United States: CMS Proposes Regulations For Returning Medicare Overpayments

There has never been a more important time for entities to be diligent in ensuring they have effective compliance programs that can prevent, detect and respond to potential noncompliance issues such as overpayments.  On February 16, 2012, the Centers for Medicare & Medicaid Services (CMS) proposed regulations for Medicare providers and suppliers concerning their obligations under the 2010 Patient Protection and Affordable Care Act (ACA) to report and return identified overpayments. Under the ACA, overpayments must be reported and returned by the later of 60 days after the date the overpayment was identified or the date any corresponding cost report is due, if applicable. Although these proposals provide some important guidance, including when an overpayment is deemed to be "identified," several areas remain unclear or unaddressed. Comments on these proposals must be received by CMS by April 16, 2012.  The full text of the proposed regulation is available here.  (Link to PDF hosted by GPO.gov)

What Entities Are Covered by These Regulations?

The proposed regulations only apply to Medicare Part A and Part B providers and suppliers. CMS intends to address the other entities identified under the ACA (Medicare and Medicaid managed care organizations and Medicare prescription drug sponsors) "at a later date."  CMS states that, notwithstanding issuance of regulations, all entities remain subject to the requirements of the law and could face potential liability, including False Claims Act (FCA) and Civil Monetary Penalties Law liability and exclusion from federal health care programs for failure to comply.

What Guidance Has CMS Provided on the Question of When an Overpayment Is "Identified"?

CMS is proposing that an overpayment becomes identified when a person has "actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment."  According to CMS, defining "identification" in this way is consistent with the FCA and gives providers and suppliers incentives to exercise due diligence to uncover overpayments, including instituting measures such as self-audits and compliance checks. 

In some cases, a provider or supplier may receive information concerning a potential overpayment that creates an obligation to make a "reasonable inquiry" to determine whether an overpayment exists (for example, when a provider receives a compliance hotline complaint, learns information through an internal or government audit or experiences a significant increase in Medicare revenue with no apparent reason for the increase).  In these cases, CMS states that if the inquiry reveals an overpayment occurred, the provider/supplier has 60 days (assuming there is no applicable cost report) from concluding the inquiry to report and return the overpayment. Failure to make a reasonable inquiry, which includes failure to do so 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" the overpayment.

What Process and Deadlines Will Apply for Reporting and Returning Overpayments?

Providers and suppliers will be required to use the existing voluntary refund process contained in Chapter 4 of the Medicare Financial Management Manual, Publication 100-06, for reporting and returning overpayments. CMS intends to develop a uniform reporting form that is consistent across all Medicare contractors, but until such time, providers and suppliers must use their current Medicare contractor's forms. Providers and suppliers will be required to report overpayments that have occurred within a 10-year lookback period (consistent with the 10-year FCA statute of limitations). CMS is also proposing to amend its existing reopening rules to be consistent with this proposed 10-year timeframe.

How Do These Proposed Procedures Relate to the OIG and CMS Stark Disclosure Protocols?

CMS proposes to suspend the deadlines for returning overpayments when either OIG acknowledges receipt of submission to its Self-Disclosure Protocol (SDP) or CMS acknowledges receipt of the Stark physician Self-Referral Disclosure Protocol (SRDP). The deadline is suspended until such time as a settlement agreement is entered, or the person withdraws or is removed from the Protocol. Reports of potential fraud under the OIG SDP would constitute notice under these CMS overpayment regulations for reporting purposes. However, providers and suppliers who report overpayments using the CMS SRDP do not satisfy the reporting obligations under these regulations and must still provide separate notice because these requirements would only be suspended with regard to the Stark physician self-referral-related component of the overpayment. CMS is soliciting comments on alternative approaches that would allow providers and suppliers to avoid making multiple reports of identified overpayments.

What Issues Remain Unresolved by These Proposed Regulations?

CMS has not defined or clarified a number of issues, including what a "reasonable inquiry" consists of, how quickly a provider or supplier must act in order to be considered acting "with all deliberate speed", or how a provider or supplier should address the situation where an overpayment has been identified but it may take some time beyond 60 days to determine an exact amount.  Also, for managed care organizations and drug sponsors, it is unclear whether CMS will choose another set of standards. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.