Section 6402(a) of the Patient Protection and Affordable Care Act (PPACA) established a new section in the Social Security Act mandating that providers timely report and return Medicare overpayments. Since PPACA’s passage, the healthcare community has awaited clarification on several ambiguities contained in the statute.
On February 16, 2012, CMS released a proposed rule implementing PPACA’s requirements regarding the report and return of Medicare overpayments (77 Fed. Reg. 9,179). The proposed rule applies only to Part A and Part B providers and suppliers; further guidance for other industry stakeholders, including Medicaid managed care organizations, Medicare Advantage organizations, and Prescription Drug Plan sponsors, will be issued separately.
Under the proposed rule, CMS does not vary the PPACA statutory definition of an “overpayment” – any funds that a person receives or retains under the Medicare program to which the person, after applicable reconciliation, is not entitled. CMS gives examples of situations that constitute an overpayment, such as payments for non-covered services, payments in excess of allowed amounts, errors and non-reimbursable expenditures in cost reports, and receipt of funds from Medicare when another party is primarily liable. Under the proposed rule, overpayments must be reported and returned within sixty (60) days of identification of the overpayment, or, when applicable, the date the corresponding cost report is due, whichever is later. Throughout the proposed rule, CMS provides distinctions and illustrations differentiating between providers who are refunding fee-for-service overpayments, and providers who are being reimbursed based on a cost report.
The proposed rule states that an overpayment is deemed “identified” when the provider or supplier has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the existence of the overpayment. Implicit in this meaning of “identification” is the expectation for providers or suppliers to perform reasonable self-monitoring activities aimed at detecting possible overpayments and diligently investigating and responding to any related notification or inquiries. Additionally, the proposed rule imposes a ten-year lookback period for identifying overpayments.
Failing to address industry concerns and comments, the proposed rule is silent as to whether the “actual knowledge” standard refers to when the provider identifies the existence of an issue, or whether “actual knowledge” exists when the amount of the overpayment is quantified.
Providers and suppliers are instructed to follow the existing “self-reported overpayment refund process” of their respective Medicare contractor, which includes the submission of a written report containing information on the discovery of the error, reason for the overpayment, corrective actions taken, existence of any corporate integrity agreement with the OIG, and statistical sampling methodology used to determine the overpayment. Under the proposed rule, CMS has made it explicit that, when a provider enters into a self-disclosure process under either the Stark Law or the Anti-kickback Statute, the overpayment disclosure/refund time-frame is tolled with respect to any overpayments that are associated with the Stark or AKS violation. Failure to report and return an overpayment within the established timeframes will potentially subject the provider to liability under the False Claims Act and the Civil Monetary Penalties Law.
CMS anticipates the report and refund of overpayments by an estimated 125,000 Medicare providers and suppliers annually, each of whom is expected to have three to five overpayments on average. This amounts to between approximately 375,000 and 625,000 overpayments processed each year for Part A and Part B providers and suppliers alone.
Commentators have already begun to weigh-in regarding the proposed rule, deeming it an “increased burden” on providers. The deadline for submitting comments on the proposed rule is April 16, 2012.
For more information, please contact Adrienne Dresevic, Abby Pendleton, or Carey Kalmowitz at (248) 996-8510 or (212) 734-0128, or visit The HLP website.