[Federal Register Volume 81, Number 29 (Friday, February 12, 2016)]
[Rules and Regulations]
[Pages 7654-7684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02789]
[[Page 7653]]
Vol. 81
Friday,
No. 29
February 12, 2016
Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 401 and 405
Medicare Program; Reporting and Returning of Overpayments; Final Rule
Federal Register / Vol. 81 , No. 29 / Friday, February 12, 2016 /
Rules and Regulations
[[Page 7654]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 401 and 405
[CMS-6037-F]
RIN 0938-AQ58
Medicare Program; Reporting and Returning of Overpayments
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule requires providers and suppliers receiving
funds under the Medicare program to report and return overpayments by
the later of the date that is 60 days after the date on which the
overpayment was identified; or the date any corresponding cost report
is due, if applicable. The requirements in this rule are meant to
ensure compliance with applicable statutes, promote the furnishing of
high quality care, and to protect the Medicare Trust Funds against
fraud and improper payments. This rule provides needed clarity and
consistency in the reporting and returning of self-identified
overpayments.
DATES: These regulations are effective on March 14, 2016.
FOR FURTHER INFORMATION CONTACT: Joe Strazzire, (410) 786-2775.
SUPPLEMENTARY INFORMATION:
I. Executive Summary and Background
A. Executive Summary
1. Purpose
On March 23, 2010, the Affordable Care Act was enacted. Section
6402(a) of the Affordable Care Act established a new section 1128J(d)
of the Social Security Act (the Act). Section 1128J(d)(1) of the Act
requires a person who has received an overpayment to report and return
the overpayment to the Secretary, the state, an intermediary, a
carrier, or a contractor, as appropriate, at the correct address, and
to notify the Secretary, state, intermediary, carrier or contractor to
whom the overpayment was returned in writing of the reason for the
overpayment. Section 1128J(d)(2) of the Act requires that an
overpayment be reported and returned by the later of-- (A) the date
which is 60 days after the date on which the overpayment was
identified; or (B) the date any corresponding cost report is due, if
applicable. Section 1128J(d)(3) of the Act specifies that any
overpayment retained by a person after the deadline for reporting and
returning an overpayment is an obligation (as defined in 31 U.S.C.
3729(b)(3)) for purposes of 31 U.S.C. 3729.
The requirements in this rule are meant to ensure compliance with
applicable statutes, promote the furnishing of high quality care, and
to protect the Medicare Trust Funds against fraud and improper
payments. This rule provides needed clarity and consistency in the
reporting and returning of self-identified overpayments. However, even
without this final rule, providers and suppliers are subject to the
statutory requirements found in section 1128J(d) of the Act and could
face potential False Claims Act (FCA) liability, Civil Monetary
Penalties Law (CMPL) liability, and exclusion from federal health care
programs for failure to report and return an overpayment. Additionally,
providers and suppliers continue to be required to comply with our
current procedures \1\ when we, or our contractors, determine an
overpayment and issue a demand letter.
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\1\ https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/MLN-Publications-Items/CMS1243389.html.
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2. Summary of the Major Provisions
a. Meaning of Identification
Section 1128J(d) of the Act provides that an overpayment must be
reported and returned by the later of--(i) the date which is 60 days
after the date on which the overpayment was identified; or (ii) the
date any corresponding cost report is due, if applicable. This final
rule states that a person has identified an overpayment when the person
has or should have, through the exercise of reasonable diligence,
determined that the person has received an overpayment and quantified
the amount of the overpayment. Creating this standard for
identification provides needed clarity and consistency for providers
and suppliers on the actions they need to take to comply with
requirements for reporting and returning of self-identified
overpayments.
b. Lookback Period
This final rule states that overpayments must be reported and
returned only if a person identifies the overpayment within 6 years of
the date the overpayment was received. Creating this limitation for how
far back a provider or supplier must look when identifying an
overpayment is necessary in order to avoid imposing unreasonable
additional burden or cost on providers and suppliers.
c. How to Report and Return Overpayments
This final rule states that providers and suppliers must use an
applicable claims adjustment, credit balance, self-reported refund, or
another appropriate process to satisfy the obligation to report and
return overpayments. This position preserves our existing processes and
preserves our ability to modify these processes or create new processes
in the future.
3. Summary of Costs and Benefits
This final rule states that a provider or supplier must (1) report
and return an overpayment to the Secretary, the state, an intermediary,
a carrier or a contractor to the correct address by the later of 60
days after the overpayment was identified or the date the corresponding
cost report is due, and (2) notify the Secretary, the state, an
intermediary, a carrier, or a contractor in writing of the reason for
the overpayment. The costs associated with these requirements are the
time and effort necessary for providers and suppliers to identify,
report, and return overpayments in the manner described in this rule.
We project an annual cost burden of between $120.87 million and $201.45
million. The former represents our low-end estimate, while the latter
is our high-end estimate. Our primary, or mid-range, projection is an
estimate of $161.16 million.
The requirements in this final rule are meant to ensure compliance
with applicable statutes, promote the furnishing of high quality care,
and to protect the Medicare Trust Funds against fraud and improper
payments. The potential financial benefits of this final rule from the
standpoint of its effectiveness in recouping overpayments are not
easily quantifiable, as we do not have sufficient data on which to base
a monetary estimate of recovered funds.
B. Background
The Medicare program (title XVIII of the Act) is the primary payer
of health care for approximately 50 million enrolled beneficiaries.
Providers and suppliers furnishing Medicare items and services must
comply with the Medicare requirements set forth in the Act and in CMS
regulations. The requirements are meant to ensure compliance with
applicable statutes, promote the furnishing of high quality care, and
to protect the Medicare Trust Funds against fraud and improper
payments. As part of our efforts to reduce fraud, waste, and abuse in
the Medicare program, we twice proposed, but did
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not finalize, rules that would have amended our regulations to codify
the longstanding responsibility of persons to report and return
Medicare overpayments. (See the March 25, 1998 (63 FR 14506) and
January 25, 2002 (67 FR 3662) proposed rules.)
On March 23, 2010, the Affordable Care Act was enacted. Section
6402(a) of the Affordable Care Act established a new section 1128J(d)
of the Act. Section 1128J(d)(1) of the Act requires a person who has
received an overpayment to report and return the overpayment to the
Secretary, the state, an intermediary, a carrier, or a contractor, as
appropriate, at the correct address, and to notify the Secretary,
state, intermediary, carrier or contractor to whom the overpayment was
returned in writing of the reason for the overpayment. Section
1128J(d)(2) of the Act requires that an overpayment be reported and
returned by the later of-- (A) the date which is 60 days after the date
on which the overpayment was identified; or (B) the date any
corresponding cost report is due, if applicable. Section 1128J(d)(3) of
the Act specifies that any overpayment retained by a person after the
deadline for reporting and returning an overpayment is an obligation
(as defined in 31 U.S.C. 3729(b)(3)) for purposes of 31 U.S.C. 3729.
Section 1128J(d)(4)(A) of the Act defines ``knowing'' and
``knowingly'' as those terms are defined in 31 U.S.C. 3729(b). In that
statute the terms ``knowing'' and ``knowingly'' mean that a person with
respect to information--(i) has actual knowledge of the information;
(ii) acts in deliberate ignorance of the truth or falsity of the
information; or (iii) acts in reckless disregard of the truth or
falsity of the information. 31 U.S.C. 3729(b) also states that knowing
and knowingly do not require proof of specific intent to defraud.
Section 1128J(d)(4)(B) of the Act defines the term ``overpayment'' as
any funds that a person receives or retains under title XVIII or XIX to
which the person, after applicable reconciliation, is not entitled
under such title. Lastly, section 1128J(d)(4)(C) of the Act defines the
term ``person'' as a provider of services, supplier, Medicaid managed
care organization (MCO) (as defined in section 1903(m)(1)(A) of the
Act), Medicare Advantage (MA) organization (as defined in section
1859(a)(1) of the Act) or prescription drug plan (PDP) sponsor (as
defined in section 1860D-41(a)(13) of the Act). Section 1128J(d)(4)(C)
of the Act excludes beneficiaries from the definition of person.
In the February 16, 2012 Federal Register (77 FR 9179), we
published a proposed rule that would implement the provisions of
section 1128J(d) of the Act.
II. Provisions of the Proposed Regulations and Analysis of and
Responses to Public Comments
To implement section 1128J(d) of the Act, we proposed to establish
a new subpart D in part 401 of our regulations, to revise Sec.
401.607, and to add sections to part 405 of our regulations. In
response to the February 16, 2012 proposed rule, we received
approximately 200 timely pieces of correspondence. In this section of
this final rule, we summarize our proposals, respond to the public
comments received, and detail the changes made to our proposals.
Many commenters stated their support for many provisions and goals
of the proposed rule. Commenters generally agreed that providers and
suppliers should promptly refund overpayments and maintain efforts to
prevent and detect improper payments. While these commenters also
suggested changes to certain provisions of the proposed rule,
commenters stated that many of the proposed rule's requirements were
reasonable. Some commenters stated they were pleased that CMS issued
the proposed rule and believed it would motivate providers and
suppliers to educate billing staff and practitioners on Medicare
billing rules. These commenters stated they were hopeful that the rule
would reduce improper payments and would help ensure the viability of
the Medicare Trust Funds. Overall, we appreciate the comments
expressing support for as well as the comments suggesting changes to
the proposed rule.
A. Scope of Subpart (Proposed Sec. 401.301)
In proposed Sec. 401.301, we stated that subpart D sets forth the
policies and procedures for reporting and returning overpayments to the
Medicare program for providers and suppliers of services under Parts A
and B of title XVIII. We proposed to implement the requirements set
forth in section 1128J(d) of the Act only as they relate to Medicare
Part A and Part B providers and suppliers. Other stakeholders,
including, without limitation, MA organizations, PDPs, and Medicaid
MCOs would be addressed in future rulemaking. Since then, in the May
23, 2014 Federal Register (79 FR 29844), we published a final rule that
addresses Medicare Parts C and D. No final rule has been published that
addresses Medicaid requirements
Comment: A number of commenters expressed concern over the
limitation of the proposed rule to Medicare Parts A and B. Commenters
stated that CMS did not articulate any statutory authority or rationale
for creating this distinction and narrowing the scope of the proposed
rule to Medicare Part A and Part B providers and suppliers. According
to commenters, the Medicare payment rules do not create any
analytically distinct issues for Medicare Part A and Part B providers
and suppliers over other categories of ``persons'' as defined under the
proposed rule, thus commenters believed that the rule should similarly
apply equally to all categories of persons as they relate to Medicare.
Commenters noted that many providers or suppliers who submit claims to
Medicare Part A or B also submit claims to managed care plans under
Part C, plan sponsors under Part D, and Medicaid. Commenters requested
that CMS include all of Medicare and Medicaid in the final rule or
quickly issue other proposed rules so all providers and suppliers have
guidance on their obligations and are treated equally.
Response: Given the differences that exist between Medicare Parts A
and B and Medicare Parts C and D and Medicaid, we believe that separate
rulemaking processes are appropriate to address those differences.
Those differences include, but are not limited to, how the programs are
administered and the involvement of Medicare contractors in Part A and
B, private health insurance plans in Part C, PDP sponsors in Part D,
and state Medicaid agencies and contractors in Medicaid. The Secretary
has the programmatic rulemaking authority to issue regulations on
section 1128J(d) of the Act. We note that section 1128J(d) of the Act
does not require the Secretary to issue regulations for the statute to
be effective, and the statute's requirements are in effect in the
absence of regulation. Providers and suppliers that identify
overpayments received from Medicare or Medicaid should report and
return those overpayments to the appropriate payor as required by
section 1128J(d) of the Act. We appreciate commenters' concerns, but
will finalize this rule as proposed to apply to Medicare Parts A and B
only. Additionally, our rules for reporting and returning of
overpayments in Medicare Parts C and D were recently published in
separate rulemaking (see the May 23, 2014 final rule (79 FR 29843)).
We remind all stakeholders that even without a final regulation
they are subject to the statutory requirements
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found in section 1128J(d) of the Act and could face potential FCA
liability, CMPL liability, and exclusion from federal health care
programs for failure to report and return an overpayment. Additionally,
providers and suppliers continue to be required to comply with our
current procedures when we, or our contractors, determine an
overpayment and issue a demand letter.
B. Definitions (Proposed Sec. 401.303)
We proposed three definitions in Sec. 401.303. We proposed to
define ``Medicare contractor'' as a fiscal intermediary, carrier,
durable medical equipment Medicare administrative contractor (DME MAC),
or Part A/Part B Medicare administrative contractor. We stated that our
proposed definition captures the different contractors that would be
involved in receiving reports of overpayments as well as handling the
return of overpayments, consistent with the statutory requirement.
Since the publication of the proposed rule, we have ceased using fiscal
intermediary and carrier contracts, and accordingly we have removed
these terms from the definition of ``Medicare contractor'' in the final
rule.
``Overpayment'' was proposed to be defined as any funds that a
person has received or retained under title XVIII of the Act to which
the person, after applicable reconciliation, is not entitled under such
title. This is the same definition that appears in the statute. In
section II.B. of the February 2012 proposed rule (77 FR 9181), we also
included certain examples of overpayments under this proposed
definition as including all of the following:
Medicare payments for noncovered services.
Medicare payments in excess of the allowable amount for an
identified covered service.
Errors and nonreimbursable expenditures in cost reports.
Duplicate payments.
Receipt of Medicare payment when another payor had the
primary responsibility for payment.
We also stated in the proposed rule that, in certain circumstances,
Medicare makes estimated payments for services with the knowledge that
a reconciliation of those payments to actual costs will be done when
the actual costs or related information becomes available, usually at a
later date. Interim payments made to a provider throughout the cost
year are reconciled with covered and reimbursable costs at the time the
cost report is due. The statutory and proposed regulatory definition of
the term overpayment acknowledges this practice and provides that an
overpayment does not exist until after an applicable reconciliation
takes place. When a provider files a cost report, the provider is
reporting the provider's reconciliation described previously and
attesting to the accuracy of the information contained on the cost
report. Providers must maintain the appropriate documentation
supporting the costs that are claimed on the cost report. We stated
that we rely upon the information that providers submit through the
cost report. Whether it is an initial submission of a cost report or an
amended one, we believed that providers must accurately report any cost
report-related overpayments at the time they submit any cost reports to
CMS.
Finally, we proposed to define the term ``Person'' as a provider
(as defined in Sec. 400.202) or a supplier (as defined in Sec.
400.202). We noted that this proposed definition does not include a
beneficiary and that our proposal was consistent with the definition of
a ``person'' in section 1128J(d)(4)(C) of the Act.
We received a number of comments regarding the definitions in
proposed Sec. 401.303.
