Located in Section 6402(a) of the ACA (Social Security Act Section 1128J(d)), the “60-day rule” requires any person who receives an overpayment of Medicare or Medicaid funds to report and return the overpayments to the Secretary of Health and Human Services, the state, or a Medicare contractor, as appropriate, at the correct address, and to notify the Secretary, the state, or a Medicare contractor to whom the overpayment was returned in writing of the reason for the overpayment. The overpayment must be reported and returned 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. Failure to return an overpayment after the deadline for reporting and returning the overpayment creates potential False Claims Act liability with respect to the overpayment.
Overview of the Final Regulations
The final regulations address many of the potential ambiguities created by the 60-day rule. Key points from the final regulations include:
• Identification of Overpayment: An area of ambiguity under Section 1128J(d) has been when an overpayment is considered “identified.” The final regulations provide that providers and suppliers are expected to use “reasonable diligence” to determine whether an overpayment exists. CMS indicates that “reasonable diligence” includes “both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments and investigations conducted in good faith and in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.” 81 Fed. Reg. 7654, 7661 (February 12, 2016). • Time Period for “Reasonable Diligence”: CMS expects that for the majority of overpayments, the period of “reasonable diligence” should not last longer than six months from receipt of credible information. However, it does acknowledge that “extraordinary circumstances” may require a longer period of reasonable diligence. CMS notes that what constitutes “extraordinary circumstances” is fact specific, but it states that examples of extraordinary circumstances include physician self-referral law (“Stark law”) violations that are referred to the CMS Voluntary Self-Referral Disclosure Protocol (“SRDP”), natural disasters, or a state of emergency. Once the investigation has been completed, providers and suppliers should submit a repayment within 60 days. Thus, absent “extraordinary circumstances,” CMS expects overpayments to be investigated and repaid within eight months. • Start of 60-Day Period: CMS confirmed that the 60-day period does not begin until “either the reasonable diligence is completed or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment.” 81 Fed. Reg. 7654, 7661 (February 12, 2016). CMS further notes that when a provider or supplier determines that it has received an overpayment, the 60-day period does not begin until the amount of the overpayment has been quantified. The 60-day period is suspended if a provider or supplier participates in the Office of Inspector General Self-Disclosure Protocol or the SRDP. • Overpayment Lookback Period: Under the proposed regulations, a provider or supplier was required to report and return overpayments if they were identified within ten years of the date the overpayment was received. According to CMS, the ten year lookback period was proposed to conform to the outer limit of the False Claims Act statute of limitations. The final regulations reduce the lookback period to six years. CMS notes that providers who submitted overpayments under the SRDP prior to the effective date of the final regulations (i.e., March 14, 2016) will still be subject to a four-year lookback period; however, SRDP submissions after the effective date of the final regulations will be subject to the six-year lookback period. • Reporting and Returning Overpayments: Providers and suppliers must use an applicable claims adjustment, self-reported refund, credit balance, or other appropriate process to satisfy the obligation to report and return overpayments. • Underpayments: Several commenters to the proposed regulations inquired about the process for recovering underpayments, and whether underpayments could be offset against overpayments when determining the amount of repayment. CMS clarified in the preamble to the final regulations that the issue of underpayments is outside of its rulemaking regarding Social Security Act Section 1128J(d). • Medicare Secondary Payer Overpayments: CMS confirmed that Medicare Secondary Payer refunds are also subject to the 60-day rule and final regulations. • Anti-Kickback Statute: Several commenters to the proposed regulations questioned how the 60-day rule applies to providers or suppliers who receive possible overpayments as a result of schemes that violate the Anti-Kickback Statute when the providers or suppliers were not themselves a party to the scheme. CMS notes in the preamble to the final regulations that providers and suppliers who are not a party to a kickback arrangement are unlikely to “identify” a payment that would be required to be repaid. However, to the extent that providers and suppliers do have knowledge of a kickback arrangement that results in overpayments, providers and suppliers must report the overpayment to CMS in accordance with the final regulations. • No De Minimis Exception: Despite requests from several commenters, CMS declined to adopt a de minimis exception to the 60-day rule, noting that a de minimis exception would be susceptible to abuse. CMS does indicate that it may establish a minimum monetary threshold for cost-report related overpayments, but states that any such threshold would be published in program guidance or future rulemaking.
