On February 11, the Centers for Medicare and Medicaid Services (“CMS”) released the display copy of the Final Rule on the Reporting and Returning of Overpayments (“Final Rule”), which was published in the Federal Register on February 12, 2016. Click here for the link to the Final Rule text. The Final Rule is effective March 14, 2016.
Section 1128J(d) of the Social Security Act provides that an overpayment must be reported and returned by the later of — (i) the date which is 60 days after the date on which the overpayment was identified; or (ii) the date any corresponding cost report is due, if applicable. CMS stated that the Final Rule provides needed clarity and consistency for providers and suppliers on the actions they need to take to comply with requirements for reporting and returning of self-identified overpayments.
Summary of the Major Provisions of the Final Rule
- CMS Clarified the Definition of “Identified”:
The Final Rule states that 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. CMS provided the following examples of “identification”:
- A provider of services or supplier reviews billing or payment records and learns that it incorrectly coded certain services, resulting in increased reimbursement.
- A provider of services or supplier learns that a patient death occurred prior to the service date on a claim that has been submitted for payment.
- A provider of services or supplier learns that services were provided by an unlicensed or excluded individual on its behalf.
- A provider of services or supplier performs an internal audit and discovers that overpayments exist.
- A provider of services or supplier is informed by a government agency of an audit that discovered a potential overpayment, and the provider or supplier fails to make a reasonable inquiry. (When a government agency informs a provider or supplier of a potential overpayment, the provider or supplier has a duty to accept the finding or make a reasonable inquiry. If the provider’s or supplier’s inquiry verifies the audit results, then it has identified an overpayment and, assuming there is no applicable cost report, has 60 days to report and return the overpayment,. Failure to make a reasonable inquiry, including failure to conduct such inquiry with all deliberate speed after obtaining the information, could result in the provider or supplier knowingly retaining an overpayment because it acted in reckless disregard or deliberate ignorance of whether it received such an overpayment).
- A provider of services or supplier experiences a significant increase in Medicare revenue and there is no apparent reason – such as a new partner added to a group practice or a new focus on a particular area of medicine – for the increase. However, the provider or supplier fails to make a reasonable inquiry into whether an overpayment exists. (When there is reason to suspect an overpayment, but a provider or supplier fails to make a reasonable inquiry into whether an overpayment exists, it may be found to have acted in reckless disregard or deliberate ignorance of any overpayment.)
2. CMS Clarified the Meaning of “Quantified”:
- CMS clarified that when a person obtains credible information concerning a potential overpayment, the person needs to undertake reasonable diligence to determine whether an overpayment has been received and to quantify the amount. The 60-day time period begins when either: 1) the reasonable diligence is completed; or 2) 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 recognized that quantifying the amount, which includes any auditing work necessary to calculate the overpayment amount, must happen before the overpayment can be reported and returned.
- CMS further clarified that the quantification of the amount of the overpayment may be determined using statistical sampling, extrapolation methodologies, and other methodologies as appropriate.
3. CMS Provided the Following Guidance on What Constitutes “Reasonable Diligence”
- “Reasonable diligence” includes both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments, and reactive compliance activities, including investigations conducted in good faith and in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.
- CMS stated that reasonable diligence is demonstrated through the timely, good faith investigation of credible information, which is at most 6 months from receipt of the credible information, except in extraordinary circumstances. CMS further stated that a total of 8 months (6 months for timely investigation and 2 months for reporting and returning) is a reasonable amount of time, absent extraordinary circumstances affecting the provider, supplier, or their community. Extraordinary circumstances may include unusually complex investigations that the provider or supplier reasonably anticipates will require more than six months to investigate, such as physician self-referral law violations that are referred to the CMS Voluntary Self-Referral Disclosure Protocol.
4. Lookback Period
- The Final Rule states that overpayments must be reported and returned only if a person identifies the overpayment within 6 years of the date the overpayment was received. CMS stated that creating this limitation for how far back a provider or supplier must look when identifying an overpayment is necessary in order to avoid imposing unreasonable additional burden or cost on providers and suppliers.
5. How to Report and Return Overpayments
- The Final Rule states that providers and suppliers must use an applicable claims adjustment, credit balance, self-reported refund, or another appropriate process to satisfy the obligation to report and return overpayments.
Kirsten McAuliffe Raleigh