CMS Proposes Regulations to Implement the Law Regarding Reporting and Returning Overpayments

Having compliance plans and procedures in place is becoming increasingly important for Medicare providers and suppliers. On February 16, 2012, CMS released a proposed rule to implement Section 128(d) of the Social Security Act (“Act”) which was added by the Affordable Care Act (“ACA”) and deals with the reporting and returning of overpayments. The proposed rule is significant in that it includes a ten year look back period and proposes a definition for when an overpayment is “identified” which includes a duty for providers and suppliers to make reasonable inquiries when an overpayment is suspected.

The ACA created Section 1128(d) of the Act to detail the requirements for reporting and returning overpayments. Overpayments are defined in Part 4(B) of the law as “any funds that a person receives or retains under title XVIII or XIX [42 USCS Section 1395 et seq. or 1396 et seq.] to which the person, after applicable reconciliation, is not entitled under such title.” Part 2 requires an overpayment be reported and returned by the later of 60 days from the date on which the overpayment is “identified” or the date any corresponding cost report is due. The statute itself does not define “identification” however, the proposed implementing regulation, 401.305(a)(2) defines “identification” as being when “the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” (77 Fed. Reg. 9179, 9182, February 16, 2012). CMS believes that this will provide an incentive to providers and suppliers to exercise reasonable diligence to determine whether an overpayment exists. CMS goes on in the proposed rule to suggest that without such a definition, a provider or supplier might avoid activities which can be done to determine an overpayment such as “self-audits, compliance checks, and other additional research.”

CMS provides a nonexhaustive list of examples of when an overpayment is identified and the provider or supplier should make a “reasonable inquiry with all deliberate speed” to determine if an overpayment exists, including:

• when a provider receives an anonymous compliance hotline telephone complaint about a potential overpayment;
• when a provider or supplier reviews billing or payment records and learns it incorrectly coded certain services resulting in increased payment;
• when a provider or supplier learns that a patient death occurred prior to the date of service on a claim submitted for service;
• when a provider or supplier learns that services were provided by an unlicensed or excluded individual on its behalf;
• when a provider or supplier performs an internal audit and discovers overpayments;
• when a provider 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 provider or supplier experiences a significant increase in Medicare revenue with no apparent reason for the increase.

While this list is not exhaustive, it should give providers and suppliers pause and reason to evaluate and update compliance plans. If a provider or supplier acts in reckless disregard or deliberate ignorance of whether it received an overpayment, then it could be found to have knowingly retained an overpayment. And, if an overpayment is retained after the deadline, it becomes an obligation under the False Claims Act, the provider or supplier may have liability under the Civil Monetary Penalties Law, and the provider or supplier could be excluded from participation in Federal Health Care programs.

In addition to the definition of “identification” requiring providers and suppliers to exercise diligence in investigating potential overpayments, CMS proposed that 401.305(g) required overpayments be reported and returned if identified within 10 years of the date the overpayment was received. CMS selected 10 years to be consistent with the False Claims Act statute of limitations. CMS is also proposing the reopening rules located at 405.980(b) be amended to allow reopening for a period of ten years.

The proposed rules also discuss the interplay between the obligation to report and return overpayments and the existing Medicare Self-Referral Disclosure Protocol (SRDP) for Stark law violations and the OIG Self Disclosure Protocol (“OIG SDP”) for the reporting of potential fraud to the OIG, as well as proposing the existing procedure for reporting overpayments be retained.

If you have any questions regarding the proposed rule, or any other compliance matters, please contact a Wachler & Associates attorney at 248-544-0888.