Medicare Compliance & Reimbursement

And 3 key strategies you can employ now to avoid big problems.

Thanks to a new final rule, you now could face serious consequences if you don’t return Medicare overpayments within 60 days. Here’s what you need to know to stay out of hot water with the Centers for Medicare & Medicaid Services (CMS).

How Innocent Overpayments Can Turn Sinister

On Feb. 12, CMS published in the Federal Register the much-debated final rule on Medicare overpayments — the so-called “60-day rule” — that requires providers and suppliers to report and return overpayments within 60 days of their identification. The final rule would subject providers and suppliers who retain overpayments beyond the 60-day time period to the reverse false claims provision under the False Claims Act, according to a Feb. 12 summary by Ropes & Gray LLP.

The 60-day rule came about from language contained in the 2010 Affordable Care Act (ACA) requiring providers to identify, report and return Medicare overpayments or else face false claims liability, Civil Monetary Penalties (CMPs), or even exclusion from Medicare.

Beware: “This rule makes the retention of an innocent overpayment a potential basis for a False Claims Act or exclusion or other horrible outcome for an organization,” warns Lawrence Vernaglia, a partner attorney with Foley & Lardner LLP. “Determining whether in fact you were overpaid through a highly-complex Medicare regulatory scheme — and even if you were, how much you need to give back — is just not that easy.”

The final rule applies to Medicare Parts A and B, and a separate rule published in May 2014 applies to overpayments under Medicare Parts C and D (see www.cms.gov/Medicare/Provider-Enrollment-and-Certification/MedicareProviderSupEnroll/Downloads/CMS-4159.pdf). Although CMS has not published a final rule addressing Medicaid requirements, some states have developed their own guidance and requirements that may apply to overpayments, Ropes & Gray explained.

What’s the Lookback Timeframe?

Under the final rule, you must report and return overpayments only if you identify the overpayment within six years of the date you received the overpayment.

“This six-year lookback period is down from the 10-year period reflected in the proposed rule,” noted attorneys Stephanie Sprague Sobkowiak and Daniel Kagan of Murtha Cullina’s Health Care Group in a recent analysis. “This change aligns the final rule with similar state and federal record-retention requirements and helps to address providers’ concerns regarding the burden and cost of a 10-year lookback period.”

The six-year lookback is not retroactive, however, and will be effective as of March 14, 2016. But CMS advises providers and suppliers that the ACA statutory requirements have been in effect since 2010.

Translation: “This means that all providers and suppliers reporting and returning overpayments on or after March 14, 2016 — even overpayments received prior to March 14, 2016 — must comply with the new regulatory requirements,” stated a recent analysis by Foley & Lardner LLP.

Understand the Meaning of ‘Identification’

One of the most contested elements of the proposed rule was the meaning of “identified” in terms of when the clock starts ticking for reporting and returning overpayments. The final rule does provide additional helpful guidance regarding when an overpayment is “identified” and thus when the 60-day time period begins for returning the overpayment, according to Sobkowiak and Kagan.

Rule of thumb: Under the ACA, a provider must report and return an overpayment by the later of:

i. The date which is 60 days after the date on which the overpayment was identified; or

ii. The date any corresponding cost report is due, if applicable.

“The final rule makes clear that the 60-day clock starts only after the provider, using reasonable diligence, determines and quantifies the amount of the overpayment,” Sobkowiak and Kagan stated. And “reasonable diligence” means the timely, good-faith investigation of credible information, which would take at most six months following the receipt of the credible information, except in extraordinary circumstances (i.e., complicated self-referral law violations, natural disasters, or states of emergency).

Although CMS’s commentary indicates that “reasonable diligence may include an audit and subsequent extrapolation to arrive at the reasonable overpayment amount,” CMS also makes clear that providers must engage in proactive measures to determine whether they’ve received overpayments, Sobkowiak and Kagan noted. “Simply waiting for a problem to come to light is not enough.”

“As you would expect, maintaining documentation of all investigatory efforts is critical and should not be overlooked,” Sobkowiak and Kagan stressed. “Of course, if the provider did in fact receive an overpayment and fails to conduct reasonable diligence, the 60-day clock starts to tick on the date that the provider received credible evidence of the overpayment.”

Follow This Refund Process

Although the proposed rule suggested that providers and suppliers use the voluntary refund process when reporting and returning overpayments, the final rule provides further explanation, according to Ropes & Gray. “CMS has now clarified that providers and suppliers may use the claims adjustment, credit balance, self-reported refund process, or other appropriate process to report and return overpayments.

CMS hopes this approach will provide an array of familiar options from which providers and suppliers can choose for returning overpayments. And the final rule grants CMS the right to change this process or create new processes in the future as it sees fit.

Also, the final rule does not limit you to reporting a self-identified overpayment using either the CMS-managed or the HHS Office of Inspector General (OIG)-managed Self-Referral Disclosure Protocol. Instead, CMS will consider you to be in compliance with the 60-day rule’s provisions as long as you’re actively engaged in either protocol.

Important: “Regardless of the process used, the refund should include an explanation of the statistical sampling methodology used if an overpayment was calculated by extrapolation,” Ropes & Gray noted.

Employ 3 Strategies to Avoid the Hidden Trap

“Organizations need to change the way they’re doing business to avoid the trap that the 60-day refund rule creates,” Vernaglia cautions. Here are some strategies you can use:

1. Utilize a variety of triggers. Your organization needs to have “many new triggers to alert folks higher up that they might be dealing with a Medicare or Medicaid overpayment,” Vernaglia recommends.

2. Launch a reasonable inquiry. “You need to have a process in place to be able to judge whether or not a concern, a complaint, or a hotline call really represents an overpayment,” Vernaglia says. “And you need to have a methodical way of addressing that” — something that CMS has referred to as a “reasonable inquiry” or “reasonable diligence.”

3. Restructure your financial streams. “Organizations need to be restructuring the way they’re looking at their patient financial services and their revenue cycle so that they can catch those potential overpayments before they linger in the system for too long and create liability and exposure,” Vernaglia notes.

The reasonable inquiry process “is an important job, because the failure to intercept these problems before somebody else does can bring real liability under the False Claims Act,” he adds.

Resource: To view the final rule in the Feb. 12 Federal Register, go to www.federalregister.gov/articles/2016/02/12/2016-02789/medicare-program-reporting-and-returning-of-overpayments.