that when using such methodologies, it is necessary to explain how the overpayment was calculated.  

Lastly, in its Final Rule, CMS adopts a “lookback” period of six years.  Therefore, the provider or supplier must refund only those overpayments identified “within six years of the date” on which they were received, not the 10-year period recommended in the prior proposed rule.  Thus, the provider’s or supplier’s reasonable diligence investigation extends back six years from the date when they received credible information regarding a potential overpayment.  CMS states that providers and suppliers may use the claims adjustment, credit balance and self-reported refund process set forth by the Medicare contractor or another appropriate process, including the OIG Self Disclosure Protocol or the CMS Voluntary Disclosure Protocol to report and return overpayments. 

Investigations Will Require Resources and Time  

The final rule is effective as of March 14, 2016, and is not retroactive.  It does not apply to the amounts actually refunded prior to March 14, 2016.  It applies only to amounts refunded after or through 2016, even for an overpayment received prior to that date.  And failure to report and return overpayments under the standards set forth in the final rule expose the provider or supplier to False Claims Act liability, Civil Monetary Penalties and possible exclusion from participating in health care programs.  

In sum, issuance of the final rule will now require providers and suppliers to be even more proactive in their compliance efforts and to undertake good faith efforts to investigate credible information of overpayments.  Thus, for compliance programs to be effective, they now must ensure that all levels of an organization are trained and incentivized to recognize and report internally such credible information in order to have the time to investigate if there was actually an overpayment.  The comments to the final rule make clear that the reasonable inquiry eight-month timeframe to repay overpayments is the outer limit, and whether a provider or supplier has satisfied the bright line standard is a fact-based inquiry.  Thus, health care organizations should prioritize their investigations and recognize they require the good faith devotion of resources and time.  

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Pullman & Comley, LLC | Attorney Advertising

Written by:

Pullman & Comley, LLC

Pullman & Comley, LLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.