By Douglas A. Grimm, FACHE
On Feb. 16, 2012, the Centers for Medicare & Medicaid Services issued its long-awaited proposed rule implementing a provision of the Patient Protection and Affordable Care Act that requires health care providers and suppliers to self-report and return overpayments to Medicare or face liability under the False Claims Act. This proposed rule provides much-needed guidance on the precise timing of when an overpayment must be reported and refunded to Medicare. Comments to the proposed rule were due by April 16, 2012.
I. “Overpayments” Defined
Section 6402(a) of the PPACA requires providers and suppliers to “report and refund” an “overpayment” by the later of “60 days after the date on which the overpayment was identified” or “the date any corresponding cost report is due, if applicable.” The PPACA also expressly makes the reporting and returning of overpayments an “obligation” under the FCA, so that the failure to return an overpayment within the applicable deadline is itself an FCA violation. An “overpayment” is broadly defined as any funds received from Medicaid or Medicare to which a person is not entitled. Section 6402(a) applies to Medicare Part A and B providers and suppliers, Medicare Advantage organizations, Medicaid managed care organizations, and Medicare Part D prescription drug plans. Therefore, failure to report and return may lead to potential FCA liability.
CMS proposes that an overpayment is considered “identified” once a “person has actual knowledge of the overpayment or acts in reckless disregard or deliberate ignorance” of the overpayment. These terms echo precisely those of the FCA’s “knowledge” requirement.
II. Identification of an Overpayment
The proposed rule explains that when a provider or supplier receives information about a potential overpayment, it must conduct a “reasonable inquiry” to determine whether an overpayment, in fact, exists. CMS recognizes that providers and suppliers need time to conduct a “reasonable inquiry” to confirm that an overpayment exists. Only after an overpayment is confirmed and the provider or supplier has actual knowledge of the overpayment does the 60-day clock begin to tick.
The proposed rule provides several examples of events triggering “identification” of an overpayment, such as a provider’s discovery:
(i) that services are incorrectly coded;
(ii) that a patient death occurred prior to the service date on a claim; or
(iii) that services were provided on behalf of the provider by an excluded individual.
The problem lies in the gray area of time between the “identification” of an overpayment and the point at which a provider has “actual knowledge” of the overpayment, as the proposed rule assumes that the provider or supplier will receive information concerning the potential overpayment.
The statute also permits providers submitting cost reports to report certain types of overpayments when the cost report is due, rather than within 60 days of identification. However, the proposed rule expressly states that claims-based payments must be returned within 60 days. Therefore, the proposed rule limits this route of reporting to only non-claims-based payments, such as disproportionate share funds or graduate medical education payments.
III. Process for Reporting and Return of Overpayments
Overpayments are reported and returned to the provider’s or supplier’s Medicare Administrative Contractor, using CMS’ existing voluntary refund process delineated in Chapter 4 of the Medicare Financial Management Manual. While CMS intends to develop a standardized overpayment reporting form, in the interim, providers and suppliers should employ the voluntary refund form that their MAC makes available. CMS points out that reporting and returning overpayments “cannot resolve any potential False Claims Act or [Office of Inspector General] administrative liability associated with the overpayment (even though returning an overpayment may, among other benefits, limit any FCA or administrative liability arising from the retention of any overpayment).” CMS states that providers and suppliers “should be aware that the contractors will scrutinize overpayments received through this process and may make referrals to OIG whenever the contractors believe circumstances warrant such a referral.” Thus, providers and suppliers are on notice that the return of overpayments does not insulate the affected party from further investigation that the MACs deem appropriate.
The proposed rule addresses the potential conflicts arising as a result of the requirements of the Medicare Self-Referral Disclosure Protocol and the OIG Self-Disclosure Protocol. Specifically, CMS proposes two exceptions relating to the procedures for reporting and refunding certain overpayments for the SRDP and the SDP. First, if a provider or supplier makes a report through the SRDP, that provider or supplier is not required to return the overpayment. Second, if a provider or supplier makes a report to the OIG through the SDP, the provider or supplier’s obligation to return and report the overpayment is suspended. However, the provider or supplier is still obligated to report the overpayment pursuant to the process delineated in the proposed rule.
IV. The Lookback Period
Consistent with the outer limit of the FCA’s statute of limitations, the proposed rule adopts a 10-year “lookback” period. Overpayments must be reported and returned if a provider or supplier identifies the overpayment within 10 years of the date on which the overpayment was received. To effectuate this 10-year lookback period, CMS has proposed amending its reopening rules, which currently allow Medicare contractors to reopen claims only within a four-year period, absent wrongdoing. CMS is particularly interested in hearing comments on the proposed length of the lookback period.
Noticeable in its absence is any corresponding mention of the reopening of cost reports for underpayments benefiting the provider, or any discussion of the fact that CMS does not impose document retention requirements on providers for a 10-year period. Finally, the reopening regulations are designed to address routine payment errors, not to address fraud as does the FCA. Thus, CMS should anticipate comments from the provider community regarding the proposed conflation of the time periods contained in the administrative finality rules with the time frame for recovering fraudulent payments under the FCA.
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