Medicare Doesn't Care if You Knew or Not ... Because You Should Have, 0317 SCBJ, SC Lawyer, March 2017, #24

• Author: Will Thomas and Walt Cartin, J.

Medicare Doesn't Care if You Knew or Not ... Because You Should Have

Vol. 28 Issue 5 Pg. 24

South Carolina Bar Journal

March, 2017

Will Thomas and Walt Cartin, J.

Introduction and background

In February 2016, the Centers for Medicare and Medicaid Services (CMS) released the final version of the 60-day overpayment rule, which can be found in full at 42 C.F.R. §§ 401.301 - 401.305. The final rule describes the requirements imposed on providers and suppliers for reporting and returning overpayments received from Medicare Parts A and B.^[1] Although this particular rule is new, providers and suppliers receiving Medicare funds have been required to report and return identified overpayments since the enactment of the 2010 Affordable Care Act.^[2] Through the final rule, CMS aims to clarify providers' and suppliers' requirements so that they may more effectively identify, report and return overpayments.^[3] However, the rule's language may instead leave readers scratching their heads and asking themselves what full compliance actually requires.

It will serve providers and suppliers well to be aware of the rule's ambiguities and the potential problems they may encounter in their attempts to comply. The terms "reasonable diligence," "identification" and "credible information" appear relatively straightforward at first glance, but upon closer inspection, readers may feel that the rule falls short of producing the desired clarity that CMS sought to achieve. While providers and suppliers are likely familiar with what is required once they have identified and calculated an overpayment, many may not realize that the rule can also expose them to liability for failing to identify the overpayments in the first place.

Failing to comply with the rule could subject providers and suppliers to ruinous financial penalties. Not only will they be required to return all overpaid funds back to Medicare, but a violation of the rule is also considered an "obligation" under the False Claims Act.^[4] Those who fail to comply with the rule will be liable for three times the amount of the overpaid funds, an additional and substantial fine for each and every claim involved with the overpayment, and all costs incurred by the government in the action to recover the funds.^[5] Further, providers and suppliers should be aware that, in June 2016, the Department of Justice published an interim final rule, which significantly increased per claim penalties for False Claims Act violations.^[6] The rule is effective as of August 1, 2016,^[7] and per claim penalties increased to a new minimum-maximum range of $10,781 and$21,562.^[8]

Throughout this article, there will be references to the final rule's actual language as codified in the Code of Federal Regulations, as well as commentary published in the Federal Register. To avoid confusion, all references to statements made by "CMS" will indicate that these statements originate from the official commentary published in the Federal Register. This commentary is in no way meant to substitute the rule's actual language. Instead, it should serve as a guide for providers and suppliers in their efforts to comply with the requirements laid out in the final published version of the rule. The goal of this article is to serve as an aid to minimize, and hopefully eliminate, any potential liability providers and suppliers may face when receiving Medicare overpayments for their services.

Identifying overpayments

The rule re-emphasizes the requirement to report and return identified overpayments laid out in section 1128J of the Social Security Act, but it also implements the standard for what it means to "identify" an overpayment.^[9] Overpayments are considered identified when either one of the following situations occurs: (1) the provider or supplier has determined an overpayment was received, and the overpayment amount has been quantified; or

(2) the provider or supplier should have determined an overpayment was received, after the exercise of reasonable diligence.^[10]

CMS provides examples of situations in which it is likely an overpayment has been identified for the purposes of the rule, which include: • discovery of incorrect coding, which results in an overpayment;

• patient death occurred prior to service date on claim that has been submitted;

• services provided by an unlicensed or excluded individual;

• significant increases in Medicare revenue without an apparent reason and with no reasonable inquiry made; and

• internal or external audits discovering potential overpayments and with no reasonable inquiry made.^[11]

Although this is not an exhaustive list, CMS declined to address other factual circumstances in which an overpayment is likely identified for the purposes of the rule. Providers and suppliers should certainly consider an overpayment identified whenever they have actual knowledge of the overpayment, but they should also be aware of their duty to conduct an...