A Chapter of the American College of Healthcare Executives March 2016
In This Issue
President's Message
Message from Your ACHE Regent
Fellow Spotlight: Rosalee Allan, FACHE
60 Days to Return Medicare Overpayments?
Building Rapport
Inspire Positivity Through Constructive Criticism
Member Announcements
UW Executive MHA and Medical Management Programs
WSU Spokane MHPA program
ACHE: Become Board Certified in Healthcare Management
ACHE Tuition Waiver Assistance Program
Your Career & Development - JOB BANKS
DELIVERY of WSHEF Newsletter (Disclaimer)
2016 Officers and Board Members
WSHEF Vision & Values
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Volunteer Opportunities
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Chapter Officers

Martin Benning, FACHE

Dina O'Leary, FACHE

Immediate Past President
Karin Larson-Pollock, MD, MBA, FACHE

Lori Nomura, JD

Jim Cannon, MHA, FACHE

60 Days to Return Medicare Overpayments?
Lori Nomura and Philip Paine

Final Rule for the Return of Medicare Overpayments

The Centers for Medicare and Medicaid Services (CMS) recently issued the long-awaited final rule (Final Rule) for the reporting and returning of overpayments for Medicare Parts A and B. The Final Rule implements Section 6402(a) of the Affordable Care Act (ACA),  known as the Overpayment Law, which requires a person who has received an overpayment to report and return the overpayment within a specified period. The Final Rule contains some welcome relief to certain elements of the proposed rule (Proposed Rule), issued in February 2012, and gives providers greater clarity of their obligations under the law. 

While the Final Rule is effective on March 14, 2016, the Overpayment Law has been in effect since the ACA was enacted in March 2010. The Final Rule, however, is not retroactive, and providers that reported and/or returned overpayments in good faith before the Final Rule’s effective date are not expected to have complied with each provision of the Final Rule. Providers returning overpayments on or after the effective date of the Final Rule, however, must comply with the new regulatory requirements.

The Overpayment Law requires that any person (defined to include Medicare providers and suppliers) who receives an overpayment must report and return the overpayment to the Secretary, the State, an intermediary, a carrier or a contractor and notify that party in writing of the reason for the overpayment. The deadline for reporting and returning an overpayment is the later of (a) the date which is 60 days after the date on which the overpayment was identified or (b) the date any corresponding cost report is due, if applicable. If an overpayment is retained by a person after the applicable deadline, it becomes an obligation for purposes of False Claims Act (FCA) liability. The Final Rule clarifies a number of elements of the Overpayment Law including: (1) when an overpayment is “identified”; (2) the required lookback period once an overpayment is identified; and (3) the process for reporting and returning overpayments. 

(1) When an Overpayment is Identified:  The Final Rule provides that a person has identified an overpayment when that 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. CMS describes "reasonable diligence" to include both proactive compliance activities conducted in good faith to monitor the receipt of overpayments and timely, good faith investigations in response to credible information of a potential overpayment. While CMS acknowledges that “reasonableness” is fact-dependent, CMS further indicates that undertaking no or minimal compliance activities to identify overpayments exposes providers and/or suppliers to liability based on a failure to exercise reasonable diligence. 

Importantly, the Final Rule clarifies that a provider may conduct the auditing and analysis necessary to quantify an overpayment before the 60-day time period begins to run. The 60-day time period to report and return an overpayment begins to run either when the reasonable diligence is completed or on the day the person received credible information of the potential overpayment if no reasonable diligence was conducted and the person in fact received an overpayment. The Final Rule abandons the Proposed Rule’s compliance benchmark of “all deliberate speed,” but that does not mean that the diligence period is without limits. CMS cautions that the reasonable diligence period should be completed within six months absent extraordinary circumstances. What constitutes “extraordinary circumstances” is a fact-specific inquiry, but CMS suggested that unusually complex investigations, such as physician self-referral law violations that are referred to the CMS Voluntary Self-Referral Disclosure Protocol, might qualify. After the reasonable diligence period, the 60-day time period begins to run. 

(2) Lookback Period: In the Proposed Rule, CMS proposed a ten-year lookback period meaning that any overpayment must be reported and returned if a person identified the overpayment within ten years of the date the overpayment was received. CMS explained that it initially proposed the ten-year period because that was the outer limit of the FCA statute of limitations. However, many commenters objected, arguing that a ten-year lookback period was unduly burdensome and in conflict with existing record retention requirements. The Final Rule shortened the lookback period to six years. Many commenters suggested using a four-year lookback period consistent with the reopening rules at 42 C.F.R § 405.980.  While CMS elected to utilize the six-year period instead, the Final Rule makes clear that CMS is amending the reopening rules to provide for a reopening period that accommodates the six-year lookback period for reporting and returning overpayments.

(3) Process for Reporting and Returning Overpayments: CMS instructs providers to use existing processes to report and return overpayments. This means that providers should use an applicable claims adjustment, credit balance, self-reported refund or another appropriate process to satisfy the reporting and return of overpayments. 

In the Proposed Rule, CMS proposed a specific list of 13 data elements required for overpayment reporting. The Final Rule abandons the list of data elements to accommodate reporting by existing processes.  CMS continues to believe, however, that “where an overpayment amount is extrapolated based on a statistical sampling methodology, it is necessary for the overpayment report to explain how the overpayment was calculated.”  Consequently, the Final Rule requires that, pursuant to 42 C.F.R § 401.305, if the overpayment was calculated using a statistical sampling methodology, the statistically valid sampling and extrapolation methodology must be described in the overpayment report.

Conclusion: The Final Rule contains specific guidance on how to identify overpayments, the steps needed to exercise “reasonable diligence,” and the duty on providers to proactively engage in compliance monitoring activities and investigate credible information that an overpayment has been received. The Final Rule also establishes a six-year lookback period and specifies the process for reporting and returning overpayments. Providers should reevaluate their audit and compliance programs to ensure consistency with the guidance contained in the Final Rule. 

Lori Nomura, Secretary, WSHEF Board of Directors
    Healthcare Attorney, Foster Pepper PLLC

Philip Paine
    Healthcare Attorney, Foster Pepper PLLC

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