CMS Publishes Long-Awaited 60-Day Repayment Proposed Rule for Identified Overpayments

On Tuesday, February 14, 2012, Centers for Medicare and Medicaid Services ("CMS") released the long-awaited Proposed Rule regarding the identification, reporting, and repayment of Medicare overpayments as required under the Affordable Care Act ("ACA"). As the health care industry is aware, one of the program integrity measures advanced as part of the federal reform was to establish a requirement that persons who have received an overpayment must report and return the overpayment to the Department of Health and Human Services, or an intermediary, carrier, or contractor, as appropriate. The statute requires that an overpayment be reported and returned by the later of: (i) the date that is 60 days after the date on which the overpayment was identified, or (ii) the date any corresponding cost report is due, if applicable. As acknowledged in the preamble of this Proposed Rule, CMS has twice attempted to propose rules amending regulations related to Medicare overpayments. In this third attempt, CMS is advancing two significant provisions: (i) defining the term "identified" as it relates to a defined "overpayment," and (ii) proposing a 10-year look-back period, and related to that, a proposed expansion of the reopening period to 10 years.

First, the Proposed Rule provided clarification on what it means to have "identified" an overpayment. Under the Proposed Rule, a person has identified an overpayment when the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment. Therefore, according to the Proposed Rule, a hotline call notifying a provider of a potential overpayment would not be enough to start the clock ticking. Instead, the 60-day period would start after the provider has made a reasonable inquiry and determined that an overpayment does exist. Similarly, if a provider receives notice of a potential overpayment from a government agency, that notice alone is not enough to trigger the 60-day reporting period. Instead, CMS states that the 60-day period begins once the provider "verifies" the audit results and the existence of an overpayment. CMS does point out, however, that the failure to conduct a reasonable inquiry, even after just a hotline call, may subject the provider to liability under the reckless disregard or deliberate ignorance standard.

Second, and perhaps the most significant provision set forth by CMS, is a proposed 10-year look-back period for an overpayment. Under this provision, providers and suppliers would be required to report and return overpayments identified within 10 years of the date the overpayment was received. Consistent with this 10-year look-back period, CMS is also proposing to amend the reopening regulation to expand it an additional six years. If finalized, the 10-year look-back period will create an additional level of risk for liability under state and federal false claims statutes, and almost certainly expanded opportunities for whistleblowers.

The following is a highlight of additional provisions included in the Proposed Rule:

• The definition of "person" is limited to providers and suppliers as defined specifically for Medicare; accountable care organizations that participate in the Medicare Shared Savings Program or Pioneer Program are potentially excluded from overpayment reporting obligations.
• As noted, the definition of "identification" parallels the "knowing" standard in the federal False Claims Act and proposes that identification occurs when "a person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment."
• Defines "overpayment" to mean any funds that a person has received or retained under Medicare Part A or B to which the person, after applicable reconciliation, is not entitled.
• Payments generally subject to cost report reconciliation overpayments must be reported and returned within 60 days of identification or on the date the cost report is due, whichever is later. However, CMS has indicated that the cost report repayment deadline applies only "when relevant to the determination of whether an actual overpayment exists" and may not be used to "improperly delay reporting" if the payments would not ordinarily be reconciled on the cost report reconciliation.
• Clarifies that "claims related" overpayments (e.g., upcoding, medically unnecessary claims, double-billing), as opposed to those that are generally reconciled in a cost report, must be reported and returned within 60 days of identification. CMS clarifies that this provision is necessary to close "a loophole that would allow providers to delay reporting an identified overpayment until a cost report is due if the overpayment would not ordinarily be reconciled on the cost report."
• Reiterates the agency's position that CMS's receipt of a disclosure made through the Medicare Self-Referral Disclosure Protocol for Stark Law violations will suspend the obligation to return overpayments. For providers or suppliers participating in the OIG Self-Disclosure Protocol, the obligation to return overpayments would be suspended until a settlement agreement is entered, or the provider or supplier withdraws or is removed from the protocol.
• Confirms the agency's position that compliance with the anti-kickback statute is a condition of payment.
• Provides that when a provider or supplier has "sufficient knowledge of a kickback arrangement" to have identified a resulting overpayment, the provider or supplier must report the overpayment within 60 days.
• Provides that providers and suppliers may not delay the identification date due to financial hardship and requires that requests for additional time to return overpayments be submitted through the existing Extended Repayment Schedule ("ERS") program. Requests for the ERS must be supported by "significant documentation" of "true financial hardship," and not all requests submitted to the ERS will be granted.
• CMS proposes to implement the requirements using the existing voluntary refund process, which will be renamed the "self-reported overpayment refund process," under which providers and suppliers use forms provided by Medicare contractors to report overpayments. CMS plans to develop and implement a uniform mandatory reporting form to replace the voluntary refund forms that currently vary across Medicare contractors.
• While this is a Proposed Rule, providers and suppliers are still subject to the statutory requirements and could face potential False Claims Act or Civil Monetary Penalties Law liability, as well as exclusion from federal health care programs for failure to report and return an overpayment.

Potential Impact of Proposed Rule and Opportunity for Additional Industry Comment

The Proposed Rule issued earlier this week provides insight into the potential required elements of a final rule as well as agency interpretation influencing assessment of compliance and enforcement. These regulations are intended to have a broad-sweeping and significant impact on the nature and volume of overpayment disclosures to Medicare. In fact, CMS projects that an estimated 8.5 percent of the total number of Medicare providers and suppliers will participate on an annual basis and during that 12-month period will make three to five repayments. If the regulations are adopted as substantially proposed, the burden on providers and stakeholders will undoubtedly be much more significant than as articulated by CMS in this Proposed Rule.

CMS will be accepting comments regarding the Proposed Rule for 60 days following publication in the Federal Register on February 16, 2012. As such, stakeholders are best served to engage in a careful and meaningful review of the Proposed Rule and pursue opportunities to submit comments to CMS that might affect the ultimate course of a final rule.

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