Comment: A number of commenters expressed support for the proposed
definition of ``overpayment.'' However, commenters recommended that CMS
exclude routine, day-to-day business practices from the definition.
Examples of practices commenters cited included: (1) Items representing
refunds from the return of a product where a credit will be issued; (2)
routine changes to dates of service for rental periods as patients
start and stop therapy, causing a change in rental periods and account
adjustments; and (3) errors in payment by a Medicare contractor that
lead to an excess payment. Commenters stated that these and other types
of overpayments are currently reported and returned through the claims
adjustment or reversal process and the credit balance reporting
process. Commenters stated that these existing processes worked well
and should be recognized in the rule. Many commenters stated that CMS
should consider these processes as part of the definition of
``applicable reconciliation'' in proposed Sec. 401.305(c), which would
mean any amounts refunded through the claims adjustment or reversal and
credit balance reporting would not fall within the definition of
``overpayment.'' Commenters stated that amounts refunded through claims
adjustment/reversal or credit balance reporting do not represent fraud,
waste, or abuse, which, commenters state, CMS is seeking to curtail in
this rule. Also, commenters believed that expanding the meaning of
``applicable reconciliation'' in the ``overpayment'' definition would
ease the burden of compliance on providers and suppliers.
Response: We understand the commenters concerns related to the
definition of overpayment. As explained in the proposed rule, our
proposed definition of overpayment mirrors section 1128J(d)(4)(B) of
the Act. We understand the commenters' concerns about the breadth of
this definition and believe we have appropriately addressed them by
expanding the ways in which overpayments may be reported and returned
to include the claims adjustment or reversal and credit balance
reporting process, as discussed in more detail in section II.C.4. of
this final rule. This change should reduce the administrative burden
issue that various commenters raised. We decline to expand ``applicable
reconciliation'' beyond cost reporting for reasons discussed in greater
detail later in this section.
With respect to the statements regarding fraud, waste, and abuse,
we recognize that many commenters posed questions and concerns about
this rule's relationship to the prevention of fraud, waste, and abuse,
and the FCA. While these issues will be addressed in more detail in
section II.C.1. of this final rule, we recognize that not all Medicare
overpayments involve fraudulent activity (though some do). Again,
overpayments are any funds that a person has received or retained under
title XVIII of the Act to which the person, after applicable
reconciliation, is not entitled under such title. These funds might be
received or retained due to fraud or due to more inadvertent reasons.
Our general aim of this final rule is to strengthen program
integrity and to ensure that the Medicare Trust Funds are protected and
made whole and that taxpayer dollars are not wasted. An overpayment
must be reported and returned regardless of the reason it happened--be
it a human or system error, fraudulent behavior, or otherwise. However,
as discussed in section II.C.4., the nature of the overpayment will
affect a provider's or supplier's decision about the most appropriate
mechanism and recipient of the overpayment report and refund.
Comment: A number of commenters requested that overpayments not
caused by the provider or supplier or that were otherwise outside of
the provider or supplier's control should be excluded from our proposed
definition of overpayment. Examples of this situation offered by
commenters included--(1) a
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CMS system error classifying a Medicare beneficiary as fee-for-service
when the beneficiary was enrolled in a MA Plan; or (2) if the Medicare
contractor makes a duplicate payment, pays for a non-covered service
due to a contractor system edit problem, or fails to implement a
national or local coverage decision correctly, resulting in an
erroneous payment.
Response: We disagree with the commenters that certain types of
payments, including those made as a result of an error by any
particular party, should be excluded from the definition of an
overpayment. We do not see any basis to exclude an overpayment from the
requirements of section 1128J(d) of the Act because it may not have
been caused by or was otherwise outside the control of the provider or
supplier. The plain language of section 1128J(d)(1) of the Act states
that providers and suppliers are obligated to report and return any
overpayment that they have received within the specified statutory
timeframes. We do not believe it is necessary for providers or
suppliers to make determinations regarding whether they were the cause
of an overpayment in lieu of reporting and returning any identified
overpayments as required by this rule.
Comment: A commenter requested that the overpayment example we used
in the preamble regarding a patient death occurring before the service
date on a submitted claim not be considered an overpayment. The
commenter stated that there could be a gap between the time of the
patient's exam and the interpretation of images, during which period
the patient could expire. While the commenter conceded that our example
of an overpayment situation relating to the relationship between the
date of a beneficiary's death and the date of service would generally
be true (for example, in the case of a claim for an operation or an
office visit with a date of service subsequent to a beneficiary's date
of death), the commenter believed there are certain circumstances where
this relationship would not, by itself, be dispositive.
Response: As we stated in the preamble to the proposed rule, the
examples were not intended to be an exhaustive list of overpayment
situations. Nor were they intended to address all potential factual
permutations and coverage rules that determine whether a particular
claim is associated with an overpayment. Providers and suppliers should
analyze the facts and circumstances relevant to a particular situation
to determine whether an overpayment exists.
Comment: Regarding our overpayment example ``errors and non-
reimbursable expenditures in cost reports,'' a commenter requested that
we rephrase our example to read: ``Increases in reimbursement resulting
from errors and non-reimbursable expenditures in cost reports.'' The
commenter indicated that the ``increase in reimbursement'' language is
more accurate.
Response: We agree that ``increases in reimbursement resulting from
errors and non-reimbursable expenditures in cost reports'' is a more
accurate example for purposes of this rule. Providers and suppliers
need to supply accurate information on their cost report. However, this
rule concerns reporting and returning overpayments received by the
provider or supplier. Therefore, if the error or non-reimbursable cost
at issue did not result in an increase in reimbursement, then no
overpayment was received and section 1128J(d) of the Act is not
implicated.
Comment: Some commenters requested that we specifically define what
it means to ``over-code'' and how a determination would be made as to
whether the miscoding was deliberate. For example, a commenter
referenced a physician billing for an evaluation and management (E&M)
code as a level III (CPT code 99213), but an auditor determines that
the documentation for the visit only supports a level II service (CPT
code 99212). The commenter states that it is unclear from the proposed
rule whether, in this instance, the physician would be in violation of
the reporting rules and liable for penalties.
Response: Over-coding, or the more commonly used term upcoding, is
illustrated by the example given by the commenter. However, the
commenter appears to believe that the physician only has an obligation
to report and return the overpayment if the upcoding was done
deliberately. To clarify, providers and suppliers must report and
return overpayments identified as a result of upcoding, whether the
inappropriate coding was intentional or unintentional. We discuss the
steps that must be taken when a provider or supplier has identified an
overpayment in section II.C. of this final rule.
Comment: A commenter requested CMS retract all of the overpayment
examples in the proposed rule and republish a proposed rule including
all specific examples of what CMS considers overpayments. In the
alternative, the commenter objected to all of the examples except
duplicate payments because, according to the commenter, these examples
are inconsistent with Medicare's practice to make estimated payments
for services with the knowledge that a reconciliation of those payments
to actual costs will be completed at a later date when the actual costs
or other relevant information become available. According to the
commenter, the word ``overpayment'' implies some payment was
appropriate but the actual amount of payment was over the appropriate
amount. Thus, the commenter stated that the examples are inconsistent
with the purpose of the statutory and regulatory definition, with
industry practice, and with the general industry understanding of what
an overpayment is in light of the cost report reconciliation process.
Response: We disagree with both of the commenter's suggestions. As
stated earlier, the examples were illustrative and not intended as an
inclusive list of all examples of overpayments. We are unable to make
blanket statements or address every factual permutation in this
rulemaking, and thus it is not feasible for us to enumerate all
specific examples of overpayments. Providers and suppliers should
analyze the facts and circumstances relevant to their situation to
determine whether an overpayment exists.
In instances where interim payments are made based on estimated
costs, an overpayment is not deemed to exist for purposes of this rule
until an applicable reconciliation has occurred in accordance with
Sec. 401.305(c). We also disagree with the commenter's statement that
Medicare's practice is to make estimated payments for services with the
knowledge that a reconciliation of those payments to actual costs will
be completed at a later date. While some payments are cost-based
estimated payments as acknowledged in the proposed rule, many payments
are not, such as claims-based payments under fee-for-service or
prospective payment systems. For example, the first preamble example is
a Medicare payment for non-covered services which, in most cases, would
be a claims-based payment that is not an estimated payment subject to
cost report reconciliation. In addition, we disagree that the term
``overpayment'' implies that some payment was appropriate. Section
1128J(d) of the Act defines overpayment to include any funds that a
person receives or retains to which the person is not entitled after
applicable reconciliation. In the case of a non-covered service, as
well as others, the amount to which the person is entitled is zero.
Comment: Several commenters requested clarification that an
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overpayment consists only of the amount of payment a provider or
supplier receives in excess of funds it should have received for the
services rendered. For instance, if a supplier was paid $40 for a claim
when it should have received $30, the commenters questioned whether the
overpayment amount is $10 and not the entire $40 amount paid.
Response: In circumstances where a paid amount exceeds the
appropriate payment amount to which a provider or supplier is entitled,
the overpayment is the difference between the amount that was paid and
the amount that should have been paid. In addition, there are instances
where payment is made for an item or service specifically not payable
under the Act (for example, claims resulting from Anti-Kickback Statute
or physician self-referral law violations or claims for items and
services furnished by an excluded person), or where the payment was
secured through fraud. In these types of situations, the overpayment
typically consists of the entire amount paid.
Comment: Several commenters requested that CMS clarify in the final
rule that potential overpayments only exist if a provider or supplier
retains funds to which it was not entitled to at the time that it
received the funds. Commenters stated that subsequent changes in law,
regulation, or guidance (such as coding rules, carrier edits, and
national and local coverage decisions) should not render payments that
were proper at the time they were made overpayments at a later date.
Response: We agree that payments that were proper at the time the
payment was made do not become overpayments at a later time due to
changes in law or regulation, unless otherwise required by law. Changes
in guidance or coverage policy also usually will not alter whether a
prior payment should be considered an overpayment, although there can
be circumstances in which guidance is issued to clarify existing law,
regulation, or coverage rules that would make clear that a past payment
is an overpayment. Typically, overpayments would be determined in
accordance with the effective date of any changes in law, regulation,
or policy. Providers and suppliers should analyze the facts and
circumstances present in their situation to determine whether an
overpayment exists.
Comment: Some commenters stated that the concept of ``overpayment''
is not fair in some situations. The commenters stated that certain
reasons for an overpayment, such as ``insufficient documentation'' or
``lack of medical necessity'' are extremely difficult to define
objectively.
Response: The definition of overpayment is fixed in statute.
Sufficient documentation and medical necessity are longstanding and
fundamental prerequisites to Medicare coverage and payment.
Comment: A commenter requested clarification of the meaning of
``entitled.'' The commenter stated that, once the statute of
limitations has run on the government's ability to sue for breach of
contract or recoupment, the provider has a vested right to the payment
and is ``entitled'' to the funds. The commenter recommended that the
final rule recognize that statutes of limitation, setoff, and other
defenses may be considered in determining whether an overpayment
exists.
Response: We believe that the statutory language clearly states
that ``entitled'' means entitled under title XVIII or XIX of the Act.
This final rule addresses payments under title XVIII and thus, Medicare
entitlement depends upon whether the funds were received in conformance
to the payment rules set forth in the Act and its implementing
regulations. We do not opine on any theories for the government's
pursuit of recovering overpayments, whether those theories are at law
or equitable in nature. The purpose of this rule is to detail the
providers and suppliers' obligations under section 1128J(d) of the Act
to report and return overpayments they have received.
Comment: A number of commenters questioned the treatment of
underpayments that providers and suppliers may identify in the course
of identifying overpayments. Some commenters requested an explanation
of the process by which providers and suppliers may recoup
underpayments. Other comments proposed that providers and suppliers
should be allowed to offset identified underpayments against identified
overpayments when determining the repayment amount. Finally, several
commenters suggested that the lookback period for overpaid claims
should be the same as the lookback period for underpaid claims.
Commenters suggested that we consider allowing providers and suppliers
more than the currently allowed one year period to rebill a claim to
correct an identified underpayment. Underpayment lookback periods of 3
years and 10 years (to match the proposed lookback period) were
recommended by commenters.
Response: This final rule implements section 1128J(d) of the Act,
which concerns overpayments, not underpayments. Thus, underpayment
issues are outside the scope of this rulemaking. Under existing
policies, providers and suppliers can seek to address underpayments by
requesting reopenings under Sec. 405.980(c).
Comment: Several commenters recommended that we ensure that
refunded overpayments will be recorded and removed from the total
amount paid by Medicare Part B for purposes of the sustainable growth
rate formula (SGR).
Response: The Medicare Access and CHIP Reauthorization Act repealed
the SGR. Overpayment refunds were recorded and removed from the total
Medicare Part B expenditures for purposes of calculating the SGR,
during the period for which the SGR was in effect under section 1848 of
the Act.
Comment: Several commenters questioned whether providers and
suppliers need to report and return Medicare secondary payer refunds
under this final rule.
Response: Yes, overpayments where the provider or supplier received
primary payment from both a primary payer other than Medicare and a
primary payment from Medicare (``provider/supplier duplicate primary
payments'') must be refunded. Overpayments where the provider/supplier
failed to file a proper claim in accordance with 42 CFR 411.24(l) must
also be refunded.
Comment: A commenter appreciated the clarification in the proposed
rule that the statutory definition of person, for purposes of reporting
and returning overpayments, does not include beneficiaries and
encouraged CMS to finalize the proposed definition. Another commenter
disagreed with the proposed rule's exclusion of beneficiaries from the
``person'' definition and requested an explanation for the exclusion.
Response: We appreciate the comment in support of the proposed
definition and note that the proposed definition of ``person'' is in
accordance with section 1128J(d)(4)(C)(ii) of the Act which excludes
beneficiaries from the definition of the term ``person.''
C. Requirements for Reporting and Returning of Overpayments (Proposed
Sec. 401.305)
Section 1128J(d) of the Act provides that an overpayment must be
reported and returned by the later of --(i) the date which is 60 days
after the date on which the overpayment was identified; or (ii) the
date any corresponding cost report is due, if applicable. Proposed
Sec. 401.305(b) contained this requirement. If an overpayment is
claims related, the provider or supplier would be required
[[Page 7659]]
to report and return the overpayment within 60 days of identification.
1. Meaning of Identified (Proposed Sec. 401.305(a))
In proposed Sec. 401.305(a)(2), we stated that a person has
identified an overpayment if the person has actual knowledge of the
existence of the overpayment or acts in reckless disregard or
deliberate ignorance of the overpayment. We stated in the preamble that
we proposed this definition in part because section 1128J(d) of the Act
provides that the terms ``knowing'' and ``knowingly'' have the meaning
given those terms in the FCA (31 U.S.C. 3729(b)(1)). While the
statutory text does not use these terms other than in the definitions,
we believed the Congress' use of the term ``knowing'' in the Affordable
Care Act was intended to apply to determining when a provider or
supplier has identified an overpayment. We also stated that defining
``identification'' in this way 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
research.
