Overpayments Proposed Rule Leaves Unanswered Questions for Providers

Questions health care providers have had about complying with the requirements for reporting and returning overpayments may still linger under CMS’ proposed overpayment regulations issued in the Federal Register on February 16. Health care professionals, however, have a chance to pose those questions during the proposed rule comment period, which ends April 16, 2012.

 Under §6402(a) of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), enacted March 23, 2010, which added Social Security Act §1128J(d), Medicare and Medicaid participating providers are required to report and return overpayments within 60 days after the date an overpayment is identified or the date the corresponding cost report is due. Any overpayment retained by a person after the deadline for reporting and returning an overpayment exposes the person to liability under the False Claims Act (FCA) (31 U.S.C. §3729).  To implement §6402(a), CMS proposed to establish a new subpart D of Part 401 of title 42. The proposed regulations only relate to Medicare Part A and Part B providers and suppliers; other stakeholders such as prescription drug plans and Medicaid managed care organizations will be addressed at a later date. CMS cautioned, however, that other stakeholders are subject to the statutory requirements of §1128(d) and could face potential False Claims Act liability, Civil Money Penalty Law (42 USC § 1320a–7a) liability, and exclusion from federal health care programs for failure to report and return an overpayment.

Timing of the identification of an overpayment. Under the proposed rule, a person has identified an overpayment if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment. The 60 day requirement to report and return would run from the date on which the person has identified the overpayment. CMS believes that this definition would provide an incentive for providers to exercise reasonable diligence to determine whether an overpayment exists, including performing activities such as self-audits, compliance checks, and other research. CMS explained that an obligation to make a “reasonable inquiry” to determine whether an overpayment exists is created when a provider receives information regarding a potential overpayment.

 According to a February 13, 2012, Foley & Lardner LLP article written by Lawrence Venaglia, Judith Waltz, and Nathaniel Lacktman, CMS appeared to “recognize that many sophisticated reimbursement questions require significant use of internal and external resources, due diligence, document review, and occasionally, financial and statistical analyses,” which require more than the 60 days of the initial allegation to be completed. It also stressed that providers have a duty to promptly conduct the reasonable inquiry. “The “reasonable inquiry” policy, however, would offer greater flexibility because the “60-day clock would not start running until after the provider has had an opportunity to undertake reasonable inquiry into the basis of the alleged overpayment.” Another article in Health Law & Policy Matters, written by Karen S. Lovitch and Stephanie D. Willis, noted however, that “CMS offered very little concrete guidance on how it will determine whether an inquiry is reasonable.”

Proposed reconciliation rules. The proposed rule adopts the definition of an overpayment in §1128(d), including the date on which the overpayment must be returned and acknowledges that Medicare makes estimated payments for services with the knowledge that a reconciliation of those payments to actual costs will be done when the actual costs or related information becomes available. If a provider files a cost report and the overpayment would be reconciled on the cost report, the provider would be permitted to report and return the overpayment 60 days from the date the overpayment was identified or on the date the cost report is due, which ever is later. CMS has recognized two exceptions to the general reconciliation rule related to Supplemental Security Income ratios used in the calculation of the disproportionate share hospital payment adjustment and the outlier reconciliation.

CMS clarified, however, that claims related issues must be paid 60 days from the date of identification. For example, if the issue involved upcoded claims for payment, the overpayment must be reported and returned within 60 days of identification; however, an overpayment that would be reconciled on the cost report, such as overpayments related to graduate medical education payments would be due either 60 days after identification or on the date the cost report is due.

Reporting and refund process. CMS would implement the requirements in §1128J by using the existing voluntary refund process described in Chapter 4 of the Medicare Financial Management Manual (Pub. 100-06), which will be renamed the “self-reported overpayment refund process.” Under the proposal, providers and suppliers would be required to use the self-reported overpayment process set forth by the applicable Medicare contractor to report and return overpayments using a form that each Medicare contractor makes available on its website. Among other things, the forms require a summary of why the refund is being made and includes how the error was discovered, a description of the corrective action plan implemented to be sure the error does not happen again, and the reason for the refund. CMS plans to develop a uniform reporting form that will enable all overpayments to be reported and returned in a consistent manner across all Medicare contractors.

Suspension of the deadline. The proposed rule would suspend the deadline for returning overpayments when the Office of Inspector General (OIG) acknowledges receipt of a submission to the OIG Self-Disclosure Protocol (SDP) until a settlement agreement is entered into, the person withdraws from the OIG SDP, or the person is removed from the OIG SDP. In addition, CMS proposed for providers that notify OIG of the overpayment through the OIG SDP; such notice would constitute a report for purposes of the reporting requirement. For the CMS Self-Referral Disclosure Protocol (SRDP), the 60 day deadline for returning a physician self-referral overpayment is suspended, however, the provider is still obligated to report the overpayment using the reporting process described in the proposed rule. CMS has requested comments regarding the SRDP reporting to avoid duplicate efforts.

Lookback period. CMS has proposed to increase the lookback period for identifying and reporting an overpayment to within ten years of the date the overpayment was received because it is the outer limit of the FCA’s statute of limitations. CMS proposed to amend the reopening rules (42 C.F.R. §405.980(b)) to provide that overpayments reported under the proposed regulations may be reopened for a period of 10 years.

Recommendations. The Foley & Lardner LLP article recommended providers consider what they could do proactively to meet the requirements, specifically (1) creating and implementing a policy and procedure for reporting and refunding identified overpayments, and (2) submitting comments regarding the Proposed rule so CMS could fully understand the impact the Proposed rule will have on provider operations.  The authors of the Health Law & Policy Matters article recommended that providers “act quickly when investigating potential overpayments and document all steps in the investigation to ensure the ability to document that the inquiry was ‘reasonable’ and conducted with ‘all deliberate speed.’”