CMS Issues Proposed Rule on Reporting and Returning Overpayments

One of the provisions of the Affordable Care Act (“ACA”) that has gotten a great deal of attention is Section 6402(a), which requires a person who receives an overpayment to report and return the funds within 60 days after the overpayment is identified (or the date any corresponding cost report is due, if applicable.) The provision is significant because the failure to report and return overpayments creates False Claims Act liability, exposure to Civil Monetary Penalties, and potentially exclusion from participation in the federal programs.

On February 16, 2012, CMS released a proposed rule (77 Federal Register 9179) to implement the requirements of Section 6402(a), and if finalized in its current form it will guide providers on what is required when information indicating a potential overpayment comes to light. While the ACA already creates the obligation to report and return overpayments, the proposed rule imposes additional burdens in an attempt to clarify and define key terms of the statute.

The most significant burden in the proposed rule is a new ten-year look-back period, which would require providers to report and return any overpayment that is identified within ten years from when it was received. CMS stated in the preamble to the rule that the ten-year period was chosen to “further our interest in ensuring that overpayments are timely returned to the Medicare Trust Fund.”

The proposed rule defines an “overpayment” just as the ACA: any funds received or retained under the Medicare program to which the person, after applicable reconciliation, is not entitled. This includes, but is not limited to, payments for non-covered services. An overpayment will be considered “identified” if the provider has actual knowledge of the existence of the overpayment or acts in “reckless disregard” or “deliberate ignorance” of the overpayment. “Reckless disregard” and “deliberate indifference” essentially mean that a provider cannot ignore information brought to his/her attention that a potential overpayment exists. The provider is thus required to make a “reasonable inquiry” to confirm whether or not an overpayment exists.

The definition of “identified” and the lack of guidance regarding “reasonable inquiry” introduce significant uncertainty. What is a “reasonable inquiry”? The preamble to the proposed rule seems to state that this means self-audits, compliance checks, or other research and suggests that such inquiry must be taken with “all deliberate speed.” When considered alongside the proposed ten-year look-back period, it is unclear whether CMS intends to obligate providers who recognize a problem to consider whether this same problem has occurred over the course of the last ten years with regard to similar claims. Is that enough information to trigger the obligation to investigate with all deliberate speed? If it is, this rule places a significant burden on providers to engage in extensive retrospective audits and generates substantial difficulties where information regarding ten-year-old claims may not be readily available.

The proposed rule contains other provisions, such as an explanation of the impact of the Anti-Kickback Statute and how the sixty-day reporting period is tolled when a provider submits a self-disclosure to either the OIG (Self-Disclosure Protocol) or to CMS (Self-Referral Disclosure Protocol).

Again, this rule is not final. The health care industry has an opportunity to comment and potentially impact the final rule’s requirements. Comments are due on April 16, 2012.

The proposed rule can be found at: http://www.regulations.gov/#!documentDetail;D=CMS_FRDOC_0001-0905