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A Look at CMS' Proposed Rule on Reporting and Returning Overpayments


An article by Connie S. Ditto, Esq., taken from the September/October issue of HBMA Billing.

In addition to the well-known provision of the Patient Protection and Affordable Care Act (PPACA) that requires individuals to obtain health insurance, a lesser-known provision requires health care providers to "report and return" overpayments within 60 days of their identification or face severe penalties. This provision is one more factor in the government's ever-increasing commitment to reducing "fraud, waste, and abuse in the Medicare program."

Section 6402(a) of PPACA requires health care providers to "report and return" overpayments to Medicare either within 60 days of the identification of the overpayment or the date any corresponding cost report is due, whichever is later.1 The retention of an overpayment after the 60-day deadline is a false claim and subjects the provider to severe penalties, including qui tam actions, civil monetary penalties, and exclusion from Medicare.2 The statute failed to define key terms such as "identify," and therefore providers were uncertain how to comply with the law.

In an attempt to clear up the confusion, CMS issued the proposed rule on February 16, 2012, and accepted comments on it until April 16, 2012. The final rule has not yet been published, and therefore the proposed rule may be modified. Nonetheless, a look at the proposed rule provides valuable insight into CMS's new efforts to "protect the Medicare Trust Funds against fraud and improper payments."

Proposed Identification of an Overpayment

Under the proposed rule, an "overpayment" has occurred when a provider has received or retained payments that said provider is not entitled to under applicable Medicare reimbursement methodologies. The proposed rule carves out special (and narrow) exceptions of overpayments that occur in the intersection of this rule and certain potential Stark and False Claims Act violations and certain possible anti-kickback relationships.

The proposed rule imposes a 60-day deadline upon the provider to report and return the overpayment once it has been "identified," which has been defined as once the provider acts with actual knowledge of, in deliberate ignorance of, or with reckless disregard to the overpayment's existence. The proposed rule notes that providers may receive information that creates an obligation to make a reasonable inquiry to determine whether an overpayment exists.

The proposed rule provides the following examples of when an overpayment has been identified:

  • When an internal review reveals incorrect coding
  • When a provider learns that a patient has died before the date of service
  • When a provider learns that services were provided by an unlicensed or excluded individual
  • When a provider is informed by a governmental agency of an audit that discovered a potential overpayment and the provider fails to make a reasonable inquiry

In regard to the last example, if a provider is subjected to a governmental audit that identifies potential overpayments, the provider must either "accept the finding or make a reasonable inquiry." If the provider's inquiry verifies the audit results, he or she then has 60 days to report and return the amount of the overpayment. CMS has encouraged providers to perform activities to proactively determine whether an overpayment exists, such as by performing self-audits, compliance checks, and other additional research.

Proposed Method to Return Overpayments

The proposed rule offers providers no breaks when it comes to returning the full amount of the identified overpayment, stating in the pertinent part that "[we] are aware that providers and suppliers may be concerned about scenarios in which they have identified an overpayment but because of the magnitude of the overpayment, need additional time to make repayment." The only option is the currently-existing extended repayment schedule (ERS).3

The proposed rule adopts the currently existing voluntary refund process, which is described in Publication 100-6 of the Medicare Financial Manual. This process essentially requires the provider to use the self-reported overpayment refund process set forth by the applicable Medicare contractor to report and return overpayments. Typically, the process consists of a form for the provider to complete to provide Medicare (or its applicable contractor) with information regarding the overpayment. One of the typical boxes for a provider to check is the reason for the overpayment.

In the proposed rule, CMS announced its plan to create a uniform reporting form applicable to all Medicare contractors, but noted that until that form is available, providers are to use the currently existing forms. As returning an overpayment is now mandatory and failure to properly report and return may subject the provider to severe penalties, the reasons for overpayments provide a wealth of opportunity to look out for the more commonplace errors that may result in an overpayment. CMS refused to provide an exhaustive list, but provided the following examples:

  • incorrect service date
  • duplicate payment
  • incorrect CPT code
  • insufficient documentation
  • lack of medical necessity

Proposed 10-Year Look Back Period

One of the most shocking and troublesome provisions in the proposed rule is CMS's suggestion that providers have a duty to report and return all overpayments in a 10-year look-back period. The current regulations allow reopening of a previously paid claim for only up to four years, and then only "for good cause."4 This provision, however, is supported by other governmental agencies' efforts to reduce overpayments.

On May 18, 2012, the Office of Inspector General (OIG) published "Obstacles to Collection of Millions in Medicare Overpayments," which indicates that CMS failed to collect nearly 80% of overpayments identified in a 30 month period. The OIG recommended that CMS pursue statutory amendments that would lengthen the current statutes of limitations and extend the amount of time the government is allowed to recoup overpayments. Therefore, while the current statute of limitations may restrict the proposed look-back period, providers may expect to see legislation allowing Medicare to seek reimbursement beyond a four-year period.
In sum, although providers may see changes to CMS's interpretation of the "report and refund" requirement, the proposed rule provides helpful information that providers can use as a guide to updating their standard billing practices, compliance plans, and internal audit procedures. n

Ms. Ditto is licensed in the states of Tennessee, Georgia, and Texas. She devotes her practice to healthcare and medical malpractice defense. Prior to her career as an attorney, she was a registered

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