Paying It Back: Overpayment Obligations of Medicare Providers
It was akin to what they call in Louisiana lagniappe (pronounced "lan-yap"), meaning a little something extra. Except in this case, it was excessively more than expected. Back in 2019, the U.S. Internal Revenue Service (IRS) seized a Lexus and $919,250 in cash from a Florida man who was mistakenly sent a tax refund of $980,000 on a reported income of $18,497, according to the Tampa Bay Times. The moral of the story is this: if you receive a windfall of funds that seems too good to be true, it probably is. That is, it is probably best to assume that someone made a mistake, and it would behoove you to set things straight before going on an unrestrained spending spree.
Those who make their living by providing medical services that are reimbursed by insurance companies and government health plans know full well that the above scenario is not only plausible but pretty typical. Perhaps it's not to the tune of a million dollars or anywhere near that amount; but, several times a year, a provider will be overpaid on a procedure here or a service there. Overpayments may occur for any number of reasons, such as errors in documentation, coding, medical necessity determination or processing (e.g., double payment). So, mistakes in payment are going to happen. The question is, what is the provider's responsibility when they do?
Identified by the Provider
According to Medicare regulations, a provider has 60 days to refund an overpayment that has been identified by the provider or his/her billing agent. However, at this point, we must dig down into the weeds a bit. If identification (of the overpayment) starts the 60-day clock, we now need to determine what constitutes such identification. According to the 2016 Medicare Physician Fee Schedule (PFS) Final Rule (FR), identification includes the time necessary to investigate, confirm and quantify the amount of the repayment. The 2016 FR indicated that six months would be a reasonable limit for this process. So, potentially, once a provider or his/her billing agent suspects that an overpayment has occurred, a total of eight months may elapse before the repayment is required (six months to investigate and two months to repay). However, a late December 2022 Proposed Rule (PR) appears to diminish the leniency of this investigative period. As comments on the PR are allowed until February 13, we will not know for some weeks whether these proposed changes will be codified in a Final Rule.
It is also important to note a couple of more items relative to this self-identified remittance. First, it matters not the size of the overpayment identified by the provider. Even if it is a matter of a few cents, the provider is obligated to send that nominal amount back to Medicare. So, there is no "$10 or more standard," as some may assume. Second, when returning the self-identified overpayment, the provider must include an explanation as to what caused the overpayment. It is recommended that the explanation be as specific as possible, though there is no need to be overly verbose. For example, "Medicare paid us twice for this single service" would suffice to meet this requirement where Medicare errantly paid both the medically directing doctor and the medically directed CRNA at the 100-percent allowable rate on each such claim.
Identified by Medicare
Sometimes, it is the Centers for Medicare and Medicaid Services (CMS) or one of the Medicare administrative contractors (MACs) that will discover an overpayment. According to a 2022 Medicare Learning Network (MLN) article, when it is determined that a provider received an overpayment of $25 or more, its MAC must initiate the overpayment recovery process by sending a demand letter requiring repayment. The demand letter will contain helpful information, including: (a) name and MBI of patient involved; (b) dates and types of services overpaid; and (c) how interest will accrue, and at what rate.
After receiving a demand letter requiring return of an overpayment, a provider may request one of the following methods of repayment:
- *Immediate Recoupment. A provider may request immediate recoupment for all future overpayments that may occur or for one specific overpayment. Unless a provider specifies it as a one-time request, the immediate recoupment request applies to all current and future debts. Upon the provider's request, the MAC recovers an overpayment by offsetting future payments to satisfy the overpayment amount. Generally, written requests for an immediate recoupment are classified as voluntary repayments. Accordingly, immediate recoupment requested by the provider isn't subject to calculation of interest under section 935(f)(2)(B) of the Medicare Modernization Act.
- *Standard Recoupment. A MAC automatically begins standard recoupment according to the Overpayment Debt Collection Activities schedule (see MLN referenced above for schedule). If the debt becomes delinquent, interest may accrue.
- *Extended Repayment Schedule (ERS). If a provider can't make the full repayment in the required timeframe, ERS provides request instructions in the MAC's demand letter
Providers also have a couple of options should they disagree with the government's determination of overpayment. One option involves the provider submitting a rebuttal within 15 calendar days from the date of the demand letter. The rebuttal should provide evidence why the MAC shouldn't recoup the payment. The MAC will promptly evaluate the rebuttal statement. However, a rebuttal does not stop recoupment activities. The second option involves an appeal, which does act to pause the recoupment process.
Finally, the lookback period on Medicare overpayments is six years. That means that if either the provider or the government finds an overpayment over a previous six-year period, the repayment process must be initiated.