February 19, 2016

Providers Required to Refund Medicare Overpayments

A long-awaited, if not celebrated, federal regulation that defines terms for refunding Medicare overpayments is raising the financial and legal stakes for American College of Radiology (ACR) members and their practices.

The new rule stems from one of the Affordable Care Act’s numerous anti-fraud and abuse provisions that target “overpayments.” The statute requires a person, such as an individual radiologist or group practice, to report and return overpayments to the secretary of the Department of Health and Human Services (DHHS), an appropriate state governing authority or a Medicare intermediary, carrier or contractor.

Notification and repayment must occur by the later of either the date that is 60 days following the date when the person identifies the overpayment or the date any applicable cost report is due. Significantly, the law also obligates a person to notify any of these stakeholders in writing about the reason for the overpayment. Failure to report and return an overpayment within the prescribed time will lead to potential liability under the Civil False Claims Act.

The Centers for Medicare and Medicare Services (CMS) issued a proposed rule in 2012 to implement this mandate, but it took four more years to issue a final rule, which emerged on Feb. 12, 2016.

The agency’s regulation defines “overpayment” as any funds that a physician, a provider or group has received or retained under Medicare law to which they, after reconciling their accounts, are not entitled to retain. For example, ACR members or their practices might have received Medicare payments for non-covered services, or they might have obtained a duplicate payment or a Medicare payment when another insurer had primary responsibility to pay the member’s or practice’s claim. Alternatively, a carrier or intermediary might have paid more than the allowable amount for an identified covered service. CMS acknowledged that a member or practice has to conduct “reasonable diligence” to determine if an overpayment has occurred and to calculate its amount.

CMS initially planned to impose a 10-year “look back” period, but, after significant opposition from medical and hospital communities, the centers ultimately decided to require members or their practices to report and return overpayments only if they are identified within six years of the date when the overpayment was received.

To comply, ACR members should use an applicable claims adjustment, credit balance, self-reported refund or similar process to decide if an overpayment might exist. Members should work with their business staffs or outside professionals to analyze billing and claims records – if necessary, going back the requisite six years. Qualified legal counsel in your state should be consulted to answer any question about whether some amount might represent an overpayment subject to the rule.

The ACR discourages its members from returning suspected overpayments without first thoroughly investigating the facts. You have a legal obligation to report and return an actual overpayment, but you should act prudently before taking that major step. Simply writing and mailing a refund check might raise questions rather than solve problems.

For more information, contact Tom Hoffman in Legal or Pam Kassing in Economics and Health Policy. The CMS Final Rule is posted on the Federal Register website.