When Medicare reimburses more than was due a provider, keeping the overpayment and failing to return it within 60 days is a violation of the federal False Claims Act. Penalties are three times the amount of the improper payment plus up to $11,000 per claim. The law does not require a specific intent to defraud.
Until recently, however, the law has been unclear as to when exactly the 60 day period begins. A provision in the Affordable Care Act (ACA) requires that overpayment be paid back to the government within 60 days of the “date on which the overpayment was identified”. The ACA, however, does not define what it means by “identified”, leaving unclear exactly when the 60-day period starts. Regulations proposed by CMS in February 2012 and a 2015 court opinion that attempted to define the beginning date also fall short of a full clarification.
On February 16, 2012 CMS proposed regulations providing that overpayments in both Part A and Part B would be “identified” when a provider has “actual knowledge of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.”
In the 2015 case Kane v. Healthfirst Inc., both the government and the district court agreed that identification of an overpayment occurs on the date when the provider is “put on notice that a certain claim may have been overpaid”. It remained unclear what would happen if the provider could not determine the amount of the overpayment within 60 days. Further, there remained the question of how far back a provider must review overpaid claims.
On February 12, 2016, CMS released final regulations on the reporting and return of overpayments. The new provision defines exactly when an overpayment is identified and eliminates uncertainty in situations where the overpayment amount is unclear by requiring quantification of the overpayment amount as an essential component of identification.
The final rule states that “a person has identified an overpayment when the 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.”
The new definition means that the 60 day period for an overpayment to be returned to the government does not begin until the provider, through reasonable diligence, has determined both that it received an overpayment and the amount of the overpayment. If the provider fails to exercise reasonable diligence, the 60 day payback period starts immediately. According to CMS in the Preamble to the rule, reasonable diligence includes both proactive compliance activities conducted in good faith and in a timely manner by qualified individuals after obtaining credible information about a potential overpayment.
The regulation is silent on how much time the provider may take to complete its investigation, but CMS has held that six months is a reasonable time limit to investigate and quantify an overpayment, and then 60 days is a reasonable limit to report the overpayment.
A provider may report the overpayment and repay it to their administrative contractor or the provider may make a disclosure under either the OIG self-disclosure or CMS voluntary self-referral protocol. The 60 day payback period runs while the provider is actively engaged in one of those protocols.
Instead of the 10-year lookback proposed by CMS in 2012, the final rule requires only a six-year lookback when identifying an overpayment.