CMS Issues Proposed Rules About Returning Medicare Overpayments

(February 22, 2012):  The proper handling of Medicare overpayments is an essential responsibility of all participating providers.  Late last week, the Centers for Medicare & Medicaid Services (CMS) released an important proposed rule in the Federal Register that could dramatically affect all healthcare providers, Third-party billers and other entities involved in the healthcare industry. The proposed rule, interpreting language set out in Section 6402(a) of the Affordable Care Act, entitled "Reporting and Returning of Overpayments," creates substantial burdens on healthcare providers. Specifically, there are three proposed rules that providers need to understand.

First, the proposed regulations define the term "identified." As you may know, Section 6402(a) mandates that providers and suppliers return identified Medicare and Medicaid overpayments within 60 days of identification. Should a provider fail to return an identified Medicare overpayment within this time frame, they may be liable for False Claims Act (FCA) or Civil Monetary Penalty (CMP) damages and penalties. However, commentators have questioned what the term "identified" really meant. Under the proposed rule, CMS states that an identified Medicare overpayment is one in which the provider has actual knowledge of the Medicare / Medicaid overpayment OR acts in reckless disregard  OR deliberate ignorance of the overpayment. This standard specifically aligns this regulation with the FCA's knowledge requirements. As a result, providers and suppliers can no longer ignore warning signs (however slight they may be), of potentially improper claims, and must perform a reasonable self-audit to ensure that no overpayment exists. Providers must remember that one of these warning signs includes receiving audit results from a government contractor. In other words, if a provider receives notice of a Medicare post-payment audit or is placed under pre-payment review, this rule arguably creates a duty for that provider to investigate the government's allegations further. Importantly, because of the possibility of FCA liability, internal audits and investigations should be conducted through counsel, thereby possibly preserving attorney-client privilege for any information uncovered.

Second, the regulations propose to expand CMS' ability to reopen claims to 10 years, in line with the maximum possible statute of limitations for the FCA. CMS and its contractors currently have a 3-tiered system regarding the reopening of paid Medicare and Medicaid claims:

Third, CMS detailed the specific time frame for returning an overpayment. Specifically, the proposed rule indicates that the 60 day time frame for returning an overpayment begins once "reasonable inquiry" determines that an overpayment does, in fact, exist. However, if there is reason for the provider to investigate a possible overpayment and it ignores or avoids this duty, the 60 day time frame would begin to run once the duty is shunned (as this would constitute deliberate ignorance or reckless disregard). CMS explicitly writes, "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 knowingly retaining an overpayment because it acted in reckless disregard or deliberate ignorance of whether it received such an overpayment." In any event, while CMS has clarified the timing of this requirement, it has made clear that providers must take it upon themselves to review claims submissions and promptly return any monies owed to the government.