It has taken nearly four years for CMS to finalize the 60-Day Overpayment Rule, first proposed by CMS on February 20, 2012. Missing its original three-year deadline and citing difficulties in defining a number of the objective standards in the proposed rule, CMS announced in the February 12, 2015 Federal Register that it would take another year to consider the issues before finalizing the rule.
Sec. 6402(a) of the Affordable Care Act (ACA), passed in 2010, requires the return of Medicaid and Medicare overpayments by the later of 60 days from the date the overpayments are discovered or from the date the related cost report is due. Although Sec. 6402(a) became effective upon passage of the ACA, CMS proposed a rule in 2012 to frame the obligations of the provider in discovering overpayments. Defining "reasonable inquiry" and defining those individuals that could be tasked with "knowledge" sufficient to trigger the start of the 60-day time frame were just a couple of the challenges CMS faced in putting structure to the subjective terms in the proposed rule. Now, CMS believes it has adequately defined these terms.
Key Components of the Final Rule:
Identifying The Overpayment
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] provider or supplier may receive information concerning a potential overpayment that creates a duty to make a reasonable inquiry to determine whether an overpayment exists. If the reasonable inquiry reveals an overpayment, the provider or supplier then has 60 days to report and return the overpayment. On the other hand, 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.
- In its comments CMS has made clear that a duty to inquire arises at any time a provider receives "credible information of a potential overpayment."
- "Credible information" is a factual determination
- This includes when a provider receives the results of a government audit; at that point, the provider or supplier has a duty to accept the finding or make a reasonable inquiry.
- A reasonable inquiry should also be triggered when there is a significant but unexplainable increase in Medicare revenue.
- A person who is not a party to a kickback arrangement is unlikely to be able to identify or have an obligation to report an overpayment, but there still may be some payback liability for the non-party if improper payments were made to it as a result of the arrangement.
- In addition to "credible information" a provider may receive internally, CMS considers contractor audits as "credible information" upon which a provider must act by examining time periods not included in the provider audit:
We believe that contractor overpayment determinations are always a credible source of information for other potential overpayments. Moreover, we recognize that in certain cases, the conduct that serves as the basis for the contractor identified overpayment may be nearly identical to conduct in some additional time period not covered by the contractor audit. If the provider appeals the contractor identified overpayment, the provider may reasonably assess that it is premature to initiate a reasonably diligent investigation into the nearly identical conduct in an additional time period until such time as the contractor identified overpayment has worked its way through the administrative appeals process.
- Any audit that a provider is unable to successfully appeal ostensibly creates a duty of the provider to investigate time periods not covered by the audit for the same activity.
- Cost report adjustments by the MAC also create an investigative duty into prior-year cost reports:
If the MAC notifies a provider of an improper cost report payment, the provider has received credible information of a potential overpayment and must conduct reasonable diligence on other cost reports within the lookback period to determine if it has received an overpayment.
- "Person" is the provider or supplier – a beneficiary is not a "person" for this rule.
- Includes employees and agents of a provider or supplier at all levels of the organization.
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 [unchanged from the statute].
- Overpayment is the difference between the amount that was paid and the amount that should have been paid.
- It is the full amount for any amount not payable under the Act (e.g., claims resulting from Anti-Kickback Statute or physician self-referral law violations, or payment for items or services provided by an excluded person).
- Fault and motive are irrelevant; includes overpayments resulting from errors made by the contractor or provider regardless of intention (or lack thereof).
- Underpayments are not considered by this rule, and set-offs are not permitted.
- Secondary payer overpayments must be refunded under this rule.
An overpayment must be reported if discovered within 6 years of the date the overpayment was received.
- The 6 years is measured back from the date the person identifies the overpayment.
- The claims reopening rules have been amended to accommodate receipt of the overpayment.
The 60-day time period does not begin to run until reasonable diligence and quantifying the payment have occurred.
- CMS establishes 6 months as the presumptive maximum time for investigation and quantification.
[W]e adopt the standard of reasonable diligence and establish that this 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.
- The presumption may be rebutted under special circumstances.
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. What constitutes extraordinary circumstances is a fact-specific question. 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 (SRDP). Specific examples of other types of extraordinary circumstances include natural disasters or a state of emergency.
Good Faith Investigation
- Although not mandated by the law, CMS comments strongly imply that failure to conduct some type of sampling and extrapolation to discover overpayments in most circumstances would fall below a "good faith investigation." CMS revised the reopening criteria to remove any barrier to adjusting individual claims, but there is no mechanism to take into account the extrapolated dollars to any particular accounts.
- Claims used for the basis of an extrapolation are not exempt from subsequent audit by CMS.
- Moneys returned to the contractor under this rule may not be returned conditionally or under protest. As stated by CMS, the overpayment determination is being made by the provider pursuant to its investigation; if the provider determines it to be an overpayment under this rule, then it is an overpayment.
- Providers and suppliers may use claims adjustment, credit balance, self-reported refund process, or another appropriate process to report and return overpayments.
- Providers and suppliers may request a voluntary offset from the contractor.
- Providers are obligated to report and return any self-identified overpayments after the submission and applicable reconciliation of the Medicare cost report.
- CMS plans to create a uniform process or form for overpayment reporting in the future. In the meantime, it recommends that providers use the forms available from contractors currently in place or the self-reporting protocols currently in place.