In 2014, the Centers for Medicare & Medicaid Services (CMS) published its then-long-awaited final rule implementing and interpreting the “60-day” overpayment rule, which was signed into law by President Obama four years prior as part of the Affordable Care Act. That final rule covered only Medicare Parts C and D. It was another two years before CMS published its final rule on the same topic for Medicare Parts A and B.
CMS’s 2014 and 2016 guidance on overpayment refund obligations was relatively straightforward; at least as far as CMS guidance goes. Generally speaking, the overpayment rule provides that a Medicare enrollee must report and return an overpayment within 60 days of identification (or by the date any corresponding cost report is due, if applicable).[i]
In its 2016 final rule, Medicare adopted a “reasonable diligence” standard and clarified that enrollees have up to six months from receiving “credible information” of a potential overpayment in which to investigate whether that enrollee did, in fact, receive such an overpayment. After that six month period, the enrollee has an additional 60 days to report and refund that overpayment to Medicare, for a total of eight months from the date of receiving the credible information.[ii] Under the current framework, then, so long as an enrollee reports and refunds an overpayment within eight months of receiving credible information, it will been deemed to have acted with “reasonable diligence” as far as CMS is concerned, and will have satisfied the overpayment rule.
In December 2022, however, CMS issued a proposed rule which would change the current framework in a very important respect. Specifically, CMS now proposes,
[T]o remove the existing “reasonable diligence” standard and adopt by reference the False Claims Act definition of “knowing” and “knowingly” as set forth at 31 U.S.C. 3729(b)(1)(A). Under the proposed rule, an MA organization, Part D sponsor, provider or supplier has identified an overpayment if it has actual knowledge of the existence of the overpayment, or acts in reckless disregard or deliberate ignorance of the overpayment.[iii]
In order to implement its stated goal of eliminating the “reasonable diligence” standard, CMS proposed to amend the overpayment refund regulation (42 C.F.R. § 401.305) by removing the following language:
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. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.
And replacing it with the following language:
A person has identified an overpayment when the person knowingly receives or retains an overpayment. The term “knowingly” has the meaning set forth in 31 U.S.C. 3729(b)(1)(A)
While CMS is extremely sparce on details of its current proposal, the implications for Medicare enrollees could be significant as it would completely eliminate the “reasonable diligence” standard and replace it with a more rigid “knowledge” standard familiar to attorneys in the False Claims Act space.
More specifically, under the proposed rule in its current form, the day an enrollee knows or should know of an overpayment, it has exactly 60 days to report and refund that overpayment to Medicare. If the provider is found to have acted in reckless disregard or with deliberate ignorance in identifying the overpayment, then that provider could be found to have violated the 60-day overpayment rule. Not only could this lead to certain administrative consequences, but because knowingly and improperly retaining an overpayment is also a violation of the False Claims Act,[iv] the provider could also face an FCA enforcement action by the DOJ.
Thankfully, public comment is open until February 13, 2023, so healthcare providers and other interested stakeholders are encouraged to provide comment in order to help shape CMS’s proposed amendment to this important rule.
[i] See, e.g., 42 C.F.R. § 401.305.
[ii] 81 F.R. 7653 (March 2016).
[iii] 87 F.R. 79452 (Dec. 2022)
[iv] 31 U.S.C. § 3729(a)(1)(G).