Understanding the Overpayments Final Rule

By Judith L. Kares, JD

Key definitions

Let us begin with the definition of “overpayments” included in the Overpayments Rule. Under the rule, an “overpayment” means any funds that a “person” has received or retained under Medicare to which the “person,” after applicable reconciliation, is not entitled. A “person” means a provider or supplier furnishing services under original Medicare (Parts A and B), but does not include beneficiaries. For purposes of the rule and its underlying statute, a person has an obligation to identify, report, and return overpayments in a timely and effective manner. Failure to do so may subject that person to significant sanctions, including sanctions under relevant federal statutes (e.g., the False Claims Act, Civil Monetary Penalties Law, etc.).

Identification

To comply with the regulatory requirements, a person first must be able to “identify” whether an overpayment has been received. 

• A person has identified an overpayment when the person has, or should have through the exercise of reasonable diligence, determined an overpayment was received and quantified the amount of the overpayment.
• A person should have determined the receipt of an overpayment and quantified the amount if the the person, in fact, received an overpayment, but fails to exercise reasonable diligence.

Although the Overpayments Rule provides an incentive for providers and suppliers to exercise reasonable diligence, the rule does not provide much guidance on what constitutes reasonable diligence. CMS simply states that reasonable diligence is fact-specific and must be demonstrated by timely, good faith investigation of credible information, generally within no more than six months. Determining whether information is sufficiently credible is also fact-specific. Examples of circumstances that might justify more than six months to investigate include physician self-referral law violations referred to the CMS Voluntary Self-Referral Disclosure Protocol (CMS SRDP), natural disasters, and states of emergency.

Applicable deadlines

A person who has received an overpayment must report and return it by the later of the following:

• The date which is 60 days after the date on which the overpayment was identified, or
• The date any corresponding cost report is due, if applicable

The 60-day time period begins either:

• On the day on which reasonable diligence is completed and the overpayment is identified (including quantification), or
• If the person fails to conduct reasonable diligence, on the day the person received credible information of a potential overpayment.

Absent extraordinary circumstances, in those cases where there is credible information of a potential overpayment, the provider or supplier has up to eight months to report and return the overpayment (six months for timely investigation and two months [60 days] for reporting and returning). An example of credible information would be a Medicare contractor’s determination of an overpayment, based upon medical review.

An otherwise applicable deadline, however, will be suspended in the following circumstances:

• OIG acknowledges receipt of an OIG Self-Disclosure Protocol (OIG SDP) submission, until settlement or the person’s withdrawal or removal from the OIG SDP,
• CMS acknowledges receipt of a CMS SRDP submission, until settlement or the person’s withdrawal or removal from the CMS SRDP, or
• The person requests an extended repayment schedule, until the contractor rejects the request or the person fails to comply.

Applicable reconciliation generally enables a person to identify funds to which the person is not entitled.

In the context of cost reporting, applicable reconciliation is the provider’s year-end reconciliation of payments and costs to create the cost report. The cost report is due within five months of the end of the provider’s fiscal year. Overpayments identified prior to submission of the cost report should be reflected in and returned at the time of filing. For example, overpayments as a result of periodic interim payments should be reported and returned at the time the initial cost report is due.

To read the complete, detailed artcile that appeared on Medicare Compliance Watch, click here.