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					Legal Advisory
March 14, 2012

REPORTING AND RETURNING MEDICARE
OVERPAYMENTS
On February 14, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule
implementing a provision in the Patient Protection and Affordable Care Act (ACA) that requires a health
care provider or supplier that received an overpayment from the Medicare program to report and return
the overpayment by the later of 60 days after the date the overpayment was identified, or the date any
corresponding cost report is due, if applicable. Failure to meet the deadline can result in liability under
the False Claims Act (FCA). The proposed rule was published in the Federal Register on February 16.
Comments are due April 16.

BACKGROUND
The overpayment provision was enacted in the ACA as a result of expansions to the FCA in the Fraud
Enforcement and Recovery Act of 2009 (FERA). In FERA, Congress made “retention of an
overpayment” a basis for FCA liability. It was added in response to concerns that a contractor or other
recipient of federal funds would recognize an overpayment had occurred and either not return the funds or
significantly delay a return to reap further unearned financial benefit. As a result, anyone who “knowingly
conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or
property to the Government” is subject to FCA liability. The term obligation is defined to include a duty
“arising from the retention of an overpayment.” Prior to enacting the overpayment provision in the ACA,
there was no explicit statutory obligation in the Social Security Act to return overpayments from the
Medicare and Medicaid programs. The purpose of this provision was to fill that gap.


AT ISSUE
There are three core components of the ACA overpayment provision: receipt of an overpayment,
identification of an overpayment, and reporting and returning an overpayment within a 60-day deadline.
The following is a summary of CMS’s proposed approach to implementing the statute for the Medicare
program.
Overpayment
The proposed definition of overpayment is consistent with the statute: any funds that a provider or supplier
receives or retains from Medicare to which they are not entitled after applicable reconciliation. Examples
of an overpayment could include payments in excess of the allowable amount for a covered service,
duplicate payments and payment when another payer had primary responsibility.

The allowance for “reconciliation” was added in response to concerns from the AHA and others that the
original bill language would interfere with the routine reconciliation processes built into government
programs to determine amounts due or owing between the government and providers and prematurely
start the 60-day clock. CMS’s interpretation of what is covered under reconciliation is unreasonably
narrow. Instead of allowing for a netting-out of identified underpayments and overpayments while an
associated cost report is still open, only items submitted for payment directly through the cost report would
be treated as part of a reconciliation process. This will create unnecessary burden for hospitals and
prevent maximum use of an established process for reconciling over-and underpayments. The proposed
rule also would interfere with the current process for rebilling to correct a claim if done within the “timely
filing” period.

Identification of an Overpayment
The statute does not define identified. Under the proposed rule an overpayment would be identified
when a person has actual knowledge of the existence of an overpayment or acts in reckless disregard or
deliberate ignorance of the overpayment. The agency’s explanation for this expansive definition is that it
“gives providers and suppliers an incentive to exercise reasonable diligence to determine whether an
overpayment exists. Without such a definition, some providers and suppliers might avoid performing
activities to determine whether an overpayment exists, such as self-audits, compliance checks, and other
additional research.”

The AHA believes this is one of the most significant and problematic provisions of the proposed rule.
The duty to report and return begins when an overpayment is identified and that is when the 60-day clock
starts running. Instead of implementing the statute’s report and repay obligation, the agency has created
a sweeping and unfounded duty to investigate, threatening FCA exposure unless a hospital can effectively
guarantee that no mistake will ever be made or no mistake is ever undiscovered. That is an impossible
standard – for providers and the government.

Contrary to providing an incentive for reasonable proactive audit compliance activities, the proposed rule
fails to acknowledge the substantial commitment of resources hospitals voluntarily make to stay current
with the latest permutations of guidance, bill correctly the first time and correct mistakes that do occur.
Indeed, in its September 23, 2010 program integrity rulemaking, CMS endorsed hospitals’ continued
reliance on the Department of Health and Human Services’ Office of Inspector General’s (OIG) guidance
for compliance program activities. The proposed rule also ignores the reality of the current landscape of
government audits and reviews to which hospitals are subjected. They face a barrage of reviews and
audits (e.g., Medicare Administrative
Contractors, Recovery Audit Contractors), many of which result in questionable determinations that are
being successfully challenged (requiring the expenditure and diversion of significant resources).

Calculating the Amount of an Overpayment
The proposed rule would create a 10-year “look-back” period for calculating the amount of any
overpayment. And it would expand the period during which CMS may reopen a claim from the current
four-year period to 10 years. The agency’s explanation for the expansion is to match the statute of
limitations for the FCA. CMS does not create a similar expansion of the period during which a provider
may reopen a claim to recoup an underpayment; it remains at four years.

A 10-year look-back is unwarranted, impossible or impractical, and is prohibited retroactive rulemaking.
Relying on the FCA is no justification for the expanded look-back and further demonstrates that the
agency is trying to rewrite the statute. There is no acknowledgment of the burden that is being created or
any cost/benefit analysis. It appears to assume that if a button is pushed, 10 years worth of claims are
immediately available (i.e. the current software and systems have been static for 10 years, all data tapes
are kept and on site) and that an automated determination can be made of whether an overpayment was
received (i.e., what was the controlling guidance at every point in the 10-year period, whether an error
was made, and whether, with corrected billing, an overpayment was ultimately received and, if yes, what
was the amount).

Reporting and Returning an Overpayment
CMS proposes to use the current voluntary refund process (Pub. 100-06, Ch. 4 Medicare Financial
Manual) as the mechanism for receiving overpayments and to rename it the “self-reported overpayment
refund process.” CMS acknowledges that the current reporting form varies across contractors, and it
plans to create a uniform form. In the interim, the form of the applicable contractor should be used. The
deadline for returning an overpayment is 60 days after it is identified or an applicable reconciliation.
There is no automatic extension for “hardship.” If additional time is needed due to financial constraints,
the existing Extended Repayment Schedule process would apply.

The proposed rule would create a carve-out for overpayments disclosed to the OIG under its
Self-Disclosure Protocol (SDP). Using the OIG process would satisfy the reporting obligation under the
new rule, and the 60-day deadline for repayment would be suspended until completion of the OIG
process. A disclosure under the CMS Self-Referral Disclosure Process (SRDP), however, would only toll
the 60-day deadline; a report would still have to be filed under the new process.

A disclosure under the CMS SRDP should toll the 60-day deadline and satisfy the reporting requirement
under the new rule. It should be treated the same as is a disclosure to the OIG.

CMS should also move promptly to remedy the confusion it has created regarding the intersection of the
proposed rule and existing processes related to the various types of
government audits and reviews of providers (e.g., Medicare Administrative Contractors, Recovery Audit
Contractors). The agency should confirm that this rule does not apply to any claims or issues that are the
subject of any government review. Similarly, it should confirm that the rule does not affect use of the
“timely filing” process.


NEXT STEPS
The AHA is developing a comment letter and we would welcome your input. Comments are due April 16.
Watch for a model comment letter for your use a few weeks before the deadline.


FURTHER QUESTIONS
Contact Maureen Mudron, deputy general counsel, at (202) 626-2301 or mmudron@aha.org.

				
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