We also noted in the February 2012 proposed rule (77 FR 9182) that,
in some cases, a provider or supplier may receive information
concerning a potential overpayment that creates a duty to make a
reasonable inquiry to determine whether an overpayment exists. If the
reasonable inquiry reveals an overpayment, the provider or supplier
then has 60 days to report and return the overpayment. On the other
hand, failure to make a reasonable inquiry, including failure to
conduct such inquiry with all deliberate speed after obtaining the
information, could result in the provider or supplier knowingly
retaining an overpayment because it acted in reckless disregard or
deliberate ignorance of whether it received such an overpayment. For
example, a provider that receives an anonymous compliance hotline
telephone complaint about a potential overpayment may have incurred a
duty to timely investigate that matter, depending on whether the
hotline complaint qualifies as credible information of a potential
overpayment. Whether the complaint qualifies as credible information is
a factual determination. If the provider incurs a duty and diligently
conducts the investigation, and reports and returns any resulting
overpayments within the 60-day reporting and repayment period, then the
provider would have satisfied its obligation under the proposed rule.
However, if the provider fails to make any reasonable inquiry into the
complaint, the provider may be found to have acted in reckless
disregard or deliberate ignorance of any overpayment.
In order to assist providers and suppliers with understanding when
an overpayment has been identified, we provided the following examples,
which were intended to be illustrative and not an exhaustive list of
circumstances:
A provider of services or supplier reviews billing or
payment records and learns that it incorrectly coded certain services,
resulting in increased reimbursement.
A provider of services or supplier learns that a patient
death occurred prior to the service date on a claim that has been
submitted for payment.
A provider of services or supplier learns that services
were provided by an unlicensed or excluded individual on its behalf.
A provider of services or supplier performs an internal
audit and discovers that overpayments exist.
A provider of services or supplier is informed by a
government agency of an audit that discovered a potential overpayment,
and the provider or supplier fails to make a reasonable inquiry. (When
a government agency informs a provider or supplier of a potential
overpayment, the provider or supplier has a duty to accept the finding
or make a reasonable inquiry. If the provider's or supplier's inquiry
verifies the audit results, then it has identified an overpayment and,
assuming there is no applicable cost report, has 60 days to report and
return the overpayment. As noted previously, failure to make a
reasonable inquiry, including failure to conduct such inquiry with all
deliberate speed after obtaining the information, could result in the
provider or supplier knowingly retaining an overpayment because it
acted in reckless disregard or deliberate ignorance of whether it
received such an overpayment).
A provider of services or supplier experiences a
significant increase in Medicare revenue and there is no apparent
reason--such as a new partner added to a group practice or a new focus
on a particular area of medicine--for the increase. However, the
provider or supplier fails to make a reasonable inquiry into whether an
overpayment exists. (When there is reason to suspect an overpayment,
but a provider or supplier fails to make a reasonable inquiry into
whether an overpayment exists, it may be found to have acted in
reckless disregard or deliberate ignorance of any overpayment.)
Finally, we also discussed in the proposed rule (77 FR 9183) issues
associated with overpayments that arise due to a violation of the Anti-
Kickback statute (section 1128B(b)(1) and (2) of the Act). Compliance
with the Anti-Kickback statute is a condition of payment. Claims that
include items and services resulting from a violation of this law are
not payable and constitute false or fraudulent claims for purposes of
the FCA. In the proposed rule, we recognized that, in many instances, a
provider or supplier is not a party to, and is unaware of the existence
of, an arrangement between third parties that causes the provider or
supplier to submit claims that are the subject of a kickback. For
example, a hospital may be unaware that a device manufacturer has paid
a kickback to a physician on the hospital's medical staff to induce the
physician to implant the manufacturer's device in procedures performed
at the hospital. Moreover, even if a provider or supplier becomes aware
of a potential third party payment arrangement, it would generally not
be able to evaluate whether the payment was an illegal kickback or
whether one or both parties had the requisite intent to violate the
Anti-Kickback statute.
For this reason, we stated that we believe that providers and
suppliers who are not a party to a kickback arrangement are unlikely in
most instances to have ``identified'' the overpayment that has resulted
from the kickback arrangement; therefore would have no duty to report
or repay it. To the extent that a provider or supplier who is not a
party to a kickback arrangement has sufficient knowledge of the
arrangement to have identified the resulting overpayment, we proposed
that the provider or supplier report the overpayment to CMS in
accordance with section 1128J(d) of the Act and corresponding
regulations. Although the government may always seek repayment of
claims paid that do not satisfy a condition of payment, where a
kickback arrangement exists, HHS's enforcement efforts would most
likely focus on holding accountable the perpetrators of that
arrangement. Accordingly, we would refer the reported overpayment to
OIG for appropriate action and would suspend the repayment obligation
until the government has resolved the kickback matter (either by
determining that no enforcement action is warranted or by obtaining a
judgment, verdict, conviction, guilty plea, or settlement). Thus, if
the provider has not identified the kickback or if it reported it when
it did identify the kickback, our
[[Page 7660]]
expectation is that only the parties to the kickback scheme would be
required to repay the overpayment that was received by the innocent
provider or supplier, except in the most extraordinary circumstances.
Comment: Several commenters noted that section 1128J(d) of the Act
has two separate provisions addressing overpayments and questioned
whether the proposed rule conflated those provisions. Section
1128J(d)(1) of the Act creates the threshold obligation that if a
person has received an overpayment, the person shall report and return
the overpayment. Once that threshold obligation is triggered--receipt
of the overpayment--then section 1128J(d)(2) of the Act addresses the
timing of fulfilling the obligation to report and return, either the
later of the date which is 60 days after the date on which the
overpayment was identified or the date any corresponding cost report is
due, if applicable. Commenters noted that the proposed rule may
conflate these two, separate obligations in proposed 42 CFR
401.305(a)(1), which stated that if a person has identified that it has
received an overpayment, the person must report and return the
overpayment in the form and manner set forth in 42 CFR 401.305.
Commenters stated that this proposed rule language tied the threshold
obligation to identifying the overpayment and not to receiving the
overpayment.
Response: We agree with the commenters and have amended Sec.
401.305(a)(1) to separate these two concepts. Section 1128J(d)(1) of
the Act plainly mandates that any overpayment received by a person
shall be reported and returned. We interpret this language as showing
the Congress intended to more clearly codify providers and suppliers'
existing duty to return overpayments they have received, which would
necessarily include taking appropriate actions to determine whether the
provider or supplier has in fact received an overpayment. The
``receipt'' threshold obligation is consistent with both the initial
standard for identification in the proposed rule and the standard for
identification in this final rule. We do not believe the Congress
intended to create a loophole to the threshold ``receipt'' obligation
through the timing provision for fulfilling this obligation. Limiting
the standard for identification to actual knowledge would create that
loophole and would conflict with the plain statutory mandate to report
and return any overpayments the person has received. In addition, we
believe we have the responsibility under the Secretary's rulemaking
authority to interpret the statute in an appropriate manner to create
safeguards that protect the integrity of its plain mandate--to report
and return overpayments the person has received.
Comment: Several commenters agreed with the proposed rule's
definition of identification. Commenters stated that the proposed rule
provides appropriate incentives for providers and suppliers to pay
attention to red flags indicating a potential overpayment may have been
received. These commenters believe providers and suppliers should be
encouraged to proceed with diligence to investigate information
suggesting an overpayment, to report, and take corrective actions, and
adopt ``best practices'' to prevent overpayments. A commenter stated
that adoption of this actual and constructive knowledge standard will
promote consistency and will allow government and providers and
suppliers to base their conduct and positions on case law interpreting
those terms. Another commenter acknowledged the need for the reckless
disregard/deliberate ignorance standard to deter evasive conduct and
fraudulent concealment. However, the commenter requested that CMS
further clarify this standard.
Response: We appreciate the comments and agree with the commenters'
interpretation of the proposed rule. We continue to believe that the
proposed standard is an appropriate interpretation of section 1128J(d)
of the Act within the Secretary's rulemaking authority. As explained in
this final rule, we have adjusted the standard for identification after
careful consideration of the numerous comments submitted. We believe
that the final rule strikes the right balance between creating a
flexible yet strong standard that applies to many different
circumstances.
Comment: Many commenters objected to the proposed inclusion of
reckless disregard and deliberate ignorance in the standard for
identification. These commenters claimed that there is no statutory
basis to apply a standard beyond actual knowledge to the term
``identified.'' Specifically, commenters disagreed with our statement
in the preamble that the Congress' use of the term ``knowing and
knowingly'' in section 1128J(d)(4)(A) of the Act indicates the
Congress' intent to apply a constructive knowledge standard to
``identified.'' Commenters noted that these terms are not used
elsewhere in section 1128J(d) of the Act except the definition section.
Commenters attributed section 1128J(d)(4)(A) of the Act as a drafting
error based on the House version of the Affordable Care Act, H.R. 3962,
which used the term ``knows.'' According to commenters, the replacement
of the word ``knows'' with ``identified'' in the final version of the
Affordable Care Act is indicative of Congressional intent not to equate
the FCA knowledge standard to ``identified.'' The commenters argue that
had the Congress intended to apply the statute this expansively, it
would have drafted the provision to extend liability to those who fail
to report and return an overpayment within 60 days of the date on which
the overpayment was identified or should have been identified.
Response: We disagree with the commenters' arguments. While we
acknowledge that the terms ``knowing'' and ``knowingly'' are defined
but not otherwise used in section 1128J(d) of the Act, we believe that
the Congress intended for section 1128J(d) of the Act to apply broadly.
If the requirement to report and return overpayments only applied to
situations where providers or suppliers had actual knowledge of the
existence of an overpayment, then these entities could easily avoid
returning improperly received payments and the purpose of the section
would be defeated.
Comment: Several commenters suggested applying the ``knowing''
concept to ``retained'' instead of our proposed approach. Commenters
believed that applying the constructive knowledge standard to trigger
the enforcement provisions would be more appropriate than our proposal.
Response: We considered applying a constructive knowledge standard
to the term ``retained'' and determined that our approach was both a
better reading of the law and a better approach to protecting the
program. As discussed previously, we believe there is a strong
statutory basis for our rule. Also, modifying ``retained'' does not
eliminate the programmatic concern of the ``ostrich defense''--that the
plain mandate to report and return overpayments received would be
avoided by not taking action to obtain actual knowledge of an
overpayment. The enforcement provision at section 1128J(d)(3) of the
Act depends on the person retaining the overpayment after the deadline
for reporting and returning. If the deadline never passes because the
person avoids obtaining actual knowledge of the overpayment, then the
enforcement provision is rendered toothless.
Comment: Commenters also expressed concern that ``reckless
disregard'' and ``deliberate ignorance'', as used in proposed Sec.
401.305(a)(2), are
[[Page 7661]]
ambiguous terms that do not adequately inform providers and suppliers
of the circumstances that would give rise to a duty to investigate and
fail to provide sufficient guidance as to what efforts are necessary to
avoid overpayment liability. Some commenters stated that the proposed
rule actually provides a disincentive to undertake compliance audits
for fear of creating liability for identifying an overpayment.
Response: We appreciate the comments and have revised the
regulatory provision in the final rule by removing the terms ``actual
knowledge'', ``reckless disregard'', and ``deliberate ignorance''. The
final rule states that a person has identified an overpayment when the
person has, or should have through the exercise of reasonable
diligence, determined that the person has received an overpayment and
quantified the amount of the overpayment. A person should have
determined that the person received an overpayment if the person fails
to exercise reasonable diligence and the person in fact received an
overpayment. ``Reasonable diligence'' includes both proactive
compliance activities conducted in good faith by qualified individuals
to monitor for the receipt of overpayments and investigations conducted
in good faith and in a timely manner by qualified individuals in
response to obtaining credible information of a potential overpayment.
The regulation uses a single term--reasonable diligence--to cover
both proactive compliance activities to monitor claims and reactive
investigative activities undertaken in response to receiving credible
information about a potential overpayment. We believe that compliance
with the statutory obligation to report and return received
overpayments requires both proactive and reactive activities. In
addition, we also clarify that the quantification of the amount of the
overpayment may be determined using statistical sampling, extrapolation
methodologies, and other methodologies as appropriate.
As to the circumstances that give rise to a duty to exercise
reasonable diligence, we are not able to identify all factual scenarios
in this rulemaking. Providers and suppliers are responsible for
ensuring their Medicare claims are accurate and proper and are
encouraged to have effective compliance programs as a way to avoid
receiving or retaining overpayments. Indeed, many commenters told us
that they have active compliance programs and that we should recognize
these compliance efforts in the final rule. It was also apparent from
some commenters that they do not currently engage in compliance efforts
to ensure that the claims they submitted to Medicare were accurate and
proper and that payments received are appropriate. We advise those
providers and suppliers to undertake such efforts to ensure they
fulfill their obligations under section 1128J(d) of the Act. We believe
that undertaking no or minimal compliance activities to monitor the
accuracy and appropriateness of a provider or supplier's Medicare
claims would expose a provider or supplier to liability under the
identified standard articulated in this rule based on the failure to
exercise reasonable diligence if the provider or supplier received an
overpayment. We also recognize that compliance programs are not uniform
in size and scope and that compliance activities in a smaller setting,
such as a solo practitioner's office, may look very different than
those in larger setting, such as a multi-specialty group. Compliance
activities may also appropriately vary based on the type of provider.
We note that in discussing the standard term ''reasonable
diligence'' in the preamble, we are interpreting the obligation to
''report and return the overpayment'' that is contained in section
1128J(d) of the Social Security Act. We are not seeking to interpret
the terms ''knowing'' and ''knowingly'', which are defined in the Civil
False Claims Act and have been interpreted by a body of False Claims
Act case law.
Comment: Several commenters stated that they interpreted the
preamble to the proposed rule as permitting providers and suppliers
time to conduct a reasonable inquiry before the 60-day time period
begins to run. These commenters noted that the preamble provides that
providers and suppliers may receive information concerning a potential
overpayment that creates a duty to conduct a reasonable inquiry to
determine whether an overpayment exists. If the reasonable inquiry
reveals an overpayment, then the provider has 60 days to report and
return the overpayment. On the other hand, failure to make a reasonable
inquiry, including failure to conduct such inquiry with all deliberate
speed after obtaining the information, could result in the provider or
supplier knowingly retaining an overpayment because it acted in
reckless disregard or deliberate ignorance of whether it received such
an overpayment. Commenters stated that this explanation and the
examples in the preamble together suggested that once a provider is
placed on notice of a potential overpayment, it must conduct a
reasonably diligent inquiry under the circumstances and the 60-day
period does not start until either the inquiry reveals an overpayment
or the provider or supplier is reckless or deliberately ignorant
because it failed to conduct the reasonable inquiry. Commenters
requested that we clarify whether this interpretation was accurate.
