The 2010 Patient Protection and Affordable Care Act (“PPACA”) imposed an obligation upon Medicare providers, including physicians, hospitals, nursing homes and home health agencies, to report and return any overpayments they receive within 60 days of identification of the overpayment.  Failure to do so could result in substantial penalties to the provider under the False Claims Act even if the original billing was not itself a false claim.  Until now, there was no guidance for providers on how to comply with these requirements.

On February 16, 2012, the Centers for Medicare and Medicaid Services (CMS) published proposed regulations interpreting the 60-day rule.

Overpayments can include Medicare payments for non-covered services, Medicare payments in excess of the allowable amount for an identified covered Service, receipt of duplicate payments, and receipt of Medicare payments when another payor had the primary responsibility for payment.

The moment of identification of the overpayment becomes quite important, as that is when the 60-day refund clock begins to tick.  The rule defines identification as “actual knowledge, wreckless disregard or deliberate ignorance” of the overpayment, and provides several examples to help providers determine date of identification, such as:

  • During a review of billing, it is learned that an incorrect code was used which resulted in a higher payment;
  • A provider of services or supplier learns that a patient death occurred prior to the service date on a claim that has been submitted for payment;
  • A provider of services or supplier learns that services were provided by an unlicensed or excluded individual on its behalf;
  • A provider of services or supplier performs an internal audit and discovers that overpayments exist.

During the 60 day period following identification, providers should fully investigate the matter in order to determine the exact amount of the overpayment.  Note that 60 day clock begins upon knowledge of an overpayment and not upon determination of the exact amount of the overpayment.  The actual “report and return” of the overpayment will include detailed information regarding the overpayment, incliding amount, how it was discovered, and how the provider will prevent future occurrences.

In considering the potential effect of the proposed rule on Medicare providers, CMS estimates it will take only 2.5 hours, and cost $92.75 of labor, for providers to investigate, report and return a discovered overpayment.  Such a low estimate may leave compliance savvy providers scratching their heads, as thorough investigations frequently require many hours of review and research, with the labor of multiple inside staff, and often includes consultation with legal counsel and compliance or billing consultants.

(Note: A 60-day period to refund overpayments should sound familiar to Medicaid providers in New York.  The New York State Office of the Medicaid Inspector General imposed similar requirements for Medicaid overpayments in response to PPACA, which were discussed in detail in its September 2010 Webinar #3 on Self-Disclosure.  The only substantial difference is that OMIG does not require repayment until it has had the opportunity to verify the amount of the overpayment.)