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Proposed Rule for Overpayment Refunds — 10 year look-back and more

Posted in Department of Health and Human Services

On February 16, CMS published a proposed rule regarding providers’ obligation to return any overpayments within 60 days of identifying such overpayment.  The proposed rule expounds on 60-day repayment obligation, which became effective in 2010 with the passage of PPACA, in ways that may give providers comfort in some areas but that will likely lead to increased litigation if adopted without change.  The proposed rule would (1) impose a duty to refund any overpayments in the last 10 years, (2) give some guidance (though not exact) about when the 60-day clock starts running and what investigation obligations exist, (2) lists the information the provider needs to report with a refund.

Click “Continue Reading” below for more in-depth discussion of these issues.  Also reporting on the proposed rule are Nathaniel Lacktman, Lawrence Vernaglia, and Judith Waltz, and Edward Kornreich, Elizabeth Mills, Richard Zall and Ryan Blaney, and Rachel Sladja.

Comments to the proposed rule are due April 16.  Numerous comments are likely.

The proposed rule includes a number of development that will change the way providers research overpayments and make refunds to the government.  Experienced guidance and prompt action will be even more important in the future, should the rule be adopted as currently drafted.  Three areas (discussed further below) that will be particularly important to watch as the rule develops are (1) the 10-year look-back, (2) the new definition of “identification” that starts the 60-day clock, and (3) an increase in the amount of information that has to accompany any refund.

1.  Probably the most important development with the proposed rule is the requirement that providers refund all overpayments that occurred any time in the last 10 years.  This is a substantial expansion on the amount of time that was generally considered to be “at issue” in the industry.  CMS explains that it chose this period to correspond to what it considers to be the outside statute of limitations for the False Claims Act.  This increase, coupled with the investigation obligation discussed below, could result not only in greater liability for providers and more whistleblower lawsuits, but also greater expense and time in investigating and analyzing potential overpayments. 

2.  On the brighter side for providers, the proposed rule appears to give some flexibility as to what constitutes “identification” of the overpayment and starts the 60-day clock.  The clock would start ticking when the provider has actual knowledge of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment (i.e., should investigate but does not).  This guidance is good news for providers, as it appears to allow for additional time for investigation of overpayment allegations.  Specifics (actual knowledge of the amount, actual knowledge of any systemic causes, etc.) are likely to get resolved through investigations and eventually litigation.

This additional time would not be available, though, if the provider does not undertake a reasonable investigation or does not do so with less than “all deliberate speed.”  Again, exactly what triggers the duty to investigate remains somewhat unclear.  The examples of triggering events, though, include notice from the government of a potential overpayment, compliance hotline tips, and increase in Medicare revenue for no obvious reason.

3.  Finally, the proposed rule specifies that overpayments would have to be made through what is now the voluntary refund process (to be re-named the self-reported overpayment refund process) and include specific information, including (i) how the error was discovered, (ii) the reason for the refund, (iii) an action plan to prevent future overpayments, (iv) protocol in effect, (v) the time frame and amount of the refund, (vi) statistics used to determine the overpayment, and (vii) the existence of any CIAs or OIG Self-Disclosure Protocol.  This requirement seems designed to prevent providers who try to quietly refund overpayments without addressing the problem that gave rise to the overpayment.  

In sum, the proposed rule could have a significant impact on provider’s exposure for overpayments.  The public comment period remains open until April 16, and it is likely many stakeholders will provide substantive comments addressing the three issues above, as well as other portions of the proposed rule.