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After 4 Years CMS Implements Final Regulations on Returning Overpayments


After 4 years of waiting CMS has published the final regulations implementing 42 U.S.C. 1320a-7k(d) (“Final Rule”) which was promulgated as part of the Affordable Care Act (“ACA”) and which requires a person who has received an overpayment from the government to report and return the overpayment to the appropriate payor within the later of 60 days of the overpayment being identified or the date any corresponding cost report is due. The Final Rule will be effective as of March 14, 2016.

CMS published a Proposed Rule interpreting 42 U.S.C. 1320a-7k(d)  in February of 2012 which left providers uncertain on a number of crucial issues including (a) when an overpayment had been “identified,” (b) how long a provider had to investigate an overpayment and conduct audits as necessary, and (c) how long the lookback period was for return of an overpayment (CMS initially proposed 10 years). As compared to the Proposed Rule, the Final Rule provides ample guidance to providers. The Final Rule includes the following key provisions:

  • Identification of Overpayments: The Final Rule expands on when a provider has “identified” an overpayment stating that an overpayment has been identified when the provider has actually quantified the amount of the overpayment. 42 CFR 401.305
  • Investigation Benchmark: The preamble to the Final Rule states with further specificity the time that a provider has to investigate the existence of an overpayment stating that CMS would consider a period of 6 months a reasonable time period over which to conduct an investigation into the existence and amount of an overpayment but also stating that a time period longer than 6 months could be considered reasonable under extraordinary circumstances.
  • Lookback Period: The final rule provides for a lookback period of 6, rather than 10, years stating that an overpayment must be reported and returned in accordance with this section if a person identified the overpayment within 6 years of the date the overpayment was received. 42 CFR 401.305(f).
  • Affirmative Duty to Conduct Internal Investigations: In the preamble the Final Rule suggests that, not only must providers take action to investigate a possible overpayment when they become aware of same, but providers should also conduct proactive compliance activities within the organization on an ongoing basis. Further, if a provider receives information regarding the possible existence of an overpayment, the preamble to the Final Rule suggests that the 60 day clock could start running immediately if the provider fails to proactively investigate the potential overpayment.
  • Refund Process: The Final Rule confirms that the repayment obligation will be satisfied if the provider self-reports to CMS or the OIG and further that receipt of a submission into the OIG’s or CMS’s self-disclosure protocols will suspend the provider’s 60 day overpayment deadline. 42 CFR 401.305(b)(2); (d)(2). The Final Rule also specifically allows overpayments to be returned through the claims adjustment, credit balance, or other appropriate process depending on the nature of the overpayment and the payor.

All in all, the Final Rule is good news for providers and sheds some much needed light on the ambiguities that existed in the proposed rule. However, the Final Rule places great emphasis on proactive compliance programs, internal investigations, and timely reporting and return of overpayments. Therefore, providers should take steps to ensure that they have strong internal compliance programs that provide for detection and investigation of potential overpayments.

The full text to the Final Rule and preamble can be found at 81 F.R. 7654: click here.

For more information, please contact one of the authors listed.