United States: CMS Proposes Regulation Implementing The ACA's 60-Day Overpayment Report And Return Provision

Only two days after the government's announcement that it recovered a record-breaking $4.1 billion from its healthcare fraud enforcement efforts in 2011, the Centers for Medicare and Medicaid Services (CMS) published a draft regulation in today's Federal Register implementing the Affordable Care Act's (ACA) 60-day overpayment report and return provision. The proposed rule, which applies only to Medicare Part A and Part B services, is an attempt to provide needed guidance on a number of issues that have left providers and healthcare attorneys in uncertain territory since the provision was passed in 2010.

Almost from the moment of its enactment, the 60-day overpayment provision stirred debate within the healthcare community about its reach and meaning. Providers and their counsel have struggled with questions including when an overpayment is "identified," defining the appropriate look-back period, and understanding the interplay and relationship between that provision and both OIG's Self-Disclosure Protocol and the CMS Self-Referral Disclosure Protocol. With the draft regulation, CMS attempts to address many of these open questions.

What is an overpayment?
The proposed regulation incorporates the definition of "overpayment" directly from the statute which provides "...any funds that a person receives or retains [under the Medicare Program] ... to which the person, after applicable reconciliation, is not entitled...." CMS offers examples of possible overpayments, including payments for non-covered services; payments in excess of the allowable amount for a covered service; errors and non-reimbursable expenditures in cost reports; duplicate payments, and receipt of Medicare payment when another payor had the primary responsibility for payment.

When is an overpayment identified?
The proposed rule states that a provider "has identified an overpayment" when the provider "has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment." Again, CMS provides examples in its introductory comments of when an overpayment has been identified, such as a provider discovers billing records on which it incorrectly coded certain services, resulting in increased reimbursement; a provider learns that a patient death occurred prior to the service date on a claim that has been submitted for payment or a provider learns that services were provided by an unlicensed or excluded individual. One example, however, is somewhat troubling. Indeed, CMS notes that an overpayment is identified when:

[a] provider of services or supplier experiences a significant increase in Medicare revenue and there is no apparent reason – such as a new partner added to a group practice or a new focus on a particular area of medicine – for the increase. Nevertheless, the provider or supplier fails to make a reasonable inquiry into whether an overpayment exists. (When there is reason to suspect an overpayment, but a provider or supplier fails to make a reasonable inquiry into whether an overpayment exists, it may be found to have acted in reckless disregard or deliberate ignorance of any overpayment.)

This definition of "identification" and the attendant liability it establishes are distressing. When is an increase is Medicare revenue "significant" and what kind of "inquiry" is reasonable under these circumstances? These questions remain unanswered by the proposed rule. Moreover, this broad definition seems to substantially stretch the 60-day overpayment provision beyond the language of the statute itself. While Congress clearly intended to establish "reckless disregard liability" when a provider retains an overpayment "knowingly," it is not clear that Congress intended to extend the reckless disregard standard to a provider's failure to inquire where a overpayment is merely possible or suspected. Whatever Congress intended, rather than clarify the vague notion of "identified," the proposed regulation establishes provider liability not only in cases where there is a failure to report and return an overpayment, but also when a provider fails to affirmatively seek out information about possible overpayments if there is "reason to suspect an overpayment."   

What is the required look-back period?
Another area the proposed regulation addresses is the required "look-back" period when evaluating the need to return and report an overpayment. In what is a startling development, the regulation uses the ten-year period based upon the outer limit of possible False Claims Act (FCA) liability, rather than the shorter FCA statute of limitations of six years or the four-year Medicare claim-reopening period that applies to simple overpayments where there is no evidence of fraud. In fact, the commentary suggests that CMS will seek to change the claims reopening period to track the ten-year look-back period under the new regulation. If this portion of the proposed rule goes into effect as drafted, it will substantially increase liability for providers.  

How does the 60-day overpayment provision intersect with the OIG and CMS Disclosure Protocols?
The proposed regulation acknowledges the interplay between the 60-day overpayment provision and the OIG and CMS disclosure protocols. In both cases, the rule provides that the 60-day period is suspended during the period of time from the acknowledgment that a submission has been received by either the OIG or CMS through their respective disclosure procedures and the time that the matter is either removed from the disclosure process or is settled. This section of the rule clarifies what has, in most cases, been the practice prior to this guidance.

While the draft regulation contains additional details, even this brief overview of its highlights demonstrates that CMS has taken an aggressive approach in seeking to implement the 60-day overpayment provision. Whether CMS has proposed a rule that will be workable and that deals with the myriad challenges faced by providers in the overpayment context, however, remains to be seen. CMS has invited public comments to the draft rule, which are due by April 16, 2012. We expect that comments from providers and trade groups will address practical and well-founded concerns regarding the application of a reckless disregard standard surrounding the identification of overpayments, the practicality and workability of a ten-year look-back period, as well as other issues. Providers should remember that even though the proposed rule is not in effect, they currently must meet the 60-day statutory requirement already in place under the ACA.

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.

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