Reporting and Returning Self-Identified Overpayments: the 60 Day Overpayment Rule
Overpayments occur, even in the most efficient and complaint provider settings. Overpayments may be isolated (e.g., adding a modifier to a claim) or involve hundreds of claims (e.g., inappropriately billing observational services). Overpayments may occur as a result of a mistake (e.g., a misinterpretation of coding/billing guidance), negligence and intentional fraud. Whether the overpayment is a mistake or intentional, healthcare providers participating in the Medicare and/or Medicaid programs have a responsibility to proactively identify overpayments and are legally mandated to return them.
Section 6402(a) of the Affordable Care Act (“ACA”) requires all Medicare and Medicaid overpayments to be reported and returned by the later of (1) the date which is 60 days after the date the overpayment was identified; or (2) the due date of any corresponding cost report, if applicable (“60 Day Overpayment Rule”). On February 12, 2016, the Centers for Medicare & Medicaid Services (“CMS”) released the final rule promulgating section 6402(a), which only applies to Medicare Parts A and B. In the final rule, CMS clarified the meaning of overpayment identification, the required look back period and available methods for reporting and returning identified overpayments.
What is the meaning of identification? A person has identified an overpayment when the person has or should have, through the exercise of reasonable diligence (defined below), determined that the person has received an overpayment and quantified the amount of the overpayment. In the final rule, CMS states that a person has a duty to make a reasonable inquiry when the person receives “credible information” of a potential overpayment. Credible information is a factual determination. Examples of credible information are results of a government audit, anonymous hotline complaint, single overpaid claim, and contractor overpayment determinations.
What is reasonable diligence? Under the rule, CMS requires “reasonable diligence” to identify overpayments. Reasonable diligence includes proactive compliance activities conducted in good faith by qualified individuals to monitor for overpayments; and reactive investigations conducted in good faith in response to credible information of a potential overpayment.
CMS has established a six (6) month presumptive maximum time for investigating and quantifying the overpayment from receipt of the credible information absent extraordinary circumstances. Extraordinary circumstances are unusually complex investigations that the provider reasonably anticipates requiring more than six (6) months to investigate. Examples include Stark investigation, and natural disasters or a state of emergency.
What is the look back period? Overpayments must be reported and returned within six (6) years of the date the overpayment was received. This is the maximum lookback period as established by regulation.
When does the 60-day countdown start? The 60-day clock does not start until reasonable diligence and quantifying the payment has occurred. This means that the 60-day time period starts after the six (6) month presumptive maximum time.
How to report and return overpayments? In the final rule, providers should report and return overpayments using applicable claims adjustment, credit balance, self-reported refund or any other reporting process set forth by the Medicare contractor. Providers can also utilize the OIG’s Self-Disclosure Protocol or under the CMS Voluntary Self-Referral Disclosure Protocol. When a self-disclosure is submitted to either the OIG or CMS the deadline for returning the overpayment is suspended until a settlement agreement is entered or the person withdraws or is removed from the applicable protocol. This suspension is not applicable if a self-disclosure is made to any other agency, like Department of Justice of Assistant U.S. Attorney.
What actions should Compliance Departments take in light of the 60 Day Overpayment Rule?
- Review the regulations and discuss with in-house general counsel
- Revise the organization’s internal audit of claims policy, identification and returning of overpayment protocol, and documentation retention policies
- Evaluate internal investigation processes and update, as needed
- Update training and conduct supplemental training
Failure to comply with the final rule can result in civil monetary penalties, False Claims Act litigation and potential exclusion from the Medicare program. Therefore, healthcare providers must ensure that they have a robust compliance program that takes reasonable proactive and reactive measures that identifies, reports and returns overpayments.
 42 C.F.R. § 401.305(a)(2)
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 81 FR 7661 (February 12, 2016)
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 Id. at 7659 – 7660
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