Medicare Compliance & Reimbursement

Why one-year postponement doesn’t really give you a reprieve.

You won’t see a final rule on how you must handle Medicare overpayments until next year — but this won’t actually change your compliance obligations. Here’s what you need to know.

Background: In a Feb. 17 Federal Register notice, the Centers for Medicare & Medicaid Services (CMS) announced that it would delay publication of the final rule covering reporting and returning Medicare overpayments until next year. CMS said that it would hold off on publishing the final overpayment rule until Feb. 16, 2016.

What is the ‘Overpayment Rule?’

Also known as the “60-day rule,” the overpayment rule requires healthcare providers to report and refund overpayments within 60 days from the date the provider identifies the overpayment, or the date the corresponding cost report is due, according to a March 2 announcement by the Texas Medical Association.

The proposed overpayment rule resulted from Section 6402(a) of the Affordable Care Act (ACA), which created a new section 1128J(d) of the Social Security Act, explained Evvie Munley, senior health policy analyst for Washington, D.C.-based Leading Age, in a Feb. 19 analysis. Although CMS published the proposed rule back in February 2012, a multitude of comments from stakeholders has delayed its publication of the final rule.

In the recent announcement, CMS attributed the one-year delay in issuing the final rule to “significant policy and operational issues that need to be resolved in order to address all of the issues raised by comments to the proposed rule and to ensure appropriate coordination with other government agencies.

Impact: Among the complex issues causing the one-year delay is the proposed rule’s definition of “identified,” which has put industry stakeholders into a tizzy.

“According to the proposed 60-day overpayment rule, an overpayment is ‘identified’ if a healthcare provider or supplier has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment,” explains Boston-based attorney Brian Dunphy with the law firm Mintz Levin Cohen Ferris Glovsky and Popeo PC. “This definition is consistent with the definition of ‘knowledge’ under the False Claims Act (FCA).”

Untangle the Rule’s Most Confusing Elements

Problem: “In practice, the proposed definition of ‘identified’ may be hard to apply,” Dunphy tells Medicare Compliance & Reimbursement Alert. “Fundamentally, it remains unclear when an inquiry into a possible overpayment crosses over to the point that an overpayment has been identified and the 60-day clock starts.”

Example: A healthcare provider may suspect an overpayment, perhaps due to a question arising during an internal audit, or might receive notice of a possible overpayment, Dunphy says. “At that point, the healthcare provider likely has not ‘identified’ the overpayment because its existence and amount are not known.”

“Usually, the provider must undertake a factual investigation, legal analysis, and other work to determine if there was an overpayment and to calculate the amount of any overpayment,” Dunphy explains. “It is difficult to say at what point during this investigation an overpayment has been identified for purposes of the 60-day clock.”

“In the proposed rule, CMS acknowledged that providers and suppliers may need time to conduct a ‘reasonable inquiry’ after receiving information regarding a potential overpayment to confirm whether an overpayment was received, and that the inquiry should be conducted with ‘all deliberate speed,’” Dunphy states. “But open questions remain about how healthcare providers and suppliers should apply these concepts in practice.”

Beware of Delay-Instigated Hurdles

The delay in the final rule leaves “providers and their counsel with the same unanswered questions on how to comply and manage potential FCA risk,” lamented attorneys Tony Maida and Evan Panich with the law firm McDermott Will & Emery in a Feb. 23 analysis for The National Law Review. The proposed rule also contains a lengthy 10-year “look-back” period.

What’s more: “There are also complexities around the use of ‘reckless disregard’ and ‘deliberate ignorance’ in the definition of ‘identified,’” Dunphy notes.

CMS said that it needs to collaborate with the HHS Office of Inspector General (OIG) and the U.S. Department of Justice (DOJ) to iron out the final rule’s complexities. “This extension indicates that the agencies recognize the far-reaching impact the final rule will have on the healthcare industry and development of the ‘reverse false claims’ theory under the FCA,” Maida and Panich wrote. 

Bottom Line: You Still Must Comply

CMS’ delay in the final rule doesn’t let you off the hook when you’re reporting and returning overpayments, however.

What to do: Despite the delay in the final overpayment rule, CMS cautioned providers that the statutory obligations of Section 1128J(d) are in full force, Munley warned. This means that if you receive any overpayments, you must return them to CMS within the 60-day deadline.

Link: To read CMS’ announcement to delay the final overpayment rule, go to http://www.federalregister.gov/articles/2015/02/17/2015-03072/medicare-program-reporting-and-returning-of-overpayments-extension-of-timeline-for-publication.