• Identification of Overpayment: An area of ambiguity under Section 1128J(d) has been when an overpayment is considered “identified.” The final regulations provide that providers and suppliers are expected to use “reasonable diligence” to determine whether an overpayment exists. CMS indicates that “reasonable diligence” includes “both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments and investigations conducted in good faith and in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.” 81 Fed. Reg. 7654, 7661 (February 12, 2016).
• Time Period for “Reasonable Diligence”: CMS expects that for the majority of overpayments, the period of “reasonable diligence” should not last longer than six months from receipt of credible information. However, it does acknowledge that “extraordinary circumstances” may require a longer period of reasonable diligence. CMS notes that what constitutes “extraordinary circumstances” is fact specific, but it states that examples of extraordinary circumstances include physician self-referral law (“Stark law”) violations that are referred to the CMS Voluntary Self-Referral Disclosure Protocol (“SRDP”), natural disasters, or a state of emergency. Once the investigation has been completed, providers and suppliers should submit a repayment within 60 days. Thus, absent “extraordinary circumstances,” CMS expects overpayments to be investigated and repaid within eight months.
• Start of 60-Day Period: CMS confirmed that the 60-day period does not begin until “either the reasonable diligence is completed or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment.” 81 Fed. Reg. 7654, 7661 (February 12, 2016). CMS further notes that when a provider or supplier determines that it has received an overpayment, the 60-day period does not begin until the amount of the overpayment has been quantified. The 60-day period is suspended if a provider or supplier participates in the Office of Inspector General Self-Disclosure Protocol or the SRDP.
• Overpayment Lookback Period: Under the proposed regulations, a provider or supplier was required to report and return overpayments if they were identified within ten years of the date the overpayment was received. According to CMS, the ten year lookback period was proposed to conform to the outer limit of the False Claims Act statute of limitations. The final regulations reduce the lookback period to six years. CMS notes that providers who submitted overpayments under the SRDP prior to the effective date of the final regulations (i.e., March 14, 2016) will still be subject to a four-year lookback period; however, SRDP submissions after the effective date of the final regulations will be subject to the six-year lookback period.
• Reporting and Returning Overpayments: Providers and suppliers must use an applicable claims adjustment, self-reported refund, credit balance, or other appropriate process to satisfy the obligation to report and return overpayments.
• Underpayments: Several commenters to the proposed regulations inquired about the process for recovering underpayments, and whether underpayments could be offset against overpayments when determining the amount of repayment. CMS clarified in the preamble to the final regulations that the issue of underpayments is outside of its rulemaking regarding Social Security Act Section 1128J(d).
• Medicare Secondary Payer Overpayments: CMS confirmed that Medicare Secondary Payer refunds are also subject to the 60-day rule and final regulations.
• Anti-Kickback Statute: Several commenters to the proposed regulations questioned how the 60-day rule applies to providers or suppliers who receive possible overpayments as a result of schemes that violate the Anti-Kickback Statute when the providers or suppliers were not themselves a party to the scheme. CMS notes in the preamble to the final regulations that providers and suppliers who are not a party to a kickback arrangement are unlikely to “identify” a payment that would be required to be repaid. However, to the extent that providers and suppliers do have knowledge of a kickback arrangement that results in overpayments, providers and suppliers must report the overpayment to CMS in accordance with the final regulations.
• No De Minimis Exception: Despite requests from several commenters, CMS declined to adopt a de minimis exception to the 60-day rule, noting that a de minimis exception would be susceptible to abuse. CMS does indicate that it may establish a minimum monetary threshold for cost-report related overpayments, but states that any such threshold would be published in program guidance or future rulemaking.
For more information about the final regulations or to receive E-Bulletins from the Health Law Committee, please contact Health Law Committee Vice-Chairs Rick Rifenbark of Foley & Lardner LLP (213-972-4813; rrifenbark@foley.com) or Charles Oppenheim of Hooper, Lundy & Bookman, PC (310-551-8110; coppenheim@health-law.com).