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CMS Publishes Proposed Rule on Self Disclosure of Overpayments

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On February 16, 2012, the Centers for Medicare & Medicaid Services issued a long-awaited proposed rule to establish regulations regarding the reporting and returning of overpayments to the Medicare program (77 Fed. Reg. 9,179 (Feb. 16, 2012)). The proposed regulations at 42 C.F.R. Part 401, subpart D would implement § 6402(a) of the Affordable Care Act (Public Law 111-148), in part, by outlining the disclosure and repayment policies and procedures applicable to Medicare Part A and Part B providers and suppliers. While the proposed regulations apply only to this subset of providers and suppliers at this time, CMS notes in the preamble of the proposed rule that the statutory requirements of § 1128J(d) of the Social Security Act (regarding the obligation to report and return overpayments) continue to apply to all stakeholders despite the absence of established regulations.

This article provides an overview of the proposed requirements for reporting and refunding overpayments, and additional guidance from the Preamble that illustrates CMS's current thinking on overpayment disclosures and repayments. Critical changes to related provisions, such as the timeframe for reopening claims, will also be addressed.

I. Reporting and Refund Requirements

The proposed regulations provide that overpayments should be reported using the "self-reported overpayment refund process" and the existing reporting form established by the applicable Medicare contractor for the claim(s) at issue, until CMS is able to develop a uniform reporting form. CMS notes that most contractors request the following information on the voluntary refund forms to allow for proper identification of the affected claim(s):

• the beneficiary's health insurance claim number;
• the provider's (or supplier's) name, Medicare provider number, tax identification number and Medicare National Provider identification;
• the date(s) of service or timeframe at issue and the Medicare claim control number, as appropriate;
• a summary of how the error was discovered;
• a description of the corrective action plan implemented to ensure the error does not occur again;
• the reason for the refund and the total amount of the refund;
• the refund for the amount of the overpayment or a request for an extended repayment plan, if needed;
• whether the provider/supplier has a Corporate Integrity Agreement with the Office of Inspector General or is under the OIG Self Disclosure Protocol; and
• if a statistical sample was used to determine the overpayment amount, a description of the statistically valid methodology used to determine the overpayment.

The proposed regulations clarify that the above reporting process to the Medicare contractor does not apply if the disclosure was made to the OIG using the OIG's protocol and resulted in a settlement agreement.

II. Reporting and Refund Deadlines and Defined Terms

The Proposed Regulations mirror the language of § 1128J(d) of the Social Security Act in requiring a provider or supplier to report and return an overpayment within 60 days of "identification" or, if applicable, the due date of the corresponding cost report. In the preamble, CMS clarifies that the option to wait for the cost report due date is only permitted if the overpayment at issue would typically be reconciled on the provider's cost report, such as an overpayment related to graduate medical education payments. In contrast, claims-based overpayments, such as those related to an upcoding issue, are subject to the 60-day reporting requirement because such an overpayment would not ordinarily be reconciled on the cost report.

A source of much ambiguity is the use of the term "identification" in determining the start of the 60-day time clock for reporting. The proposed regulations would clarify that a provider or supplier has identified an overpayment if there is actual knowledge of the existence of the overpayment or the person acts in reckless disregard or deliberate ignorance of the existence of the overpayment. In a key passage, CMS notes in the preamble that:

We believe Congress' use of the term "knowing" in the ACA was intended to apply to determining when a provider or supplier has identified an overpayment. We believe defining "identification" in this way gives providers and suppliers an incentive to exercise reasonable diligence to determine whether an overpayment exists.

CMS added that "[w]ithout such a definition, some providers and suppliers might avoid performing activities to determine whether an overpayment exists such as self-audits, compliances checks, and other additional research." Thus, CMS leaves no doubt that there is not merely an obligation to self-report known overpayments, but also an obligation under certain circumstances to make reasonable inquiry regarding the existence of an overpayment.

CMS provides the following examples "[i]n order to assist providers and suppliers with understanding when an overpayment has been identified":

• A provider's review of billing or payment records shows that certain services were incorrectly coded, resulting in increased reimbursement;
• A provider discovers the patient was deceased prior to the service date on the claim;
• A provider learns that the services were provided by an unlicensed or excluded individual;
• A provider is informed by a government agency of an audit that discovered a potential overpayment, but the provider fails to make a reasonable inquiry, which includes failure to conduct an inquiry with deliberate speed after obtaining the information (which suggests that the provider is acting in reckless disregard or deliberate ignorance of the overpayment); and
• A provider experiences a significant increase in Medicare revenue, there is no apparent reason for the increase, such as a new partner added to a group practice or a new focus on a particular area of medicine, and the provider fails to make a reasonable inquiry into why the revenues have increased (which suggests that the provider is acting in reckless disregard or deliberate ignorance of the overpayment).

CMS uses these examples to emphasize that "[w]hen there is reason to suspect an overpayment, but a provider or supplier fails to make a reasonable inquiry into whether an overpayment exists, it may be found to have acted with reckless disregard or deliberate ignorance of any overpayment." For providers, the difficulty will be in determining what constitutes sufficient "reason to suspect an overpayment."

III. Look-back Period for Reports/Refunds and Related Changes to the Reopening Rules

The proposed regulations also provide for a 10-year look-back period for overpayment disclosures, meaning that a provider or supplier is no longer liable for an overpayment if the overpayment is identified 10 years or more after the date that the overpayment was received. CMS notes that this approach is consistent with the outside statute of limitations for the False Claims Act and, similar to a statute of repose, gives providers and suppliers a reasonable period after which they can close their books for accounting purposes.

However, this concession by the agency may come at a greater cost. To ensure the reopening regulations are consistent with the look-back period, CMS also proposes to amend the reopening rules at 42 C.F.R. § 405.980(b) to allow a contractor to reopen an initial determination or redetermination within 10 years if the overpayment is reported pursuant to the new proposed regulations. At this time, it is unclear from the proposed language whether such a revised reopening provision would only apply to those specific claims reported in the overpayment disclosure (i.e., to allow CMS to review the accuracy of the provider's overpayment determination) or whether CMS and/or its contractors would adopt a more expansive interpretation to allow for the reopening of any and all claims potentially related to an overpayment disclosure.

VI. Note about Anti-kickback Related Overpayments

CMS specifically discusses identification of overpayments that arise due to a violation of the anti-kickback statute, stating that since compliance with the anti-kickback statute is a condition of payment, claims for items or services resulting from a violation of the statute are within the purview of the False Claims Act. CMS recognizes that "in many instances, a provider or supplier is not a party to, and is unaware of the existence of, an arrangement between third parties that causes the provider or supplier to submit claims that are the subject of a kickback." Nevertheless, CMS notes that "[t]o the extent that" a provider or supplier who is not a party to a kickback arrangement has sufficient knowledge of the arrangement to have identified the resulting overpayment, the provider or supplier must report the overpayment to CMS. In that event, CMS expresses its "expectation […] that only the parties to the kickback scheme would be required to repay the overpayment that was received by the innocent provider or supplier, except in the most extraordinary circumstances."

V. Conclusion

The proposed regulations and the preamble make it clear that providers and suppliers cannot take refuge in an actual knowledge standard and that their compliance culture and efforts may be a factor in determining whether an overpayment exists. Furthermore, as CMS increases its efforts to encourage provider self-reporting, the potential impact of any overpayment disclosures becomes exponential if the reopening provisions are expanded to a 10-year period without additional clarification.

The comment period for the proposed rule is open until April 16, 2012.

Learn more about Arnall Golden Gregory.

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