Anesthesia Practices Must Refund Overpayments within 60 Days—Final Rule
The Affordable Care Act requires Medicare physicians and others to report and return overpayments within 60 days after the date when an overpayment is identified. Four years after publishing its proposed rule, CMS issued a Final Rule on February 6, 2016 with the intent of providing “needed clarity and consistency for providers and suppliers on the actions they need to take to comply with requirements for reporting and returning of self-identified overpayments.”
Identification of an overpayment starts the clock for the repayment deadline of 60 days. The most significant point of clarification in the Rule is that “identification” of an overpayment occurs when “the person 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." Applying this principle may seem to require little explanation but CMS managed to spend nine pages discussing it in the Federal Register. It is also self-evident that often an attempt to reduce ambiguity ends up adding new ambiguities, and this final rule is one of those attempts.
A physician will typically be deemed to have acted with “reasonable diligence” if he or she conducts a “timely, good faith investigation” within “6 months from receipt of the credible information, except in extraordinary circumstances.” If the physician does not conduct such an investigation, lack of actual knowledge of the overpayment will not stand in the way of the enforceable obligation to repay the Government. The physician cannot rely on the “ostrich defense.” CMS specifies in its commentary that “If the requirement to report and return overpayments only applied to situations where providers or suppliers had actual knowledge of the existence of an overpayment, then these entities could easily avoid returning improperly received payments and the purpose of the section would be defeated.”
As stated in CMS Publishes Long-Awaited 60-Day Repayment Final Rule for Identified Overpayments, an alert recently posted by lawyers at Jones Day,
In addition, CMS uses its "reasonable diligence" standard to expand the provider's and supplier's obligations beyond merely investigating allegations of overpayments. Consistent with its position that the statute's requirement of repaying overpayments stands independently, CMS emphasizes in the preamble that "reasonable diligence" requires "proactive compliance activities" to identify overpayments, as well as reactive investigations into "credible information of a potential overpayment."
At the same time, however, expressly permitting the provider or supplier to conclude its "reasonable diligence" before an overpayment is deemed "identified" permits providers and suppliers additional time to conduct a factual investigation and then quantify any overpayment received, before the 60-day clock begins to run. For providers that do not exercise "reasonable diligence" when confronted with credible information of a potential overpayment, however, and that did receive overpayments, the repayment clock begins to run when they first receive that "credible information."
CMS provided a number of examples to help providers with understanding when an overpayment has been identified. The examples, “which were intended to be illustrative and not an exhaustive list of circumstances,” include the following:
- A provider of services or supplier reviews billing or payment records and learns that it incorrectly coded certain services, resulting in increased reimbursement.
- A provider of services or supplier performs an internal audit and discovers that overpayments exist.
- A provider of services or supplier is informed by a government agency of an audit that discovered a potential overpayment, and the provider or supplier fails to make a reasonable inquiry.
Many observers welcomed a second major feature of the Final Rule, the look-back period, which CMS has now set at six years instead of the ten years indicated in the proposed rule. Thus overpayments must be reported and returned only if a person identifies the overpayment within six years of the date the overpayment was received. (We note that CMS’ instructions to the Medicare Administrative Contractors had long been that they could reopen claims only from the past 48 months for review of potential overpayments.)
CMS explained that a six-year rule would “appropriately address many of the concerns about burden and cost” raised by commenters on the ten-year proposal, since “many providers and suppliers retain records and claims data for between 6 and 7 years based on various existing federal and state requirements.” CMS did not make clear, however, whether the look-back period combined with the “reasonable diligence” requirement means that practices must conduct audits to determine whether there have been any overpayments in their six-year payment history. At least one commentator (the author of a blog entry on the Squire Sanders Boggs website entitled “CMS’s Final Overpayment Rule: What Providers and Suppliers Need to Know”) thinks that that interpretation is the correct one:
CMS appears to confirm this in commentary relating to the 6-year lookback, stating “[t]hus providers and suppliers have a clear duty to undertake proactive activities to determine if they have received an overpayment or risk potential liability for retaining such overpayment.” In light of this, the Final Rule’s administrative impact may be significant.
Lastly, the Final Rule addresses the methods for reporting and returning overpayments. It provides that providers and suppliers must use an applicable claims adjustment, credit balance, self-reported refund or another appropriate process to satisfy the obligation to report and return overpayments. This approach for returning overpayments provides an array of familiar options from which physicians and others can select.
Compliance with the new regulations explaining the requirement is important because physicians who do not meet the 60-day deadline could be subject to False Claims Act or Civil Monetary Penalties Law liability (treble damages plus $11,000 per claim, civil monetary penalties, and exclusion from the Medicare and Medicaid programs). CMS stresses that all providers and suppliers are subject to the statutory requirements of the ACA and could face potential liability even if the conduct falls outside the scope of the Final Rule. The Rule goes into effect on March 14, 2016.