In the February 12, 2016 Federal Register, the Centers for Medicare & Medicaid Services (CMS) published a final rule (Final Rule) with respect to reporting and returning overpayments by Medicare Part A and Part B providers to the Medicare program. The Final Rule is effective on March 14, 2016. All Medicare providers and suppliers should take the time to understand the Final Rule and their responsibilities in the event of receiving an overpayment from Medicare.

The Final Rule implements Section 1128J(d) of the Social Security Act, which was enacted as part of the Affordable Care Act in March 2010. Section 1128J(d) requires a “person” (defined in the Final Rule as a Medicare provider or supplier) who has received an overpayment to report and return the overpayment by the later of (i) sixty days after the date on which the overpayment was identified; or (ii) the date any corresponding cost report is due if applicable. Failure to do so could result in the imposition of severe penalties under the False Claims Act (FCA) or the Civil Monetary Penalties Law (CMPL). In the absence of final rulemaking, health care providers and suppliers have lacked clarity with respect to their rights and responsibilities to report and return these Medicare overpayments. The Final Rule modifies several provisions from the proposed rule published on February 16, 2012 (Proposed Rule). The Final Rule will be located at 42 C.F.R. Section 401.301 et. seq.

Highlights from the Final Rule include the following:

• The Final Rule defines when and what it means to “identify” an overpayment. Under 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. Notably, this allows Medicare providers and suppliers time to investigate and quantify a suspected overpayment before the sixty-day period begins. In the preamble to the Final Rule, CMS clarified that, “The 60-day time period begins 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 the person in fact received an overpayment.” CMS stated in the preamble that, absent extraordinary circumstances, an investigation should be complete within six months.
• The Final Rule implements a six-year lookback period for returning overpayments. This is a significant reduction from the 10-year period that had been included in the Proposed Rule.  Some commenters to the Proposed Rule requested a lookback period as short as three years.
• In response to comments received, CMS clarified in the preamble that neither the Final Rule nor Section 1128J(d) of the Social Security Act is retroactive. CMS stated that, “Providers and suppliers that reported and/or returned overpayments prior to the effective date of this final rule and that made a good faith effort to comply with the provisions of section 1128J(d) of the [Social Security] Act are not expected to have complied with each provision of the final rule.” The Final Rule will be applicable to all Medicare providers and suppliers reporting overpayments on and after March 14, 2016, even if the overpayment at issue was actually received prior to the effective date of the Final Rule.
• The Final Rule allows Medicare providers and suppliers to report overpayments through several different methods including the claims adjustment, credit balance, self-reported refund or other reporting process provided for by the applicable Medicare contractor.  

Medicare providers and suppliers should consider implementing procedures to minimize the risk of FCA or CMPL liability under the Final Rule. This might include any of the following:

• Identify and regularly review activities that might generate “notice” of a potential overpayment (e.g., pattern of claim denials, internal audit, complaints to compliance officer);
• Conduct prompt investigations to determine whether “credible evidence” of an overpayment exists when an audit or other activity identifies a potential overpayment;
• If credible evidence of an overpayment is found, prepare an investigation plan that can be completed reasonably promptly (not to exceed six months) in order to quantify the amount of the overpayment;
• Proceed without delay with an investigation to determine the amount of the overpayment, number of claims involved, etc.;
• Ensure that the investigation is conducted diligently; an interruption of the investigation could be construed as absence of diligence; and/or
• If credible evidence of an overpayment is not found, document the decision and the rationale.

Medicare providers and suppliers should be familiar with the terms of the Final Rule and understand their obligations with respect to reporting overpayments. A Fact Sheet on the Final Rule was published by CMS and is available here.