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CMS Has Issued Proposed Rule Which Would Force Providers to Report Overpayments in 60 Days

The Centers for Medicare & Medicaid Services (“CMS”) released proposed regulations on Tuesday, February 14, 2012 proposing that providers and suppliers must report any self-identified overpayments within 60 days of the incorrect payment being identified or on the date when a corresponding cost report is due, whichever is the latter.

A Medicare overpayment includes any funds that a person receives or retains under Medicare to which the person was not entitled.  Examples of an overpayment would include duplicate submissions, payment for non-covered services, etc.

Section 6402 of the Patient Protection and Affordable Care Act (“ACA”) created possible False Claims Act liability and possible program exclusion for the knowing concealment or avoidance of a repayment obligation.  The statute broadly defined the provider’s obligations but did not provide specifics on several topics such as when an overpayment is deemed to be “identified” or how long providers were obligated to look back when identifying potential overpayments.

The proposed regulations are intended to further define the general obligation that was included in the ACA.  In addition, CMS has proposed a 10-year look back period.  This means that providers will be obligated to report overpayment obligations that they discover which date back as far as ten years from the date they identify the overpayment.

In the proposed regulations, Centers for Medicare & Medicaid Services interpreted an overpayment as being “identified” when the provider knows that an overpayment may exist.  CMS adopted the knowledge standard of the False Claims Act and stated that an overpayment is “identified” when a person acts with actual knowledge of, in deliberate ignorance of, or with reckless disregard to the existence of an overpayment.  Thus, a provider has a duty to investigate the claim if the provider receives information about a potential overpayment.  By way of example, if a provider’s compliance officer receives a tip or report of a suspected overpayment, the provider has an affirmative duty to investigate the tip or report in a timely manner to determine if an overpayment was actually made, or would risk potential liability under the False Claims Act under the reckless disregard or deliberate ignorance standard.  In the proposed regulations, CMS stated that when a review of payment or billing records reveals improper coding, then an overpayment will be deemed to have been “identified” under the proposed rule.  The full text of the proposed regulations can be found at 77 Fed. Reg. 9179 (February 16, 2012).

Compliance officers and providers should pay close attention to the proposed regulations.  Any failure to report and return an overpayment within the applicable time frame could be deemed a violation of the False Claims Act.  Providers may also be subject to criminal charges, civil monetary penalties, or excluded from participating in federal health care programs for failure to report and return an overpayment in a timely manner.

Christopher Shaughnessy is a Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Mr. Shaughnessy concentrates his practice area in health care law and is located in the firm’s Lexington office.  He can be reached at cshaughnessy@mmlk.com or at (859) 231-8780, ext. 1251. 

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

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