Response: We agree with the commenters' interpretation of the
proposed rule and have revised Sec. 401.305(a) and (b) in this final
rule to clarify the duty to investigate through a reasonable diligence
standard. When a person obtains credible information concerning a
potential overpayment, the person needs to undertake reasonable
diligence to determine whether an overpayment has been received and to
quantify the amount. The 60-day time period begins when either the
reasonable diligence is completed or on the day the person received
credible information of a potential overpayment if the person failed to
conduct reasonable diligence and the person in fact received an
overpayment.
Comment: Commenters questioned how quantification of the
overpayment fit into the proposed rule. Specifically, commenters stated
that the proposed rule did not expressly address the difference between
determining that an overpayment has been received and the auditing work
necessary to calculate the overpayment amount. Commenters stated that
the calculation necessarily must happen before the overpayment can be
reported and returned.
Response: We agree and have revised the language in Sec.
401.305(a)(2) to clarify that part of identification is quantifying the
amount, which requires a reasonably diligent investigation.
Comment: Commenters expressed concern over whether the proposed
rule treats failing to conduct a ``reasonable inquiry'' with ``all
deliberate speed'' as a violation of section 1128J(d) of the Act by
itself. In other words, commenters questioned whether the mere
possibility of an overpayment, without there actually being an
overpayment, can establish liability at any point.
Response: We understand the commenters' concerns and have amended
the language accordingly. The final rule clarifies that failure to
conduct reasonable diligence does not by itself create liability under
section 1128J(d) of the Act. The statutory obligation is to report and
return received overpayments; thus a provider or supplier must also
have received an overpayment that it should have identified before
liability can exist under section 1128J(d) of the Act.
[[Page 7662]]
Comment: Several commenters requested clarity on the phrase
``reasonable inquiry.'' Some commenters suggested defining ``reasonable
inquiry'' as a good faith investigation that is promptly conducted
until its conclusion by persons with sufficient knowledge and
experience to make such determination.
Response: We appreciate the commenters' suggestions and amended the
final rule as described in this section by creating a ``reasonable
diligence'' standard in Sec. 401.305(a)(2). We also appreciate the
commenters' suggested definition and incorporated various suggestions
into our discussion of what constitutes ``reasonable diligence,'' as
explained previously in this section. We also note that although the
preamble to the proposed rule used both ``reasonable diligence'' and
``reasonable inquiry,'' for clarity, we used only the term ``reasonable
diligence'' in this final rule.
Comment: Commenters suggested that we provide more detail on how to
judge what is ``reasonable'' about a reasonable inquiry, such as taking
into account the unique characteristics of the provider or supplier and
the nature of the problem. Accordingly, commenters suggested defining
``reasonable inquiry'' as ``reasonably diligent under the
circumstances, taking into account the size, capacity, workload,
technological sophistication, and resources of the subject provider or
supplier and the complexity, uniqueness, and significance of the
suspected overpayment at issue.'' In addition, commenters recommended
that we provide a list of illustrative hallmarks of a reasonable
inquiry, but also stated that some of these hallmarks will be fact-
dependent.
Response: We appreciate the comments and believe we have provided
additional explanation of the meaning of ``reasonable diligence'' in
this final rule. However, we decline to expressly adopt the commenters'
proposed definitions and suggestions. We believe that the concept of
``reasonableness'' is fact-dependent.
Comment: A number of commenters requested clarification on the
meaning of ``all deliberate speed'' a phrase used in the preamble to
the proposed rule. Commenters stated that we effectively established a
time limit for preliminary action before the 60-day clock began to
toll, yet did not clearly state what this time limit is or what a
person must do to meet it. Commenters stated that the proposed rule was
not clear about how to determine whether an ongoing investigation
occurred with ``all deliberate speed.'' Commenters noted that in many
circumstances, multiple people will be involved in determining whether
an overpayment exists and in what amount, such as auditors, billing
personnel, and legal counsel. Commenters believed we should issue
additional guidance in the final rule, particularly what documentation
we expect providers and suppliers to maintain to show compliance with
the rule. Some commenters suggested that we adopt an approach that
would allow for a ``reasonable period of time to investigate'' a
potential overpayment. Other commenters pointed to the Federal
Acquisitions Regulations (FAR) treatment of the time between first
learning of an allegation and the requirement to disclose credible
evidence of an overpayment. The commenters noted that the FAR drafters
considered but rejected adding a set period of time, such as 30 days,
to the disclosure requirement. (See the November 12, 2008 final rule
(73 FR 67074).) Under FAR, failure to timely disclose credible evidence
of significant overpayment is measured from the date of the
determination by the contractor that the evidence is credible. (See the
November 12, 2008 final rule (73 FR 67075).) A few commenters requested
additional time to conduct the inquiry in the event of an emergency,
such as a natural disaster affecting the provider or supplier.
Response: The preamble to this final rule does not include the
phrase ``all deliberate speed'' as the benchmark of compliance.
Instead, we adopt the standard of reasonable diligence and establish
that this is demonstrated through the timely, good faith investigation
of credible information, which is at most 6 months from receipt of the
credible information, except in extraordinary circumstances. We
considered but rejected adopting a ``reasonable period of time to
investigate'' standard because we concluded that an open-ended
timeframe would likely be viewed as no more clear than ``all deliberate
speed'' and establishing a time frame would better respond to
commenters' concerns on this issue. We choose 6 months as the benchmark
for timely investigation because we believe that providers and
suppliers should prioritize these investigations and also to recognize
that completing these investigations may require the devotion of
resources and time. Receiving overpayments from Medicare is
sufficiently important that providers and suppliers should devote
appropriate attention to resolving these matters. A total of 8 months
(6 months for timely investigation and 2 months for reporting and
returning) is a reasonable amount of time, absent extraordinary
circumstances affecting the provider, supplier, or their community.
What constitutes extraordinary circumstances is a fact-specific
question. Extraordinary circumstances may include unusually complex
investigations that the provider or supplier reasonably anticipates
will require more than six months to investigate, such as physician
self-referral law violations that are referred to the CMS Voluntary
Self-Referral Disclosure Protocol (SRDP). Specific examples of other
types of extraordinary circumstances include natural disasters or a
state of emergency.
As for documentation, it is certainly advisable for providers and
suppliers to maintain records that accurately document their reasonable
diligence efforts to be able to demonstrate their compliance with the
rule.
Comment: Several commenters recommended that CMS define
identification as actual knowledge of credible evidence that an
overpayment has occurred and of the actual amount received in excess of
what was due. Commenters stated that ``credible evidence'' is a well-
understood concept; that is, information that, considering its source
and the circumstances, supports a reasonable belief that there has been
an overpayment. The credible evidence standard differs from a credible
``allegation'' because, according to commenters, it requires some level
of diligence to determine whether the information is credible.
Response: We appreciate the comments but decline to adopt this
definition of ``identification.'' It limits the obligation to instances
in which the provider or supplier has actual knowledge, which, as
discussed previously, we do not believe is consistent with section
1128J(d) of the Act. As discussed previously, we have clarified that
providers and suppliers may conduct a timely investigation of credible
information before the 60-day deadline is triggered. We also decline to
adopt a ``credible evidence'' standard because we are concerned there
may be further confusion about the term ``evidence'' because of its
significance in the litigation context. Instead, as noted previously,
we have adopted a ``credible information'' standard. We believe
credible information includes information that supports a reasonable
belief that an overpayment may have been received. This standard should
address commenters' concern of being required to investigate every
instance or complaint concerning a potential overpayment. We recognize
that providers and suppliers may receive
[[Page 7663]]
information that could be considered not credible. Determining whether
information is sufficiently credible to merit an investigation is a
fact-specific determination.
Comment: Several commenters suggested an alternative definition to
identification as ``when, after the person receives reliable evidence
(as defined at 42 CFR 405.902) that it has received an overpayment and,
through the exercise of reasonable diligence has determined that an
overpayment exists, the person has quantified the amount of the
overpayment within a reasonable degree of certainty.'' Commenters
stated that such a standard would provide some degree of comfort that
providers and suppliers would not be under a duty to investigate every
``whiff'' of an overpayment and removes the constructive knowledge
standard. Commenters also stated this definition would acknowledge that
an overpayment cannot be reported and returned if it is not quantified,
as well as the circumstances, such as when statistical sampling and
extrapolation are used, when it may not be possible to know with 100
percent accuracy the exact amount of an overpayment. These commenters
stated that it also acknowledges that in some circumstances providers
and suppliers may need more time to commence an inquiry. Other
commenters suggested a similar alternative ``when the person has actual
knowledge of an overpayment and is able to quantify the overpayment
with reasonable certainty, or when a person does not initiate an
inquiry within a reasonable amount of time after receiving credible
information suggesting the existence of a potential overpayment.''
Response: We appreciate the comments and incorporated some of these
ideas into the final rule. We agree that statistical sampling and
extrapolation are an appropriate component of a provider's reasonable
diligence in investigating an overpayment and can serve as an
appropriate way to calculate an overpayment amount. The final rule
provides guidance for reporting overpayments identified through such
statistical methods. We also use the term ``credible information'' in
the preamble as suggested in these comments. We considered but declined
to adopt the term ``reliable evidence'' as defined at 42 CFR 405.902
because it is potentially too limited and the term ``evidence'' is
prone to confusion as ``credible evidence'' discussed previously.
Finally, we also disagree with the commenters' proposals to the extent
they suggest identification efforts are limited to reactive
investigations (and do not include the proactive compliance activities
necessary to monitor for receipt of overpayments) or actual knowledge
(and do not include the constructive knowledge standard discussed
previously).
Comment: Commenters stated that the 60-day time period should start
to run on the day that an overpayment inquiry has concluded, confirmed
that there has been an overpayment, and produced sufficient information
to calculate the precise overpayment amount. Commenters stated that
this standard would avoid confusion about when to report.
Response: We recognize that additional clarity was necessary and
revised the final rule to clarify that the 60-day time period starts to
run when the overpayment has been identified based on the standard for
identified in Sec. 401.305(a)(2). These commenters do not appear to
take into account statistical sampling and extrapolation calculations,
which is something other commenters suggested that we recognize. As
discussed previously, we also interpret section 1128J(d) of the Act to
include both an actual knowledge and a constructive knowledge standard.
Comment: Commenters questioned how we proposed determining the
actual date for triggering the 60-day reporting and returning deadline
and for when a person acts in reckless disregard or deliberate
ignorance of an overpayment. Commenters suggested that we provide clear
guidance as to what actions a provider or supplier must take to avoid a
determination that it is in reckless disregard or deliberate ignorance
of the existence of an overpayment.
Response: We believe the final rule provides additional clarity on
how we revised the constructive knowledge standard for when a person
has identified an overpayment. The 60-day time period begins either
when the reasonable diligence is completed and the overpayment is
identified or on the day the person received credible information of a
potential overpayment if the person fails to conduct reasonable
diligence and the person in fact received an overpayment. This
standard, as well as the requirement to conduct a timely, good faith
investigation in response to obtaining credible information of a
potential overpayment, provide ``bright line'' standards that should
assist providers and suppliers in structuring their compliance programs
to comply with the rule.
Comment: Several commenters questioned whether, after finding a
single overpaid claim, it is appropriate to inquire further to
determine whether there are more overpayments on the same issue before
reporting and returning the single overpaid claim. Expanding the
inquiry may take additional time and, according to commenters, it is
unclear whether the 60-day time period has begun to run for the single
overpaid claim. Similarly, several commenters also questioned whether
compliance with the rule required periodic repayments while the person
is conducting the review. For example, commenters noted that a provider
or supplier may conduct a probe sample of claims and discover a
possible overpayment with respect to some of the claims. Commenters
questioned whether in this situation the provider or supplier has
identified an overpayment that would require reporting and returning
the overpayment for the probe sample claims, even though the probe
sample review is typically one step in the usual audit process.
According to commenters, validation of the probe sample findings would
then lead to expanding the audit beyond the probe sample and conducting
a root cause analysis to determine the cause of the overpayment and
whether more overpayments exist. Commenters stated that it is a common
practice to include the probe sample in the expanded audit to
extrapolate an error rate to the entire population. Commenters stated
that permitting this practice would result in a more robust analysis of
the overpayment and a more accurate repayment to the government. The
premature return of any overpayment identified during the probe sample
audit could taint the results of the complete review, according to
commenters.
Response: We understand the commenters' concerns and believe that
the final rule's clarifications should address these concerns. We
expect providers and suppliers to exercise reasonable diligence and to
quantify, report, and return the entire overpayment in good faith. Part
of conducting reasonable diligence is conducting an appropriate audit
to determine if an overpayment exists and to quantify it. Providers and
suppliers are obligated to conduct audits that accurately quantify the
overpayment. After finding a single overpaid claim, we believe it is
appropriate to inquire further to determine whether there are more
overpayments on the same issue before reporting and returning the
single overpaid claim. To the extent this concern is based on a
question about when the 60-day clock begins to run, the final rule
clarifies that identification
[[Page 7664]]
occurs once the person has or should have through the exercise of
reasonable diligence, determined that the person received an
overpayment and quantified the amount of the overpayment.
We understand that a common way to conduct an audit is to use a
probe sample and then incorporate that probe sample into a larger full
sample as the basis for determining an extrapolated overpayment amount.
In the probe sample, it is not appropriate for a provider or supplier
to only return a subset of claims identified as overpayments and not
extrapolate the full amount of the overpayment. We believe that in most
cases, the extrapolation can be done in a timely manner consistent with
the identification requirements of this rule and that the provider or
supplier should not report and return overpayments on specific claims
from the probe sample until the full overpayment is identified.
Comment: Some commenters requested clarification that a provider or
supplier with an active and robust compliance program that contains the
elements suggested by OIG's compliance program guidance and the Federal
Sentencing Guidelines cannot be found to have acted with ``reckless
disregard or deliberate ignorance'' with respect to overpayments. Some
commenters suggested that a provider that has a ``certified'' or
``approved'' compliance program should be entitled to a presumption
that any overpayments are simple mistakes rather than fraud or abuse.
Response: We disagree with the commenters. Based on our experience,
it is possible for providers or suppliers who have active compliance
programs to commit fraud. Moreover, even if an overpayment is the
result of a mistake, rather than fraud or abuse, the provider or
supplier has an obligation to report and return it under section
1128J(d) of the Act.
