Four years after publication of its proposed rule related to reporting and returning overpayments within 60 days, CMS has issued a final rule that responds to comments and provides greater clarity. The published rule is under the Affordable Care Act requirement that providers report Medicare and Medicaid overpayments and return the overpayment within 60 days of the date it was identified. Failure to repay timely creates potential liability under the False Claims Act.

Providers expressed concern with the standards for determining with sufficient certainty when an overpayment had been identified. Anxiety was heightened with a decision from the United State District Court for the Southern District of New York that notice of a potential overpayment starts the 60-day clock, without regard to whether the overpayment amount had been quantified. [Our prior blog on this topic can be viewed here.]

Reasonable diligence: With this final rule, effective March 13, 2016, CMS has clarified the standard and recognized that identification of an overpayment involves a reasonable process of investigation. The final rule specifies that identification has occurred when a provider “has or should have, through the exercise of reasonable diligence,” determined that there has been an overpayment and quantified the amount of the overpayment.

The provision in the proposed rule requiring “all deliberate speed” was not adopted as part of the final rule, with an acknowledgement from CMS that reasonable diligence is demonstrated through timely, good faith investigation of credible information. Unless there are extraordinary circumstances, investigations must be completed within six months to be considered timely. CMS suggested that six months to investigate, and another 60 days to report and refund any overpayment, requires appropriate attention and recognizes that investigations require time and resources.

Look-back Period: The final rule also specifies that the look-back period for reporting and returning overpayments is six years, rather than the ten year look-back period that had been part of the proposed rule. Although longer than many commenters urged, there is relief from an onerous review of ten years of claims data.