CMS Issues the Final Rule on Providers’ Obligation to Report and Return Overpayments

Written By Nate Trexler

On February 12, 2016, the Centers for Medicare and Medicaid Service (“CMS”) published a final rule regarding the Affordable Care Act’s requirement that providers report and return overpayments.  It has been a long road to this point.  Back in 2012, we wrote about CMS’ proposed rule, which introduced quite a bit of uncertainty in the process of investigating overpayments and ultimately reporting and returning those overpayments.  After nearly four years, and after considering approximately 200 pieces of commentary from interested parties, CMS has finalized the rule, further outlining provider responsibilities under the Affordable Care Act’s requirement.

The Affordable Care Act was enacted on March 23, 2010 and established a requirement that a person who has received an overpayment must report and return the overpayment to the appropriate party and to notify that party of the reason for the overpayment.  The Act requires that an overpayment be reported and returned by the latter of 60 days from the date on which the overpayment was identified or the day any corresponding cost report is due, if applicable.  Importantly, the Act specified that any overpayment that was retained by a person after the deadline for reporting and returning an overpayment constituted an obligation under the Federal False Claims Act, which could lead to significant liability.  This requirement became effective immediately on March 23, 2010, and for almost six years, providers have been under an obligation to report and return overpayments.  Still, for those six years, a number of questions remained.

In this multi-part blog, we will discuss broad highlights from the Final Rule and some more in-depth takeaways.  In this blog post, we discuss how the Final Rule defines when an overpayment is “identified” and the lookback period for reporting and returning overpayments.

Two Highlights of the Final Rule

At the outset, the Final Rule applies only to Medicare Parts A and B. A separate rule applies to Medicare Parts C and D, but there is no rule with respect to Medicaid overpayments.

The Final Rule defines an “overpayment” to be any funds that a person has received or retained under Medicare Parts A and B to which the person, after applicable reconciliation, is not entitled. It does not matter how the overpayment occurred, even if by honest mistake.

One major highlight from the Final Rule is that providers have the ability to investigate whether an overpayment exists without starting the 60-day clock.  As described above, the Act requires a person to report and return an overpayment by the latter of 60 days from the date on which the overpayment was identified or the date any corresponding cost report is due.  The Final Rule has defined “identified” as when a person “has, or should have through the exercise of reasonable diligence,” determined and quantified the amount of the overpayment.  A person “should have determined” that the person received an overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.  This definition clarified confusion as to whether time spent investigating and quantifying a known (or suspected) overpayment would essentially toll the 60-day deadline.  However, CMS makes clear the providers must still exercise “reasonable diligence,” which requires both proactive and reactive compliance measures.  Reactive investigations must occur in a “timely manner,” which CMS considers to be “at most 6 months from receipt of credible information, except in extraordinary circumstances.”  CMS’s commentary on proactive compliance measures will be discussed in a subsequent blog post.

The second major highlight of the Final Rule is the six-year lookback period.  Under the rule, providers must report and return an overpayment if the provider identifies the overpayment within six years of the date the overpayment was received.  The impact of this lookback period is that if a provider obtains credible information of a potential overpayment, the provider needs to conduct reasonable diligence to determine whether they have received an overpayment, which may extend back six years from the date the provider received the credible information.  CMS even commented on the fact that various Medicare audits, including RAC audits, may be time limited (e.g., only the last 3 years), but they serve as credible information of a potential overpayment going back further.  As part of reasonable diligence, providers need to determine whether they have received overpayments, based on the same issues identified in the Medicare audit, going back 6 years.  This lookback period effectively expands the sometimes shorter audit authority of Medicare contractors, putting the onus on providers to complete the entire six year audit.

The text of the Final Rule may be viewed here.

 
In the next blog post, we will discuss some broader takeaways from the Final Rule and how providers can ensure they have appropriate and robust compliance programs in place to address the overarching concerns of these requirements.

Delaware Dental Board Proposes “Fee-Splitting” Prohibition

Written By Joanne Ceballos 

The Delaware Board of Dentistry and Dental Hygiene is proposing an amendment to its regulations to ban what it characterizes as “fee-splitting.”  The proposed amendment provides that a dentist or dental hygienist may be disciplined for “engaging directly or indirectly in the provision or receipt of anything of value for recommending a dentist or hygienist's services.”  The proposed regulation, however, permits the offering or receipt of “office gifts” on a quarterly basis if the value of the gifts does not exceed $1,000 annually and the gifts are “unrelated to a specific referral.”  As the federal and state Anti-Kickback statutes generally prohibit offering or receiving anything of value in exchange for the referral of federal or state health care program business, dentists who provide services payable by federal or state health care programs cannot rely solely on the proposed state regulation as a guideline for permissible gift-giving. 

 

The comparison between the Dental Board’s proposed regulation and fee-splitting regulations applicable to other Delaware health care providers is interesting.  The Board of Medical Licensure and Discipline prohibits payment of a fee by a physician to another physician who has referred a patient to him, “unless the fee is in proportion to the work actually performed by the referring physician.” 24 Del. Admin. Code 1700 Board of Medical Licensure and Discipline 8.1.9.   The regulation, while inartfully worded, seems to provide an exception for the sharing of fees among a physician employer and a physician employee. Otherwise, a physician cannot pay another physician a “fee” for referrals.  It is unclear whether a “fee” would include non-monetary gifts.  The proposed Dental Board regulation, on the other hand, clearly applies to “anything of value.” Of course, as stated above, federal and state statutes generally prohibit physicians from offering or accepting anything of value in exchange for referrals where payment may be made, in whole or in part, by a federal or state healthcare program.

 

Delaware physical therapists and athletic trainers are subject to a broad fee-splitting statute which not only prevents them from “transferring fees” to referral sources, but also prevents them from working in the same practice with referral sources, e.g., physicians, as well as any “relative” or “business associate” of a referral source, neither of which is defined in the statute.  §24 Del. C. 2616(a)(8).  The BMLD regulation does not encompass “relatives” and “business associates.”  The proposed Dental Board regulation arguably applies to any scenario where a third person receives or offers anything of value in exchange for referrals on behalf of a dentist or dental hygienist, as it proscribes “engaging directly or indirectly in the provision or receipt of anything of value.”

 

The Board of Dentistry and Dental Hygiene will hold a public hearing on the proposed regulation on March 17, 2016, and will accept written comments until April 1, 2016.  Click here for the text of the proposed regulations and for more information about the hearing and how to submit written comments.