Comment: Commenters expressed concerns that the proposed rule's
constructive knowledge standard for ``identified'' introduces a
subjective standard that would lead to the 60-day clock beginning to
run on a date that a person ``should have known'' about an overpayment,
although it actually had no knowledge at all. For example, if a health
care entity accidentally programs its computers incorrectly, and as a
result, erroneously bills and is paid for a service, commenters
questioned whether the addition of the ``reckless disregard'' standard
suggests that one could argue that the company should have been aware
of the error, and therefore is liable for a false claim, even if the
company has a robust compliance program that fails to uncover the
error. Commenters believe that the proposed definition of
``identified'' raises the possibility that CMS, other regulators, or
qui tam relators may second-guess the provider and question whether the
provider exercised ``reasonable diligence'' and made a ``reasonable
inquiry'' ``with all deliberate speed'' in assessing when an
overpayment should have been identified.
Response: We understand commenters' concerns and believe the
changes made to the proposed rule in this final rule should provide
additional clarity for providers and suppliers on the actions they need
to take to comply with the rule. With regard to the commenters concern
that as a result of this final rule CMS, other regulators, or qui tam
relators may second-guess the provider and question whether the
provider exercised ``reasonable diligence'' and made a ``reasonable
inquiry'' ``with all deliberate speed,'' we note that it has long been
true that many activities in the provision of health care, including
billing the Medicare program, are subject to review by various
stakeholders. This rule does not change that situation or significantly
expand the areas that have long been subject to such review.
Comment: Several commenters expressed concerns with our statement
in the preamble that we defined ``identification'' as an incentive to
exercise reasonable diligence to determine whether an overpayment
exists and that 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. Commenters believed this statement appeared to disregard the
compliance activities of many in the health care industry and indicated
that CMS did not believe providers and suppliers would engage in
compliance activities without increased liability. The commenters
recognized the legitimate need for this rule to not permit avoiding the
report and return obligation when there is some indication of a
potential overpayment simply by avoiding additional investigatory work
to obtain actual knowledge. Commenters stated that voluntary compliance
programs already follow this basic duty to investigate and recommended
a parallel, narrowly drawn duty to investigate when there is credible
evidence of the existence of an overpayment. According to commenters,
this standard could apply to a variety of fact patterns, including,
compliance hotline communications, internal statistical analyses
identifying potential payment discrepancies, and issues raised by
staff. Commenters believed this approach would satisfy our stated
concern, while imposing a more reasonable administrative burden.
Response: We appreciate the commenters' concerns but decline to
limit the constructive knowledge standard in the final rule to receipt
of information as discussed previously. We note that certain types of
information noted by commenters, such as internal statistical analyses,
require some proactive action on the part of the provider or supplier
to obtain that information. We are concerned that limiting the standard
for identified to instances in which the provider or supplier is simply
receiving information may create a disincentive for providers and
suppliers to undertake those important proactive compliance activities
to ensure they have properly received Medicare payments. We understand
that many providers and suppliers have active compliance programs that
do both proactive and reactive reviews of Medicare billing. Our
intention is to capture both of those activities in this final rule.
Comment: Several commenters requested that CMS clarify that there
is no duty to proactively search for overpayments without a reason to
believe that a specific overpayment exists. These commenters stated
that the preamble language suggests that providers and suppliers have a
perpetual duty to research whether any overpayment may exist, which
would be overly burdensome and not consistent with the requirements of
section 1128J(d) of the Act. A commenter stated that the compliance
program regulations implementing section 6401 of the Affordable Care
Act may be a more appropriate mechanism for CMS to propose these
requirements.
Response: These comments underscore our concern expressed in the
proposed rule that some providers and suppliers might avoid performing
activities to determine whether an overpayment exists. As discussed
earlier, section 1128J(d) of the Act requires a person to report and
return overpayments they have received. Thus, providers and suppliers
have a clear duty to undertake proactive activities to determine if
they have received an overpayment or risk potential liability for
retaining such overpayment.
Comment: Some commenters objected to the example of an identified
overpayment concerning a provider learning of services provided by an
unlicensed or excluded individual. The commenter believed that such a
[[Page 7665]]
scenario does not automatically imply that an overpayment has occurred,
but that an investigation must be conducted to determine if there is a
regulatory or legal nexus between the individual's licensure or
exclusion and the reimbursement.
Response: We understand the commenters' belief that the example
given doesn't automatically imply than an overpayment has occurred.
Billing for items or services furnished by an unlicensed or excluded
person can result in receiving an overpayment. Part of determining
whether an overpayment has been received in this situation is
investigating the relevant facts about the activities of the unlicensed
or excluded individual and reviewing the relevant laws, regulations,
and billing rules.
Comment: A commenter suggested adding to the list of examples where
no reasonable inquiry occurred after learning that the profits from a
practice or physician were unusually high in relation to hours worked
or the relative value units associated with the work.
Response: We agree that this situation could constitute credible
information that would require a provider or supplier to conduct
reasonable diligence. As we stated earlier, the list of examples is
illustrative only and not a comprehensive list. We are unable to
address all possible factual permutations in this rulemaking.
Comment: Several commenters questioned how a hotline complaint
could create a duty to conduct a reasonable inquiry. A hotline
complaint is made by employees or other sources and is typically used
to raise allegations of improper conduct or something that may need to
be investigated.
Response: Hotline complaints received by a provider or supplier may
qualify as credible information of a potential overpayment under this
rule, which would require the provider or supplier to exercise
reasonable diligence to determine if an overpayment has occurred.
Whether a hotline complaint qualifies as credible information is a
factual determination. For example, receiving repeated hotline
complaints about the same or similar issues may lead a reasonable
person to conclude that they have received credible information that
obligates conducting reasonable diligence. However, one hotline
complaint may be detailed enough to lead a reasonable person to the
same conclusion.
Comment: Several commenters questioned to whom within an
organization CMS would attribute knowledge of the overpayment.
Commenters suggested that CMS clarify that it must be a senior official
who has confirmed the overpayment before ``knowledge'' can be
attributed to the organization.
Response: We disagree with the commenters. As a general matter,
organizations are responsible for the activities of their employees and
agents at all levels.
Comment: Some commenters requested confirmation that a valid report
of an overpayment bars any substantive liability under the FCA qui tam
provisions. Commenters suggested that the reporting of the overpayment
should result in a ``public disclosure.'' Other commenters requested
clarification on the proposed rule's interaction with reverse FCA
liability. Commenters suggested that a failure to report and return an
identified overpayment should not lead to reverse FCA liability, unless
the provider ``knowingly concealed'' or ``knowingly and improperly
avoided'' the obligation. Other commenters stated that the proposed
rule inappropriately applies the FCA, specifically the ``reverse false
claims'' cause of action, to honest mistakes or inadvertent
overpayments.
Response: We are interpreting section 1128J(d) of the Act in this
rulemaking, not the FCA. In this rule, our discussion of the FCA is
limited to its explicit inclusion in the enforcement provision under
section 1128J(d) of the Act, which states that any overpayment retained
by a person after the deadline for reporting and returning the
overpayment under this rule is an obligation for purposes of the FCA.
Comment: Several commenters requested clarification about the level
of resources a small provider or supplier is expected to devote to
investigating potential overpayments in order to avoid being liable
based on a theory of ``reckless disregard'' or ``deliberate
ignorance.'' Some commenters expressed concern that resources might be
diverted from patient care in order to ensure compliance with this
rule. Commenters requested that CMS provide compliance guidance on how
to develop compliance plans and conduct self-audits for small providers
and suppliers and recommended that this guidance be coordinated with
the rulemaking related to sections 6102 and 6401 of the Affordable Care
Act.
Response: We understand the concern of smaller providers and
suppliers. However, we are unable to provide specific guidance on
resource levels or other measures to ensure compliance with this rule.
Providers and suppliers, large and small, have a duty to ensure their
claims to Medicare are accurate and appropriate and to report and
return overpayments they have received. We have produced a number of
educational materials, including the Medicare Learning Network[supreg],
which are available on our Web site, http://www.cms.gov.\2\ OIG has
also produced a number of compliance educational materials that are
available on its Web site, http://www.oig.hhs.gov.\3\
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\2\ A current, more direct link: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNGenInfo/index.html?redirect=/mlngeninfo.
\3\ A current, more direct link: http://oig.hhs.gov/compliance/.
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Comment: A commenter acknowledged that while a significant increase
in Medicare revenue could be an example of an identified overpayment
for some types of providers, it might be inapplicable to other types of
providers. Specifically, the commenter explained that laboratories are
not in a position to determine the medical necessity of the services
they provide because they do not order the tests. The commenter
suggested that the final rule clarify that laboratories and other
providers that do not directly order tests or services be exempt from
any requirement to proactively conduct an inquiry into whether an
overpayment exists based on the volume of Medicare work it conducts.
Response: We disagree with the commenter. All providers and
suppliers have a duty to ensure that the claims they submit to Medicare
are accurate and appropriate. There may be situations where a
significant increase in Medicare revenue should lead a laboratory to
conduct reasonable diligence.
Comment: A commenter expressed concern regarding the proposed
rule's effect on hospitalists. The commenter explained that
hospitalists have very little contact with the payment process because
they are employed by a hospital or physician group and typically assign
their Medicare payments to their employer.
Response: For purposes of this rule, an entity to which a provider
or supplier has reassigned Medicare payments has a duty to determine
whether it has received overpayments associated with that provider or
supplier. Additionally, although the entity to which payments were
reassigned has a duty to determine if it has received any overpayments,
this does not mean that the individual who has reassigned his or her
payments might not, in certain circumstances, also be responsible for
the overpayment. This will be a fact-specific determination regarding
the individual's
[[Page 7666]]
knowledge of the circumstances leading to the overpayment.
Comment: Several commenters stated that the proposed rule is
inconsistent with the limitation on liability provision in section 1879
of the Act (42 U.S.C. 1395pp), in situations where the provider did not
know and could not reasonably have been expected to know that the
payment would not be made.
Response: We disagree with the commenters. Determinations by the
Secretary with respect to liability for non-covered items or services
under section 1879 of the Act are independent from the obligations of
providers and suppliers under section 1128J(d) of the Act to report and
return overpayments received by a provider or supplier. Section 1879
determinations are decisions by CMS about whether to make payment not
withstanding certain other provisions in Title XVIII and assignment of
financial responsibility for denied items or services when payment may
not be made. When CMS has made such a determination that payment must
be made for certain denied items or services, the resulting payment
would not be an overpayment under section 1128J(d) of the Act.
Moreover, determinations in accordance with section 1879 of the Act are
CMS determinations; section 1879 of the Act is not applicable to the
provider's or supplier's own assessment of whether funds are an
overpayment. We believe it is inappropriate for providers or suppliers
to make determinations regarding their own knowledge of non-coverage or
whether they were the cause of an overpayment in lieu of reporting and
returning an identified overpayment as required by this rule.
Comment: A number of commenters suggested including the reasonable
inquiry issues in the regulatory text for clarity. Commenters noted
that these issues were only discussed in the preamble and not noted in
the regulatory text.
Response: We have included the reasonable diligence language in the
regulatory text at Sec. 401.305(a)(2).
Comment: Several commenters requested clarification as to how the
regulations will apply to providers or suppliers who receive a possible
overpayment as the result of a scheme that violates the Anti-Kickback
Statute and the provider or supplier was not a party to the scheme.
Commenters stated that providers or suppliers receiving a payment with
no knowledge of a kickback arrangement should not be held responsible
for identifying and returning the resulting overpayment. Commenters
also stated that there should be no affirmative duty on innocent
providers and suppliers to report a suspicion of a kickback
arrangement. A commenter proposed that ``sufficient knowledge'' of a
kickback should mean ``actual knowledge of the existence of the
kickback or acts in reckless disregard or deliberate ignorance of the
kickback.'' Additionally, some commenters suggested that the government
has no right to recover ``tainted'' claims made to an innocent party
that were the result of a kickback arrangement and that no overpayment
exists if the provider is without fault. Comments also requested
further explanation of the extraordinary situations in which the
government would seek recovery from an innocent provider.
Response: As stated in the proposed rule and elsewhere in this
final rule, providers and suppliers who are not a party to a kickback
arrangement are unlikely in most instances to have ``identified'' an
overpayment that has resulted from the kickback arrangement and would
therefore have no duty to report or return it. To the extent that a
provider or supplier who has received an overpayment resulting from a
kickback arrangement and is not a party to a kickback arrangement but
has sufficient knowledge of the arrangement to have identified the
resulting overpayment, the provider or supplier must report the
overpayment to CMS. However, we decline to adopt the suggested
definition of ``sufficient knowledge.'' It is possible that a provider
or supplier may obtain information that indicates that an arrangement
may violate the Anti-Kickback Statute.
We would refer the reported overpayment and potential kickback
arrangement to OIG for appropriate action and would suspend the
repayment obligation until the government has resolved the kickback
matter (either by determining that no enforcement action is warranted
or by obtaining a judgment, verdict, conviction, guilty plea, or
settlement). Our expectation is that only the parties to the kickback
scheme would be required to repay the overpayment that was received by
the innocent provider or supplier, except in extraordinary
circumstances. As these issues are fact-specific, we are unable to
speculate as to what facts would need to be present to qualify as
extraordinary circumstances.
Comment: A commenter suggested creating additional exceptions for
reporting and returning overpayments for other ``innocent provider''
situations for errors made by a third party billing company or
overpayments resulting from the provider or supplier being a victim of
identity theft.
Response: Providers and suppliers are responsible for the actions
of their agents, including third-party billing companies. We understand
that providers and suppliers are concerned that they may become victims
of identity theft. Providers and suppliers should report any identity
theft to law enforcement and CMS and should wait for instructions from
CMS concerning returning the overpayment.
Comment: Several commenters requested clarification on the
overpayment example concerning receiving a significant increase in
Medicare revenue for no apparent reason and failing to make reasonable
inquiry. Commenters requested guidance on what is significant. Some
commenters requested that a ``significant increase'' in Medicare
revenue be defined as a 25 percent increase in Medicare revenue or
alternatively, allow a neutral third-party to decide when there is a
``significant increase.''
Response: We decline to adopt the commenters' suggestions and will
not define the term ``significant increase.'' As stated earlier, we are
unable to make blanket statements or address every factual permutation
in this rulemaking. Providers and suppliers should analyze the facts
and circumstances present in their situation to determine whether they
have credible information that a potential overpayment exists. As
discussed earlier in this section, providers and suppliers are required
to exercise reasonable diligence to determine whether they have
received an overpayment when there is credible information of a
potential overpayment.
Comment: Commenters raised concerns about the potential for a
provider or supplier to refund overpayments and that those refunded
claims may become the subject of an audit by a Medicare contractor,
such as a Medicare Recovery Contractor, or the OIG in the future. A
commenter requested that CMS clarify that Medicare contractors should
take appropriate steps to remove any claims that are the subject of an
overpayment refund from the claims data warehouse so that the claims
are not later subject to contractor or OIG review and recoupment for
similar issues.
Response: We understand the commenters' concerns and believe that
our adjustments to the process for reporting and returning overpayments
discussed in section II.C.4. of this final rule address those concerns.
