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CMS finalizes self-identified overpayments rule for services including Part B
by Judith L. Kares, JD
The Medicare Reporting and Returning of Self-Identified Overpayments final rule (81 Fed. Reg. 7654?7684), which became effective March 14, is designed to implement Section 1128J(d) of the Social Security Act, which was established under Section 6402(a) of the Affordable Care Act, effective March 23, 2010.
The rule applies only to healthcare providers and suppliers furnishing services under Medicare parts A and B. A separate rule was published in May 2014 that addresses the applicability of similar requirements to overpayments under Medicare parts C and D.
Key definitions
Let us begin with the definition of "overpayment" included in the rule. An overpayment means any funds that a person has received or retained under Medicare to which the person, after applicable reconciliation, is not entitled. A "person" means a provider or supplier furnishing services under original Medicare (parts A and B)?not a beneficiary. For purposes of the rule and its underlying statute, a person has an obligation to identify, report, and return overpayments in a timely and effective manner. Failure to do so may subject that person to significant sanctions, including sanctions under relevant federal statutes (e.g., the False Claims Act, Civil Monetary Penalties Law, etc.).
Identification
To comply with the regulatory requirements, a person first must be able to identify whether an overpayment has been received:
Although the overpayments rule provides an incentive for providers and suppliers to exercise reasonable diligence, the rule does not provide much guidance on what reasonable diligence actually constitutes. CMS simply states that reasonable diligence is fact-specific and must be demonstrated by timely, good faith investigation of credible information, generally within no more than six months. Determining whether information is sufficiently credible is also fact-specific. Examples of circumstances that might justify more than six months to investigate include physician self-referral law violations referred to the CMS Voluntary Self-Referral Disclosure Protocol (CMS SRDP), natural disasters, and states of emergency.
Applicable deadlines
A person who has received an overpayment must report and return it by the later of the following:
The 60-day time period begins either:
Absent extraordinary circumstances, in cases where there is credible information of a potential overpayment, the provider or supplier has up to eight months to report and return the overpayment (six months for timely investigation and two months [60 days] for reporting and returning). An example of credible information would be a Medicare contracto’?s determination of an overpayment, based on medical review.
An otherwise applicable deadline, however, will be suspended in any of the following circumstances:
Applicable reconciliation generally enables a person to identify funds to which the person is not entitled.
In the context of cost reporting, applicable reconciliation is the provide’?s year-end reconciliation of payments and costs to create the cost report. The cost report is due within five months of the end of the provide’?s fiscal year. Overpayments identified prior to submission of the cost report should be reflected in and returned at the time of filing. For example, overpayments as a result of periodic interim payments should be reported and returned at the time the initial cost report is due.
Certain cost report overpayments cannot be identified until the Medicare contractor provides relevant information (e.g., payments in excess of certain caps, overpayments as a result of cost report outlier reconciliation, etc.). If a provider self-identifies an overpayment after submission and reconciliation of the initial cost report, the provider must report and return the overpayment within 60 days of identification. The applicable reporting process is to submit an amended cost report, along with the overpayment refund.
If the contractor identifies the overpayment during the cost report audit, it will determine the overpayment amount at the time of final cost settlement.
Six-year lookback period
Under the overpayments rule, an overpayment must be reported and returned if a person identifies the overpayment within six years of the date of its receipt. The otherwise applicable lookback period may be subject to certain limitations based on whether, and to what extent, the requirements of the rule and the underlying statute are retroactive.
The underlying statute (section 1128J[d] of the Social Security Act) is not retroactive. Therefore, failure to comply with its specific requirements prior to its effective date (March 23, 2010) is not a violation of the statute. Providers and suppliers, however, must report and return any overpayments not returned prior to March 23, 2010, in compliance with the statut’?s specific requirements, even if those overpayments were received prior to that date.
Similarly, the overpayments rule is not retroactive. Overpayments reported and returned prior to its effective date (March 14, 2016) are not expected to comply with the rule. For the time period from March 23, 2010, through March 13, 2016, however, providers and suppliers must make a good faith effort to comply with the specific requirements of the underlying statute, even if those overpayments were received prior to March 23, 2010. All providers and suppliers reporting or returning overpayments on or after March 14, 2016?including those received prior to March 14, 2016?must comply with the rule.
For example, Provider A receives an overpayment on March 22, 2010, which is identified, reported, and returned on March 10, 2016. In that case, the provider must make a good faith effort to comply with the specific requirements of the underlying statute.
Another example: Provider B receives an overpayment on March 22, 2010, which is identified, reported, and returned on March 15, 2016. In this case, the provider must comply with the specific requirements of the rule.
Reporting options
CMS has indicated that the obligations of the overpayments rule are satisfied when a person follows the appropriate process to report and return the overpayment in good faith, including quantification. If a person calculates the overpayment amount using a statistical sampling methodology, the person must describe it in the report. Under the overpayments rule, providers and suppliers have a broad array of reporting processes from which to choose. These choices include certain existing processes and other processes that may be established in the future, including the following:
In addition to the options identified above, overpayments associated with cost reports generally should be reported through the existing cost report reconciliation process:
One additional caveat: CMS agrees that where the contractor identifies a payment error by the contractor and notifies the provider or supplier that the contractor will adjust the claim""" to correct the error, the provider or suppler does not need to report and return the overpayment separately.
Edito’?s note
Kares is an expert on Medicare rules and regulations and is an instructor for HCPr’?s Medicare Boot Camp?Hospital Version®. She spent a number of years in private law practice, representing hospitals and other healthcare clients, then served as in-house legal counsel prior to her current legal/consulting practice. She is also an adjunct faculty member at the University of Phoenix, teaching courses in business and healthcare law and ethics.