Rebecca Campbell Mar. 2, 2016, 10:18am


WASHINGTON (Legal Newsline) – The Centers for Medicare and Medicaid Services (CMS) has issued a new rule stating that companies have within 60 days to return overpayments from federal governments after it identifies the overpayment.

The much anticipated final rule concerning Section 6402(a) of the Affordable Care Act means that Medicare and Medicaid providers, suppliers and managed care contractors have to report and return an overpayment by the later of “60 days after the date upon which the overpayment was identified or the date any corresponding cost report was due, if applicable.”

The requirements in the rule are aimed at ensuring the compliance with related statutes, promote the furnishing of high quality care, in addition to protecting the Medicare Trust Funds from fraud and improper payments.

Tony Maida, a partner at McDermott Will & Emery, who was involved in creating the final rule, told Legal Newsline that the rule will help businesses.

“The rule will help companies defending False Claims Act suits because having a regulation is better than the risk of having the meaning of the statute litigated in separate judicial districts,” Maida said.

However, Maida added that there are many unanswered questions about how False Claims Act lawsuits will play out regarding those who knowingly conceal, or knowing and improperly avoiding reporting and returning an identified overpayment.

“We have already started to see relators increasingly include this allegation in complaints, so I expect to see that further increase following the final rule,” Maida said.

In an effort to respond to many concerns within the industry, CMS reduced the lookback period from the proposed 10 years to six years, while clarifying its "identified" standard and simplifying how companies should report and return overpayments.

Under the new rule, the 60-day clock begins when a provider has identified an overpayment, which includes proactive compliance activities such as internal audits and reactive activities such as internal investigations of credible information of a potential overpayment.

However, the most important issue in the rule, the meaning of "identified," will be debated as controversial by many, Maida said.

“It essentially creates a negligence standard by saying that you have identified an overpayment when you should have determined through exercising reasonable diligence that you have received an overpayment,” Maida said.

They key element of the final rule is the emphasis CMS has put on the importance of compliance programs in making sure that providers meet the “reasonable diligence” concept.

Many commentators to the rule’s proposed preamble were concerned about the meaning of the rule’s “reckless disregard or deliberate ignorance of the overpayment” standard and whether the time proposed was enough for the provider to take steps to conclude whether or not it had received an overpayment and, if so, the amount.

CMS is clear that providers have a period of time to conduct the “reasonable diligence” to determine if they have an overpayment and the amount before the 60-day clock report and return starts, Maida said.

“CMS said it applies a six-month 'benchmark' to measure how long this 'reasonable diligence' should take, absent extraordinary circumstances or complex matters, such as a Stark issue,” Maida said.

While Maida thinks the benchmark is unrealistic due to the complicated nature of Medicare laws and rules, the rule applies to a wide ride of situations from a simple error to a complex, multi-year situation.

“The government expects providers to move forward on reviewing potential overpayment issues in a reasonable manner,” Maida said. “[While] it’s not a sprint, it not a Sunday walk in the park [either].”

CMS’s final rule will become effective on March 14.

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