If providers and suppliers report and return overpayments for specific
claims, then
[[Page 7667]]
the MAC can adjust those claims. If providers and suppliers report and
return using statistical sampling and extrapolation, then it is only
possible to adjust the specific erroneous claims found in the sample.
In this situation, providers and suppliers should retain their audit
and refund documentation in the event that a Medicare contractor or the
OIG audits claims that the provider or supplier believes have been
previously refunded. While we will not recover an overpayment twice, we
do not intend to exempt from subsequent audit by CMS, a CMS contractor
or the OIG any claims that form the basis for a returned overpayment.
Comment: Some commenters stated that CMS should clarify that the
obligation to report and return overpayments begins at the conclusion
of a contractor or government audit, after the provider is presented
with results.
Response: This rule addresses the relevant person's responsibility
to report and return overpayments it has received and identified based
on its own proactive analysis or any other means of identification.
There are many ways, other than a government audit, that a person can
identify an overpayment. Receiving the results of a contractor or
government audit is an example of credible information of a potential
overpayment that requires the provider or supplier to conduct
reasonable diligence to confirm or contest the audit's findings.
Comment: Some commenters requested clarification that the fact that
a contractor or the government determines that a claim constitutes an
overpayment does not automatically mean that the provider or supplier
should have reported and returned the overpayment at an earlier time.
Response: As previously discussed, the threshold obligation in
section 1128J(d) of the Act is that providers and suppliers shall
report and return overpayments. For a claims-based overpayment, that
obligation must be fulfilled within 60 days of identifying the
overpayment. Section 401.305(a)(2) states that a person has identified
an overpayment when the person has or should have determined, through
the exercise of reasonable diligence, that the person has received an
overpayment and has quantified the amount of the overpayment. Whether a
particular provider or supplier has satisfied this standard in a
particular circumstance is a fact-based inquiry.
Comment: Other commenters requested clarification that a provider's
obligation to inquire about potential overpayments extends only to the
results of the contractor or government audit and not to other similar
potential overpayments.
Response: We agree that when receiving the results of a contractor
or government audit, the scope of the duty to conduct reasonable
diligence is defined by the issues that the contractor or government
audited. However, providers and suppliers will need to review the
specific facts and circumstances, including the billing and coverage
rules, to determine the required scope of their reasonable diligence.
Also, the contractor or government audit may be for a limited time
period. If the provider or supplier confirms the audit's findings, then
the provider and supplier may have credible information of receiving a
potential overpayment beyond the scope of the audit if the practice
that resulted in the overpayment also occurred outside of the audited
timeframe. In such situations, providers and suppliers will need to
conduct reasonable diligence within the lookback period of this rule to
comply with section 1128J(d) of the Act.
Comment: Several commenters also stated that the duty to search for
overpayments should not be triggered by a general government notice,
such as the OIG annual work plan. Commenters requested that the final
rule indicate that the duty to make a reasonable inquiry is only
triggered by a notice of a contractor or government audit specific to a
provider.
Response: If a contractor or government audit discovers a potential
overpayment, the audit notice from the contractor or government
triggers the provider's or supplier's obligations under section
1128J(d) of the Act. We encourage providers and suppliers to take
advantage of additional sources of publicly available information, such
as the OIG's annual work plan and CMS notices, to inform their planning
of proactive compliance monitoring activities and retroactive reviews.
Comment: Many commenters requested clarification of the rule's
application in the administrative appeal process. Some commenters
recommended that providers and suppliers have the opportunity to review
Medicare contractor audit results and determine whether they agree or
whether they will file an appeal. Some commenters believed that the
obligation to report and return overpayments identified by Medicare
contractors should wait until the appeals process is completed. In
support, commenters rely on Section 935 of the Medicare Modernization
Act (MMA), which places limits on the ability of CMS and its
contractors to recoup a potential overpayment during the first 2 levels
of administrative appeal. Commenters requested that CMS clarify that,
for the purposes of complying with proposed 42 CFR 401.305, a potential
overpayment brought to the provider's or supplier's attention by a
Medicare contractor shall not be considered ``identified'' until the
later of: (1) The exhaustion of the provider's or supplier's appeal
rights; or (2) the expiration of the time limit for the provider or
supplier to pursue the next level of administrative or judicial appeal.
Response: The provisions of this final rule establish that a person
has the responsibility to conduct an investigation in good faith and a
timely manner in response to obtaining credible information of a
potential overpayment and to return identified overpayments by the
deadline set forth in Sec. 401.305(b). This responsibility exists
independent of the appeals process for contractors' overpayment
determinations. We believe that contractor overpayment determinations
are always a credible source of information for other potential
overpayments. Moreover, we recognize that in certain cases, the conduct
that serves as the basis for the contractor identified overpayment may
be nearly identical to conduct in some additional time period not
covered by the contractor audit. If the provider appeals the contractor
identified overpayment, the provider may reasonably assess that it is
premature to initiate a reasonably diligent investigation into the
nearly identical conduct in an additional time period until such time
as the contractor identified overpayment has worked its way through the
administrative appeals process.
Comment: A number of commenters questioned whether providers and
suppliers have appeal rights to self-identified overpayments.
Commenters stated that the potential penalties for not reporting and
returning an overpayment, coupled with the short 60-day time period for
doing so, likely will result in providers and suppliers erring on the
side of caution and returning an overpayment prematurely. Commenters
suggested expanding the list of actions in 42 CFR 405.924 that
constitute an initial determination to provide for an appeal right
related to a ``contractor's acceptance of a refund of an overpayment
made in accordance with Sec. 401.305.'' Other commenters stated that
the acceptance of the overpayment and the related adjustment should be
considered a reopening and revised determination of the initial
[[Page 7668]]
determination of payment under the current regulations and CMS manual
instructions. Other commenters stated that the concept of
reconciliation should incorporate the existing appeals process.
Response: Section 1128J(d) of the Act clearly requires providers
and suppliers to report and return identified overpayments they have
received. To the extent that the return of any self-identified
overpayment results in a revised initial determination of any specific
claim or claims, a person would be afforded any appeal rights that
currently exist, as some commenters stated. Revised initial
determinations, which trigger appeal rights under the existing rules,
are issued when specific claims are adjusted. We note the process for
identifying an overpayment requires a person to exercise reasonable
diligence in determining whether an overpayment was received and to
quantify the overpayment amount with a reasonable degree of certainty.
We expect persons to exercise responsibility in identifying an
overpayment that is reported and returned in accordance with section
1128J(d) of the Act. It would be inconsistent with the intent of the
statute and our regulations for persons to return self-identified
overpayments or a subset of the larger overpayment, and then appeal
those overpayments as a means to circumvent the duty for timely
investigation of potential overpayments or the deadline for reporting
and returning of identified overpayments. As such, we decline the
commenters' suggestion to create an explicit appeal right by
classifying ``contractor's acceptance of a refund of an overpayment
made in accordance with Sec. 401.305'' as an initial determination in
Sec. 405.924. If a provider or supplier were to report and return
certain overpayments through individual claims determinations but chose
not to extrapolate and, thus, not return the entire overpayment amount
because the provider or supplier is appealing the individual claim
determinations, then the provider or supplier could be viewed as
failing to exercise reasonable diligence to identify amounts that the
person should have determined are overpayments. As discussed in section
II.C.1. of this final rule, any overpayment retained by a person after
the deadline for reporting and returning the overpayment is an
obligation that has the potential to trigger FCA liability.
Comment: Several commenters requested that CMS confirm that refunds
based on statistical sampling will maintain appeal rights. Because
individual claim adjustments may not be made when sampling is utilized
to estimate an overpayment amount, CMS should confirm that providers
and suppliers may still appeal such findings if necessary.
Response: To the extent that the return of any self-identified
overpayment results in a revised initial determination of any specific
claim or claims, a person would be afforded the appeal rights that
currently exist. As is currently the case under the existing voluntary
refund process, there are no appeal rights associated with the self-
identified overpayments that do not involve identification of
individual overpaid claims and individual claim adjustments.
Comment: Several commenters noted that the proposed rule provided
no avenue for providers and suppliers to cancel the overpayment refund
if the provider or supplier subsequently determines that the
overpayment refund was made in error. Commenters suggested requiring
contractors to return payments to providers and suppliers when the
provider or supplier notifies the contractor that the funds were
returned in error and requests a reversal.
Response: Providers and suppliers should exercise reasonable
diligence as set forth in this final rule before reporting and
returning the overpayment. Additionally, the existing reopening
regulations afford a means for a provider or supplier to request
correction of a mistake in reporting an overpayment, although we do not
expect this to be a frequent occurrence.
2. Meaning of Applicable Reconciliation
Our proposed rule acknowledged that in some instances, we make
interim payments to a provider through the cost year and that the
provider reconciles these payments with covered and reimbursable costs
at the time the cost report is due. In proposed Sec. 401.305(c), we
stated that ``applicable reconciliation'' would occur when the cost
report is filed. This would include an initial cost report submission
or an amended cost report. We proposed two exceptions to the general
rule that the applicable reconciliation occurs with the provider's
submission of a cost report. The first was related to Supplemental
Security Income (SSI) ratios used in the calculation of
disproportionate share hospital (DSH) payment adjustment. The second
exception was related to the outlier reconciliation, which is performed
at the time the cost report is settled if certain thresholds are
exceeded.
Comment: Many commenters questioned our proposed interpretation of
the term ``applicable reconciliation.'' Generally, commenters did not
believe the Congress intended applicable reconciliation to be
interpreted as narrowly as we proposed. Some commenters interpreted
``applicable reconciliation'' as the preliminary steps taken by the
provider or supplier to determine whether they have received an
overpayment. Some commenters suggested that CMS include the claims
adjustment and credit balance processes in the definition of applicable
reconciliation. Other commenters requested CMS to include all instances
of addressing and resolving overpayments in the term ``applicable
reconciliation,'' including but not limited to Medicare contractor or
OIG audits and pre- and post-payment reviews by Medicare Administrative
Contractors.
Response: We understand some of the commenters' concerns and
believe our clarification of the constructive knowledge standard for
identifying an overpayment discussed previously should address many of
these concerns. However, we disagree with the commenters'
interpretation of the term ``applicable reconciliation'' in the context
of this final rule, which applies to Medicare Parts A and B. The term
``persons'' covered by section 1128J(d) of the Act is broad--it covers
not only providers and suppliers, but also Medicaid managed care
organizations, MA organizations, and PDP sponsors. The definition of
overpayment, where the term ``applicable reconciliation'' is used, is
similarly broad in that it covers overpayments received or retained by
any of these persons. As a result, Congress addressed the significant
differences between how all of these persons receive federal health
care program dollars in the overpayment definition by including the
term ``applicable reconciliation.'' Medicare Part A and B claims are
submitted by providers and suppliers to contractors and those claims
are expected to be correct when filed. Medicare contractors do not
audit or ``reconcile'' every claim. To the extent our contractors
perform claims auditing, that auditing is done in the context of our
program integrity efforts to find improper claims. Section 1128J(d) of
the Act does not permit providers and suppliers to retain overpayments
until a CMS contractor or the OIG identify the overpayment for the
provider or supplier. Providers and suppliers cannot rely on Medicare's
contractors or the OIG to point out their overpayments for them--
providers and suppliers are obligated to identify the overpayments they
have received. Also, we do not believe that the claims adjustment and
credit balance processes
[[Page 7669]]
are properly considered ``reconciliation.'' Instead, they are
mechanisms for providers and suppliers to report and return
overpayments that they identify. We have revised Sec. 401.305(a)(2) to
address those processes.
Comment: Some commenters stated that our proposed approach is
inconsistent with our prior position in previous rulemakings that
commenters contend allowed for post-payment adjustments before
considering if an overpayment exists. Commenters cited language from
the March 25, 1998 proposed rule (63 FR 14506) as an indication that
CMS allowed reconciliation to occur prior to the remaining overpayment
amount being considered a debt. The March 25, 1998 proposed rule
specified that overpayments generally result when payment is made by
Medicare for non-covered items or services, when payment is made that
exceeds the amount allowed by Medicare for an item or service, or when
payment is made for items or services that should have been paid by
another insurer (Medicare secondary payer obligations). Furthermore, it
specified that, once a determination and any necessary adjustments in
the amount of the overpayment have been made, the remaining amount is a
debt owed to the United States Government.
Similarly, commenters believed the following statement in our
January 25, 2002 proposed rule (67 FR 3663) supports a more inclusive
definition of applicable reconciliation: ``Submission of corrected
bills in conformance with our policy, within 60 days, fulfills these
requirements for providers, suppliers, and individuals.''
Response: The cited language from the March 1998 proposed rule was
addressing the Secretary's identification of overpayments, not
overpayment identified by a provider or supplier, which is the subject
of this rule. As for the January 2002 proposed rule, we note that the
structure proposed in that rule is similar to the section 1128J(d)
obligation regarding the reporting and returning of overpayments within
60 days of identification. We fail to see how the sentence cited by
commenters from the January 2002 proposed rule indicates anything about
the concept of applicable reconciliation. Moreover, this statement is
consistent with the discussion in section II.C.4. of this final rule
regarding the claims adjustment processes as a way to report and return
overpayments.
Comment: Many commenters questioned the proposed definition of
``applicable reconciliation'' as it pertains to cost reports. The
proposed rule defined ``applicable reconciliation'' as occurring when a
cost report is filed, except that any changes to the SSI ratio that
affect the Medicare hospital disproportionate share payments and any
reconciliation to outlier payments will not result in a refund
obligation until such time as the final settlement of the hospital's
cost report occurs. Specifically, commenters stated that section
1128J(d) of the Act recognizes the deadline for submission of the
initial cost report as tolling the 60-day time period and thus
applicable reconciliation should mean a process that occurs subsequent
to the submission of the initial cost report.
Commenters stated that CMS' discussion of the applicable
reconciliation period seemed to suggest that, other than for SSI ratios
and outliers, providers will be expected to have identified a cost
report-related overpayment at the time that the provider submits an
initial or amended cost report. According to commenters, this
suggestion is inconsistent with the purpose of the cost report
settlement process, which is to assist all parties in identifying and
correcting errors, and it is not until this process is completed (and
sometimes long after) that providers may become aware of an
overpayment. In addition, commenters objected to the position that
initial or amended cost reports can serve as the basis for an
overpayment, given that the determination of the amount of
reimbursement due on that cost report is not final until the contractor
audits the cost report and issues a written determination under 42 CFR
405.1803(a).
Commenters recommended ``applicable reconciliation'' in the context
of cost reporting occur upon the final settlement of a provider's cost
report by the MAC, so long as, upon discovery of an issue subject to
cost report audits that could affect a provider's Medicare payment, the
provider timely discloses the issue to a MAC for purposes of preparing
a final cost report settlement.
