New Final Rule from CMS Re Medicare Overpayments

Medicare Overpayments: Severe Penalties -Even Small Providers Must Comply

Effective March 16, 2016 all providers receiving Part A or B Medicare payments are required to “report and return” any identified overpayments to Medicare. This Final Rule does not contain a materiality threshold, and thus applies to small and large providers alike. (Attached is a link to the CMS Press Release regarding these medicare overpayment regulations).

An “overpayment” is defined as any funds a person retains or received under Medicare or Medicaid to which the person is not entitled. Once an overpayment is “identified” and “quantified” by a provider, the payment must be reported and refunded to Medicare within 60 days. The penalties for non-compliance are severe, and include potential exclusion from Medicare and Medicaid programs and civil monetary penalties. (CMS did not address Medicaid overpayments in the Final Rule but by analogy the Final Rule provides valuable guidance, as do as state law requirements).

Providers have the burden to monitor their Medicare claims and to have a compliance program. For smaller providers the compliance program can be of a lesser scale and require fewer resources than for larger providers. Once a provider has “credible information” that an overpayment has occurred, it has up to six (6) months to conduct a reasonable and diligent investigation to determine if an overpayment has occurred, and if so, to “quantify” it. The provider then has sixty (60) days to report and refund the overpayment. “Credible information” can come from many different sources, including hotline calls or a whistleblower, or a lower level employee becoming aware of an alleged overpayment. “Credible information” is not defined in the law and will be decided on a case-by-case basis.

If a provider has credible information that an overpayment may have occurred, but the overpayment is more than six years old, the Final Rule does not apply. CMS makes it clear in the Final Rule that the provider is ultimately responsible for the reporting and returning of the overpayment even if the provider was not responsible for the overpayment. For example, if its biller or coder made a mistake or it has inaccurate eligibility information from a vendor.

What should healthcare providers do to comply Medicare Overpayments:

  • adopt a compliance program consistent with the Final Rule regulations;
  • monitor compliance with Medicare billing regularly;
  • if credible information indicates overpayments may have occurred, the provider should conduct an investigation with “reasonable diligence” (which depending on the circumstances could take up to six months), and ;
  • if an overpayment is identified the provider should “quantify” the overpayment (and then report and refund it within 60 days thereafter);
  • providers must keep all records pertaining to this compliance for six years.
    In sum, this is another burden and expense for healthcare providers, not matter how small. However, because the penalties are so severe, providers must comply diligently and keep all relevant records for at least six years.

CMS Press Release regarding these medicare overpayment regulations: