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CMS finalizes the 60-day overpayment rule and providers can breathe a little easier

The wait is over – in February, the Centers for Medicare & Medicaid Services (“CMS”) released its Final Rule on identifying, reporting, and returning overpayments to the Medicare and Medicaid programs. This rule is the result of provisions in the Patient Protection and Affordable Care Act (“ACA”) which created a 60-day safe harbor during which providers can identify overpayments by the two major federal healthcare programs. If a provider fails to report an overpayment within 60 days of the date that it was identified, the overpayment may be considered a violation of the federal False Claims Act (“FCA” - for more information on the FCA, please read my earlier blog posts). The Final Rule implementing this provision became effective on March 14, 2016.

Providers have been waiting with bated breath for clarity on certain provisions of the 60-day rule. For example, when does CMS consider an overpayment to have been “identified”? While in Kane v. Continuum Health Partners, Inc. (for more on this decision, please read our McBrayer healthcare law blog post “Providers Wary after First Ruling on 60-Day Rule”), the court found that a provider had failed to exercise reasonable diligence in quantifying a potential overpayment, CMS has clarified in the 60-day rule that an overpayment has not been truly “identified” until a provider “has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.” 42 C.F.R. § 401.305(a)(2) (emphasis added).

Calculator and stethoscopeIn other words, mere notice of a potential overpayment does not constitute ‘identification’ of an overpayment, and reasonable diligence in investigating and quantifying a potential overpayment will not trigger the 60-day window to return the payment in question to CMS. This pragmatic approach encourages providers to remain vigilant in their investigations of overpayments. CMS does indicate, however, that six months is a sufficient length of time to identify and quantify an overpayment once providers have noticed a potential issue.

Also of concern to many healthcare providers is the lookback period for identifying potential overpayments. In the Proposed Rule published by CMS in 2012, providers were subject to a ten-year “lookback” period for the identification of potential overpayments. Many providers criticized this as an unreasonable administrative burden.  CMS has addressed this concern by now defining the lookback period as “within 6 years of the date the overpayment was received.” 42 C.F.R. § 401.305(f).

Generally speaking, the Final Rule appears to be something of a relief for healthcare providers in light of the provisions indicated four years ago in the Proposed Rule. Providers should use reasonable diligence when quantifying and reporting overpayments, but the standard for identifying overpayments and the lookback period for doing so are nowhere as stringent as those initially proposed. For more information on the 60-day Final Rule, contact your McBrayer healthcare attorney.

This article is intended as a summary of federal and state law and does not constitute legal advice.

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