In today’s Federal Register, the Centers for Medicare and Medicaid Services (CMS) published its Final Rule implementing the Affordable Care Act's (ACA) 60-day report and return provision for self-identified overpayments. This publication offers much needed clarity to this ACA provision that healthcare providers have been waiting for since the ACA passed in 2010. CMS believes it has created a “bright line” standard for overpayment identification that providers and suppliers will need to comply with the ACA and the Final Rule and to avoid potential False Claims Act (FCA) liability. In addition to clarifying when overpayments are identified for the purpose of the 60-day requirement, the Final Rule and its accompanying commentary address the lookback period for overpayments (six years), how to report and return overpayments, and the interplay between the returning and reporting overpayments rule and the OIG Self-Disclosure Protocol (SDP) and CMS Voluntary Self-Referral Protocol (SRDP). These items as well as highlights of the Final Rule are discussed in more detail below.
The Final Rule will go into effect March 14, 2016, and the portions of the Final Rule discussed herein will appear in 42 C.F.R. §§ 401.301, .303, and .305.
To whom does the Final Rule apply?
The Final Rule only applies to providers and suppliers of services under Parts A and B of Medicare.
What is an “overpayment”?
The Final Rule defines “overpayment” to mean “any funds that a person has received or retained under title XVIII of the Act to which the person, after applicable reconciliation, is not entitled under such title.” This definition mirrors the definition in the ACA and the Proposed Rule for this ACA provision that CMS published in 2012. In the commentary to Final Rule, CMS states there is no minimum monetary threshold for an overpayment. Although the Final Rule did not include specific examples of overpayments, CMS stated in the accompanying commentary that it is not retracting the examples of overpayments it offered in the Proposed Rule. The examples of overpayments in the Proposed Rule include: Medicare payments for noncovered services; Medicare payments in excess of the allowable amount for an identified covered service; (increases in reimbursement resulting from) errors and nonreimbursable expenditures in cost reports; and duplicate payments.
What is the meaning of “identified”?
CMS adopts a reasonable diligence standard for overpayment identification in the Final Rule, which requires both proactive compliance activities (e.g., good faith monitoring) and reactive measures (e.g., investigatory response to credible information). The Final Rule abandons the terms "actual knowledge," "reckless disregard," and "deliberate ignorance" from the identification definition that were used in the Proposed Rule and states:
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. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.
As for documenting an investigation, CMS advises providers and suppliers to maintain records that accurately establish their reasonable diligence efforts to be able to demonstrate their compliance with the rule.
What is the deadline for reporting and returning overpayments?
The Final Rule states that if a provider or supplier receives an overpayment, the provider or supplier must report and return the overpayment by the later of “the date which is 60 days after the date on which the overpayment was identified” and “the date any corresponding cost report is due, if applicable.”
The 60-day time period begins either: (1) when the reasonable diligence investigation is completed (which CMS states can take at most six months from the receipt of credible information barring extraordinary circumstance) and the overpayment is identified (i.e., determined and quantified); or (2) on the day the person received credible information of a potential overpayment if the person fails to conduct reasonable diligence and the person in fact received an overpayment.
What is the Final Rule’s interplay with the OIG Self-Disclosure Protocol (SDP) and CMS Voluntary Self-Referral Disclosure Protocol (SRDP)?
The Final Rule also clarifies its interplay with the SDP and SRDP. The 60-day period to return overpayments is tolled once a provider makes a disclosure under either the SDP or SRDP. The deadline will continue to be suspended for the full duration of settlement negotiations in connection with the SDP or SRDP process. Once negotiations end or a provider or supplier is no longer actively engaged in the SDP or SRDP process, the tolling will stop and the 60-day returning requirements of the Final Rule will be in effect. Furthermore, if a provider or supplier discloses an overpayment under the SDP or SRDP that results in a settlement agreement, the provider or supplier will have established its reporting obligations under the Final Rule.
What is the “lookback period” for overpayment reporting and returning?
The Final Rule establishes a six-year lookback period for which an overpayment must be reported and returned. The lookback period is measured from the date the person identifies the overpayment to the date the overpayment was received. The Proposed Rule offered a 10-year lookback period, which is the outer limit of the FCA statute of limitations. Refunds made under the SRDP made after the effective date of the Final Rule will be extended to a six-year lookback period, but those made before the effective date are only subject to the four-year lookback period. The commentary further indicates that for refunds made after March 23, 2010 (the effective date of the ACA) but before the effective date of the Final Rule, “providers and suppliers may rely on their good-faith and reasonable interpretation of Section 1128J(d) of the Act.”
How does one report an overpayment?
A provider or supplier must report the overpayment to a Part A or Part B Medicare Administrative Contractor (MAC) or Durable Medical Equipment MAC (DME MAC). The reporting person must use an applicable claims adjustment, credit balance, self-reported refund, or other reporting process set forth by the MAC or DME MAC (e.g., one may request a voluntary offset). The Final Rule states that “[i]f the person calculates the overpayment amount using a statistical sampling methodology, the person must describe the statistically valid sampling and extrapolation methodology in the report.