CMS Issues Final Rule on Retention of Medicare Overpayments

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CMS has issued the final rule to implement section 6402(a) of the Affordable Care Act, which relates to the obligation of providers to repay an overpayment within 60 days of identifying it, for Medicare Part A and Part B claims. CMS Rule 6037-F, as it is known, will go into effect on March 12, 2016.

The Affordable Care Act required providers to report and return overpayments to the government by the later of 60 days after identification or the corresponding cost report.  The law is now contained in section 1128J(d) of the Social Security Act.

We are covering it here for the implications on the False Claims Act.  If a provider does not report and return an overpayment within the appropriate time frame, then it becomes an obligation which can be subject to False Claims Act litigation.  The Justice Department is already litigating one such case under the FCA.  For whistleblowers, this opens the possibility that they can receive rewards of between 15 and 30 percent of the government’s recovery when a health care provider fails to return an overpayment according to the law.

Overpayment Identification

The rule clarifies that the 60 day period begins not upon first discovery of the potential issue but upon the determination through reasonable diligence that there has been an overpayment and the amount owed, which should not normally take more than 6 months when investigating credible information.

Lookback Period

The length of time that providers are responsible for overpayments was shortened from the 10 year loopback period initially proposed by CMS. Instead, physicians will be required to reimburse the government for improper payments over a 6 year period. This compromise number is longer than the 3 year period used in the recovery audit programs of Medicaid and Medicare.

Damage Amount

The overpayment required to be returned is the difference between the amount that was received and the amount that should have been paid if the claim was properly submitted. The provider is not required to return the entire amount if some payment would have been proper. There is no requirement that the money to be returned was received with fraudulent intent. Payment amounts received because of mistake or error must still be returned.

Regular Audits

Based on the comments to the final rule, the exercise of reasonable diligence would typically require both proactive and reactive activities to discover overpayments.

Parts C & D

Medicare Parts C & D were previously addressed in a rule published in the Federal Register in May 2014.

The rules provide for liability under the reverse false claim subsection of the False Claims Act. For additional information about the rules regarding improper retention of Medicare overpayments, please contact one of our False Claims Act attorneys.