CMS Overpayment Rule

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On February 11, 2016, HHS published the long-awaited final CMS OVERPAYMENT RULE. 42 CFR Parts 401 and 405.  The rule requires providers and suppliers receiving Medicare Part A and Part B funds to report and return overpayments by the later of 60 days after the date on which the overpayment was identified; or any corresponding cost report is due, if applicable.

Here are some significant provisions that could affect False Claims Act litigation for reverse false claims based on wrongful retention of Medicare funds due to the failure to report and return overpayments:

  1. The rule is limited to Medicare and does not include Medicaid.
  2. The rule covers only “providers” and “suppliers” (Part A and Part B); MAOs, Medicaid MCOs and PDPs (Part C and Part D) were already addressed separately in a rule issued in 2014.
  3. The look back period would be 6 years (from when the overpayment was received), not 10 years as in the proposed rule from 2012.
  4. The overpayment would have to  be properly reported and refunded within 60 days of when it  is “identified.”
  5. “ Identified” means when a 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.”  (Or 60 days from when  cost report reconciliation is filed, if applicable and if later).
  6. A reasonable amount of time to investigate an overpayment was received and to quantify the amount should not exceed 6 months, except in extraordinary circumstances.
  7. Overpayment Liability exists even if the overpayments were the result of inadvertence or innocent mistakes or errors; fraud conduct is not required.
  8. The amount of an overpayment is generally “the difference between the amount that was paid and the amount that should have been paid.” However, for claims tainted by violations of the Anti-Kickback Statute or Stark Law, CMS typically will view the overpayment as the full amount received by the provider.
  9. Sufficient documentation and medical necessity are longstanding and fundamental prerequisites to Medicare coverage and payment and can be the basis of overpayment liability.
  10. Providers cannot offset identified overpayments with identified underpayments.
  11. The rule becomes effective March 12, 2016.


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