Response: We appreciate the comments on this issue. However, we are
finalizing the definition of applicable reconciliation as proposed. The
applicable reconciliation for purposes of 1128J(d)(4)(B) is the
reconciliation that enables a person to identify funds to which the
person is not entitled. Providers are required to file annual cost
reports in order to determine their total reimbursement and any amount
due to or from the Medicare program. When a provider files its cost
report, it is attesting to the accuracy of the provider's
reconciliation of the interim payments and costs. Accordingly, in the
context of cost reporting, the ``applicable reconciliation'' is the
provider's year-end reconciliation of payments and costs to create the
cost report. The cost report must be filed within 5 months of the end
of the provider's fiscal year end, which allows the provider time to
reconcile payments and costs and identify any funds to which the
provider is not entitled. This overpayment should be returned at the
time the cost report is filed. We note that this definition establishes
a policy that is consistent with our regulations at 42 CFR
405.378(e)(2)(i), which state that if a cost report is filed indicating
that an amount is due to CMS, interest on the amount due will accrue
from the due date of the cost report (unless certain exceptions apply).
Comment: Several cancer centers raised concerns about the rule's
application to their payments. According to comments, cancer centers
are reimbursed for inpatient services based on the reasonable cost
methodology subject to the Tax Equity and Fiscal Responsibility Act
(TEFRA) cost limits and are eligible for hold harmless payments under
the outpatient prospective payment system. Because of the unique
aspects of these payment methodologies, billing or other errors or
omissions that may cause an overpayment for other types of hospitals
would often not result in a reduction in overall reimbursement for a
cancer center if they were corrected. Therefore, commenters requested
that CMS clarify that billing or other errors that would not impact the
reimbursement amount that a provider receives would not constitute an
overpayment for purposes of this final rule.
Response: We agree with the commenters to the extent that section
1128J(d) of the Act pertains only to overpayments. If a provider
identifies an error or omission that does not result in an overpayment,
then the requirements of section 1128J(d) of the Act or this rule do
not apply.
Comment: Commenters questioned whether there is a duty to revise
past cost reports based on the results of a MAC audit on one cost
report. For example, a MAC may audit a cost report for one year and
make certain adjustments based on what it determines to be the improper
treatment of certain costs. Commenters questioned whether, under this
rule, a provider would be required to submit amended cost reports for
all other unaudited cost report years in which the provider treated
those costs in a similar fashion.
[[Page 7670]]
Response: If the MAC notifies a provider of an improper cost report
payment, the provider has received credible information of a potential
overpayment and must conduct reasonable diligence on other cost reports
within the lookback period to determine if it has received an
overpayment.
Comment: Commenters questioned the rule's effect on the hospice
annual cap, the home health outlier revenue cap, and requests for
anticipated payments (RAPs). According to commenters, hospices and home
health agencies have no way of knowing whether they have received a cap
overpayment, or the amount, until they are notified by the MAC.
Commenters requested that CMS clarify that the rule does not apply in
these situations.
Response: The hospice and home health cap determinations are made
at the end of the year and it is possible that the provider may not be
aware of the cap status until their MAC calculates the final cap
amount. Therefore, the provider is not responsible to report and refund
the overpayment until they have received the cap determination from
their MAC. There can be no applicable reconciliation until the final
cap amount is determined.
Comment: Commenters questioned the rule's effect on payment
adjustments under the long-term care hospitals (LTCHs) prospective
payment system (PPS), including the so-called ``25-percent threshold
rule'' payment adjustment policy as implemented by 42 CFR 412.534 and
412.536.
Response: In this final rule, we define overpayment as any funds
that a person has received or retained under title XVIII of the Act to
which the person, after applicable reconciliation, is not entitled
under such title. To the extent the LCTH adjustments meet this
definition they are overpayments.
Comment: Commenters questioned how providers that receive periodic
interim payments (PIP) would be expected to return any overpayments.
Under the statutory and proposed regulatory definitions of
``overpayment,'' during any cost reporting period, no overpayment
exists until the provider submits its cost report. Commenters sought
clarification that any overpayments identified by providers related to
these interim payments must be reported and returned by the date any
corresponding cost report is due, not within 60 days of identification.
Commenters believed that the preamble language in the proposed rule
indicated that CMS believed any overpayments associated with interim
payments made to a provider throughout the cost report year would be
reconciled at the time that the cost report is due, but they sought
confirmation that this is CMS's policy for PIP providers.
Response: We agree with commenters. Overpayments as a result of PIP
payments would be reported and returned at the time the initial cost
report is due. There is no applicable reconciliation until the PIP
payments are dealt with in the cost report process. However, if a
provider is aware that their PIP payment may not be accurate, they
should continue with normal business practices and inform its MAC of
the issue.
Comment: Some commenters questioned under what circumstances a
provider would anticipate an outlier reconciliation will be performed
at the time of cost report settlement and requested that CMS clarify
that outlier payments may be returned via the overpayment reporting
process for claims. Other commenters requested clarification of how the
rule would apply in situations where a MAC amends the provider's cost
to charge ratio resulting in a reduction to its Medicare outlier
payments for the cost reporting period. Specifically, commenters
questioned whether it is the provider's responsibility to recompute its
outlier payments based on this new information and remit any
overpayment to the Medicare contractor within 60 days of receiving the
notification or whether the provider should wait for the MAC to audit,
or if applicable, reopen the cost report and redetermine the settlement
amount.
Response: An overpayment as a result of an outlier reconciliation
would be identified once the provider receives that information from
its MAC as part of the cost report settlement process. The provider is
not responsible for attempting to identify the cost report outlier
reconciliation overpayment in advance of the MAC's reconciliation
calculation. However, for claims, if the provider identifies an
inaccurate outlier claim payment, the provider must follow the
overpayment payment reporting process for claims, as noted in this
final rule.
Comment: Given that cost reports can remain under audit review for
3 to 4 years and are not finalized until the Notice of Program
Reimbursement (``NPR'') date, commenters requested that CMS provide
guidance on providers' responsibilities when an overpayment is
discovered by the provider or the MAC auditor after the cost report is
due/filed but prior to the NPR date. Commenters questioned whether the
provider would be required to report and repay the overpayment within
60 days of identification rather than allowing for completion of the
audit process, which includes netting out of underpayments and
overpayments, while the cost report is still open. Commenters stated
that requiring reporting and returning within 60 days of
identification, as opposed to allowing completion of the audit process,
would force providers to send in numerous overpayments for minor errors
while the cost report is open and disrupt the normal MAC audit process.
Commenters also questioned a number of other cost report issues
that they believed to be not entirely known to the provider at the time
of initially filing the as-filed cost report, but which are reconciled
through the audit process, and finalized with the issuance of the NPR,
including--
Home office cost statements (HOCS), providers usually file
an estimate of home office costs on the hospital cost report, which is
subsequently reconciled to the HOCS when the MAC audits the HOCS;
Any interim payments such as Medicare bad debt or graduate
medical education (GME), including resident ``overlap'' reports from
the MAC;
Sole-community hospital (SCH)/Medicare-dependent hospital
(MDH) payments;
End-stage renal disease (ESRD) payments;
Organ payments;
Nursing and allied health payments;
Tentative settlement payments;
Updated Provider Statistical & Reimbursement Report (PS&R)
for claims processed after cost report submission;
Prior-year audit adjustments, CMS rulings, and PRRB
appeals; and
HITECH Act EHR incentive payments.
Response: If the provider self-identifies an overpayment after the
submission and applicable reconciliation of the Medicare cost report,
it is their responsibility to follow the procedures in this rule, and
report and return the overpayment within 60 days of identification. The
provider must use the applicable reporting process for cost report
overpayments (submit an amended cost report) along with the overpayment
refund. The amended cost report must include sufficient documentation
and data to identify the issue in order for the MAC to adjust the cost
report.
If the overpayment is identified by the MAC during the cost report
audit, the MAC will determine and demand the exact amount of the
overpayment at
[[Page 7671]]
final settlement of the cost report. The provider remains responsible
to report and refund similar overpayments in cost reports for other
years not covered by the MAC audit.
Comment: Commenters noted that the proposed rule did not mention
any changes to the cost report reopening period at Sec. 405.1885,
which is 3 years.
Response: We did not propose and are not changing the time period
in 42 CFR 405.1885.
3. Lookback Period
Proposed Sec. 401.305(g) specified that overpayments must be
reported and returned only if a person identifies the overpayment
within 10 years of the date the overpayment was received. We proposed
10 years because this is the outer limit of the FCA statute of
limitations. We also proposed amending the reopening rules at Sec.
405.980(b) to provide that overpayments reported in accordance with
Sec. 401.305 may be reopened for a period of 10 years to ensure
consistency between the reopening regulations and Sec. 401.305(g).
Comment: Many commenters objected to the proposed 10-year lookback
period in Sec. 401.305(g) for several reasons. First, commenters
stated that section 1128J(d) of the Act does not provide a basis to
create a new lookback period that is different from the one in existing
reopening rules. Second, commenters stated that it was not appropriate
to use the outer limit of the FCA as the lookback period. Since the FCA
is a fraud enforcement statute, commenters stated that it was not
appropriate to apply this time period to all overpayments, which could
also be caused by errors or mistakes that did not rise to the level of
fraud. Third, commenters stated that 6 years is the more commonly used
statute of limitations in the FCA and that the 10-year period only
applied in certain circumstances. Thus, commenters stated that the
proposed lookback period was broader than, and not parallel to, that of
the FCA.
Commenters also stated that the proposed 10-year period was overly
burdensome. First, many commenters stated that compliance with the
proposed time period would require a de facto 10-year record retention
requirement and would be inconsistent with existing record retention
requirements. Second, commenters stated that maintaining paper and
electronic medical and billing records for the proposed 10-year period
as well as the difficulties with retrieving that information from
legacy systems would be costly and time-consuming. Third, commenters
stated that the proposed 10-year period would increase the burden,
costs, and complexity in investigating a potential overpayment. For
example, commenters noted that they would likely need to create very
large sample sizes to cover a 10-year timeframe. In addition, the
review would need to account for any changes in the coding, including
Current Procedural Terminology (CPT) codes (or other codes used to
identify items or procedures billed), Correct Coding Initiative (CCI)
editing protocols, local contractor determinations, coverage
guidelines, and other CMS policies. Finally, commenters noted that
staff turnover at both the provider or supplier and CMS contractor
levels may create additional challenges in investigating claims filed
up to 10 years ago.
Commenters offered a variety of alternative lookback periods:
Many commenters suggested using the current reopening
rules at 42 CFR 405.980, which permit contractors to reopen claims
within 1 year for any reason, within 4 years for good cause, and at any
time if evidence of fraud or similar fault exists. These commenters
stated that Sec. 405.980 sets forth a reasonable timeframes and
providers and suppliers have built their internal processes around
them.
Other commenters recommended a 3-year lookback period for
all overpayments not resulting from fraud or other intentional
misconduct. These commenters generally justified a 3-year period
because the Medicare and Medicaid RACs are limited to 3 years in their
audits. A commenter recommended 3 years because it matched the
timeframe for coordination of benefits under Part D.
Other commenters recommended a 5-year period because it
was consistent with the medical record retention requirement in the
hospital conditions of participation at 42 CFR 482.24.
Other commenters recommended a 6-year period. These
commenters stated that 6 years is consistent with the more commonly
applicable FCA statute of limitations as well as the statute of
limitations for section 1128A of the Act, which contains a variety of
civil monetary penalty (CMP) authorities applicable to Medicare and
Medicaid, including the CMP applicable to section 1128J(d) of the Act.
Several commenters also recommended 6 years because it is consistent
with the medical record retention requirements for Part B providers
under Chapter 24, 30.2 of the Medicare Claims Processing Manual and the
HIPAA requirements at 45 CFR 164.316(b)(2) for maintaining
documentation of compliance policies and procedures as well as various
state medical record retention requirements.
Other commenters recommended a 7-year period. These
commenters stated that most, if not all, providers and suppliers retain
documentation for claims they submit for a 7-year period as part of
their standard record retention policies.
Response: We have carefully considered all of the comments on the
lookback period and have concluded that 6-year time period is most
appropriate for this rule. The change is reflected in Sec. 401.305(f)
of this final rule. The 6-year lookback period will be measured back
from the date the person identifies the overpayment. As an initial
matter, we believe that we have the authority to establish a lookback
period for section 1128J(d) of the Act under our programmatic
rulemaking authority, including our authority to create the reopening
rules under section 1869 of the Act. We note that section 1128J(d) has
no time limit to the obligation to report and return overpayments
received by a provider or supplier. The enforcement mechanisms, the FCA
and section 1128A of the Act, have time limits ranging from 6 to 10
years. We believe that the current reopening rules need to be adjusted
to properly reflect section 1128J(d) of the Act, specifically the
statute's enforcement aspects. We are amending the reopening rules to
provide for a reopening period that accommodates the 6-year lookback
period for reporting and returning overpayments, and to ensure that the
reopening rules do not present an obstacle or unintended loophole to
compliance and enforcement of section 1128J(d) of the Act. We specify
in Sec. 405.980(c)(4) that providers may request that contractors
reopen initial determinations for the purpose of reporting and
returning an overpayment under Sec. 401.305. However, this revision to
the reopening regulation does not extend the lookback period specified
in Sec. 401.305(f). Rather, it serves to make administrative
accommodations so that contractors may reopen the initial determination
associated with any overpayment reported and returned by a provider or
supplier during the 6-year lookback period set forth in this final
rule.
After review of all the issues identified by the commenters, we
conclude that a 6-year lookback period would appropriately address many
of the concerns about burden and cost outlined previously.
Specifically, we note that, according to commenters, many providers and
suppliers retain records and claims data for between 6 and 7 years
based on various existing
[[Page 7672]]
federal and state requirements. Thus, we believe our final rule does
not create additional burden or cost on providers and suppliers in this
regard. Also, 6 years is consistent with one component of the FCA
statute of limitations as well as the statute of limitations under
section 1128A of the Act.
Comment: Several commenters recommended a lookback period that is
no longer than the state medical record retention law in which the
medical professional or facility is licensed and is not longer than 7
years from the date of service.
Response: We decline to adopt this approach for the reasons
discussed previously. In addition, we do not believe it is appropriate
or desirable to have the time period vary based solely on the medical
record retention laws of the state in which the provider or supplier is
furnishing services. Section 1128J(d) of the Act uniformly applies to
all providers and suppliers in each state and, as such, all providers
and suppliers should have the same obligations.
Comment: A commenter recommended changing the reopening rules to
eliminate the ability to reopen claims at any time for fraud or similar
fault and instead modify reopening rules to be a 4-year lookback period
for errors that are not the result of fraud or similar fault, a 6-year
lookback period (consistent with one component of the FCA statute of
limitations) for knowingly false or fraudulent claims, and a 10-year
lookback period (consistent with the outer limit of the FCA statute)
for the most extreme cases where knowingly false or fraudulent claims
have been actively concealed from discovery.
Response: We also decline to adopt this approach for the reasons
discussed previously. In addition, we see no reason to change the
``fraud or similar fault'' aspect of the reopening rule. First, this
issue is outside the scope of this rulemaking. Second, we do not
believe changing this aspect of the reopening rule is necessary or
desirable. We note that fraud investigations and judicial proceedings
can require an extended period of time beyond the date the claim was
filed to resolve, which counsels against imposing a limitation on
reopening determinations procured by fraud or similar fault.
Comment: Several commenters noted that in 2005 we considered
extending the reopening periods to 5 years in certain circumstances and
decided not to. Specifically, we proposed a 5-year reopening period if
a contractor discovered a pattern of billing errors or identified an
overpayment extrapolated from a statistical sample. (See the November
15, 2002 proposed rule (67 FR 69327).) In response to this proposed
provision, commenters maintained that we did not adequately justify the
proposed 5-year timeframe and expressed concerns about the difficulty
and burden of locating documentation on older claims. (See the March 8,
2005 interim final rule with comment period (70 FR 11452).) In the
interim final rule, we did not finalize the 5-year proposed period.
Commenters questioned why we proposed a lookback period twice the
length of the period proposed, and not finalized, in 2005 and suggested
that we refrain from extending the look-back period for reported
overpayments to 10 years for the same reasons.
Response: In the March 2005 interim final rule, we stated that we
proposed the 5-year lookback period in an effort to accommodate
overpayments identified by external auditors and law enforcement
agencies where the external or law enforcement auditor used a 5-year
sampling methodology, but the Medicare contractor was limited to a 4-
year recovery period where there was no fraud determination. We decided
to remove the proposal in recognition of commenters' concerns and
directed contractors to rely on the similar fault provisions to reopen
claims where law enforcement findings suggest a need to reopen. Since
the March 2005 rulemaking, the Congress has changed the law by enacting
section 1128J(d) of the Act. We believe that this law requires us to
re-examine our reopening rules to ensure that those rules are
consistent with the law. Previously in this final rule, we have
articulated a rationale for the 6-year period in a way that balances
giving full effect to the law the Congress passed with the cost and
burden issues identified by commenters.
Comment: Commenters questioned whether they had a responsibility to
go back beyond the 3 years covered in a Recovery Audit Contractor (RAC)
audit that identifies overpayments.
Response: Yes, as discussed previously, this final rule clarifies
that when the provider or supplier receives credible information of a
potential overpayment, they need to conduct reasonable diligence to
determine whether they have received an overpayment. RAC audit
findings, as well as other Medicare contractor and OIG audit findings,
are credible information of at least a potential overpayment. Providers
and suppliers need to review the audit findings and determine whether
they have received an overpayment. As part of this review, providers
and suppliers need to determine whether they have received overpayments
going back 6 years as stated in this rule.
Comment: A commenter requested that, regardless of the lookback
period we adopt, we allow Part B providers to use scanned records to
justify their Part B claims for auditing purposes. The commenter stated
that maintaining paper records for 6 or 10 years is burdensome, takes
up significant physical space and is unnecessarily costly in terms of
the cost of renting or purchasing space to store 6 or 10 years' worth
of paper records. The commenter noted that the proposed rule was silent
as to whether scanned versus paper records are sufficient for
validating claims under the lookback period and requested clarification
that scanned records are acceptable for validating claims.
Response: We agree with the commenter that scanned or electronic
records are acceptable for validating claims for purposes of
identifying overpayments within the context of this rule.
Comment: Several commenters believed that the 10-year lookback
period was appropriate. Commenters believed that the proposed rule was
consistent with the 10-year FCA statute of limitations and would help
ensure wrongfully retained overpayments were returned to the
government. Commenters noted that the 10-year FCA provision has been in
place since the 1986 amendments, and thus does not impose new burdens
or duties on providers and suppliers. Commenters stated that an
alternative period would lead to unnecessary confusion and
inconsistencies in light of existing expectations of liability for a
10-year lookback period.
Response: We appreciate the commenters' perspective and agree that
a 10-year lookback period would be a justifiable option for this final
rule. However, we have decided to adopt a 6-year period for the reasons
discussed previously.
Comment: A few commenters sought clarification of the proposed
reopening rule change insofar as whether it affects the existing
reopening rules for contractors reopening paid claims beyond 4 years.
Commenters stated that they believed the proposed revision to the
reopening rules was intended to eliminate an administrative hurdle that
would otherwise prevent the contractor from adjusting claims following
receipt of an overpayment disclosed by a provider. Commenters
interpreted the revision to the reopening rules to not expand the
authority of contractors to reopen paid claims that are not the subject
of a voluntary disclosure by a
[[Page 7673]]
provider and requested that we confirm that interpretation in the final
rule.
Response: We agree with the commenters' interpretation. The
proposed rule amended Sec. 405.980(b), which applies to reopenings
initiated by the contractor. In the context of this final rule,
providers or suppliers would be initiating the reopening by reporting
and returning the overpayment, which falls under Sec. 405.980(c). As
such, we have included language concerning reopenings under this final
rule in Sec. 405.980(c)(4) for clarity. Reopenings under this
subsection are limited to reopenings requested by the provider or
supplier under Sec. 401.305.
Comment: A commenter requested clarification of the statement in
the preamble indicating that overpayments reported in accordance with
Sec. 401.305 may be reopened for a period of 10 years. The commenter
suggested this statement could mean that the decision to adjust a paid
claim following the report of an overpayment would be subject to
revision for 10 years after the adjustment is made. The commenter
requested that we clarify that claims reported as overpayments in
accordance with Sec. 401.305 may be reopened for a period of 10 years
after the date the claim was paid.
Response: Consistent with the lookback period specified in Sec.
401.305, any initial determination that is subsequently reported and
returned as an overpayment is subject to reopening and revision by a
contractor whenever the overpayment is returned.
Comment: A commenter questioned whether the adjustment to a paid
claim following a provider's report and return of an overpayment
constitutes a redetermination for purposes of the reopening rules.
Response: An adjustment to any individual paid claim constitutes a
revised initial determination for purposes of the reopening rules.
Comment: Several commenters noted that the Medicare hospital
conditions of participation at 42 CFR 482.24 requires hospitals to
retain medical records for 5 years and requested clarification on how
(if at all) the implementation of the proposed 10-year lookback period
impacts or alters recordkeeping rules.
Response: First, we note that Sec. 482.24(b)(1) states that
hospitals must retain medical records for a period of at least 5 years,
which sets a minimum record retention period, not a maximum. We also
note that, as discussed previously, other commenters cited other record
retention rules and practices for 6 to 7-year periods. Since we are
establishing a 6-year lookback period, we believe hospitals will have
little, if any, additional record retention burden as the result of
this rule.
Comment: A commenter recommended that any lookback period be
phased-in over a series of years to balance the need for the return of
Medicare overpayments with the amount of time medical groups need to
prepare for such a change. The commenter stated that a phase-in period
would provide medical groups with a greater transition period to adjust
their record retention policies and develop additional efficiencies to
ensure that the identification, quantification, and accuracy of
Medicare overpayments are not compromised.
Response: Given our finalized lookback period, we do not believe a
phase-in period is necessary or appropriate.
Comment: Several commenters requested clarification on whether this
rule is retroactive. More specifically, commenters questioned how this
rule would apply to overpayments received prior to--(1) March 23, 2010,
the effective date of section 1128J(d) of the Act; and (2) the
effective date of the final rule. Commenters frequently posed these
questions in conjunction with objecting to the proposed 10-year
lookback period. First, commenters stated that they believed
retroactive application of the rule to overpayments received prior to
March 23, 2010 would not be legally supportable because the Affordable
Care Act does not indicate that section 1128J(d) of the Act applies
retroactively. In addition, commenters believed that the Secretary was
not given retroactive rulemaking authority here.
Response: Section 1128J(d) of the Act is not retroactive; thus,
failure to comply with the specific requirements of this section prior
to March 23, 2010 is not a violation of this statutory provision.
However, we note that other statutes governed the disposition of
overpayments prior to the enactment of the Affordable Care Act. We do
not address here compliance with such other statutory provisions.
Beginning on March 23, 2010--the enactment date of the Affordable Care
Act and section 1128J(d) of the Act--providers and suppliers that had
not already returned a particular overpayment were required to report
and return the overpayment in accordance with the provisions of section
1128J(d) of the Act. This requirement exists even if the provider or
supplier received the overpayment prior to March 23, 2010.
Similarly, this final rule is not retroactive. Providers and
suppliers that reported and/or returned overpayments prior to the
effective date of this final rule and that made a good faith effort to
comply with the provisions of section 1128J(d) of the Act are not
expected to have complied with each provision of the final rule.
However, all providers and suppliers reporting and returning
overpayments on or after the effective date of this final rule--even
overpayments received prior to the rule's effective date--must comply
with the new regulatory requirements.
For example, self-referral overpayments reported to us in
accordance with the CMS Voluntary Self-Referral Disclosure Protocol
(SRDP) prior to the effective date of this final rule will not be
governed by the 6-year lookback specified in this final rule. This
includes both overpayments reported and returned (via compromise and
settlement) as well as those reported and still in the process of being
reviewed through the SRDP. Providers and suppliers that made a good
faith effort to comply with section 1128J(d) of the Act by reporting
self-referral overpayments to the SRDP, which, until now, has operated
with a 4-year lookback period, are not expected to return overpayments
from the fifth and sixth year through other means. Providers and
suppliers reporting overpayments to the SRDP on or after the effective
date of this final rule are subject to the 6-year lookback period
specified in this final rule. However, at this time, we are only
authorized under the Paperwork Reduction Act to collect financial
analysis of overpayments that occurred during a 4-year lookback period.
In connection with this final rule, we are seeking authorization from
OMB to collect financial information regarding overpayments using the
6-year lookback period. Until the revised collection is approved by
OMB, providers and suppliers reporting overpayments to CMS in
accordance with the SRDP have no duty to provide financial information
from the fifth and sixth years, that is, the 2 years outside of the
currently authorized 4-year lookback period. Accordingly, until
notification of changes to the SRDP lookback period, providers and
suppliers submitting to the SRDP may voluntarily provide financial
information from the fifth and sixth years or report and return
overpayments from the fifth and sixth years through other means.
There are two time periods of concern to commenters--the time prior
to the enactment of the Affordable Care Act on March 23, 2010 and the
time period between March 23, 2010 and the effective date of this final
rule. For the time prior to March 23, 2010, while providers and
suppliers had an existing
[[Page 7674]]
obligation to return overpayments, the specific obligations contained
in section 1128J(d) of the Act are not retroactive prior to March 23,
2010. Therefore, failing to report and return overpayments within the
deadline in section 1128J(d) of the Act would not be actionable prior
to March 23, 2010. The obligations of section 1128J(d) of the Act were
effective March 23, 2010. Thus, providers and suppliers were obligated
to comply with section 1128J(d) of the Act as of that date. For the
time period between March 23, 2010 and the effective date of this final
rule, providers and suppliers may rely on their good-faith and
reasonable interpretation of section 1128J(d) of the Act.
Comment: Some commenters suggested that providers with a
``certified'' or ``approved'' compliance program should not be subject
to the lookback period because commenters stated that any overpayment
would be caused by a simple mistake and not fraud or abuse.
Response: We see no justification in section 1128J(d) of the Act
for the commenters' suggestion. As we stated earlier, section 1128J(d)
of the Act requires the reporting and returning of all overpayments
received by a provider or supplier.
Comment: Many commenters expressed concerns that certain
requirements in the proposed rule, particularly the proposed lookback
period, would increase the administrative burden on providers and
suppliers, which would lead to increased operating costs and may lead
to certain providers and suppliers opting out of Medicare. Commenters
expressed concerns about the overall tone of the proposed rule as one
that appeared to assume that all overpayments are caused by fraud and
abuse. Commenters stated that most providers and suppliers are honest
and use their best efforts to submit claims to Medicare that are
appropriate. Some commenters characterized the proposed rule as a
``one-size-fits-all'' approach that did not take into account the
differences between large and small providers and suppliers or
providers and suppliers that CMS has designated as lower fraud risks.
Response: We appreciate all the comments and have amended the final
rule to take many of these comments into account, as discussed
elsewhere in this final rule. We understand the concerns expressed and
have fashioned the final rule to balance concerns raised by commenters
with fulfilling the requirements and purpose of section 1128J(d) of the
Act. The final rule contains flexible yet strong standards that can be
applied to many different circumstances and providers and suppliers.
The statute and this rule are not limited to overpayments caused by
fraud or abuse.
4. How To Report and Return Overpayments
Section 1128J(d) of the Act provides that if a person has received
an overpayment, the person shall both report and return the overpayment
to the Secretary, an intermediary, a carrier, or a contractor, as
appropriate, at the correct address; and notify the Secretary,
intermediary, carrier, or contractor to whom the overpayment was
returned in writing of the reason for the overpayment.
In Sec. 401.305(e)(1), we proposed to require the use of the
existing voluntary refund process, which will be renamed the ``self-
reported overpayment refund process,'' set forth by the applicable
Medicare contractor to report and return overpayments except as
provided in Sec. 401.305(e)(2). Section 401.305(e)(2) provided that a
person would satisfy the reporting obligations of this section by
making a disclosure under the OIG's Self-Disclosure Protocol resulting
in a settlement agreement using the process described in the OIG Self-
Disclosure Protocol. The existing voluntary refund process is
referenced in Publication 100-08, Chapter 4, Section 4.16 of the
Medicare Program Integrity Manual. Under the existing voluntary refund
process, providers and suppliers report overpayments using a form that
each Medicare contractor makes available on its Web site.
In Sec. 401.305(d) of the February 16, 2012 proposed rule (77 FR
9179), we also proposed a specific list of 13 data elements that were
required in the report: (1) Person's name; (2) person's tax
identification number; (3) how the error was discovered; (4) the reason
for the overpayment; (5) the health insurance claim number, as
appropriate; (6) date of service; (7) Medicare claim control number, as
appropriate; (8) National Provider Identification (NPI) number; (9)
description of the corrective action plan to ensure the error does not
occur again; (10) whether the person has a corporate integrity
agreement with the OIG or is under the OIG Self-Disclosure Protocol;
(11) the timeframe and the total amount of refund for the period during
which the problem existed that caused the refund; (12) if a statistical
sample was used to determine the overpayment amount, a description of
the statistically valid methodology used to determine the overpayment;
and (13) a refund in the amount of the overpayment. We recognized that
some of the current reporting forms may differ among the different
Medicare contractors and stated we planned to develop a uniform
reporting form that will enable all overpayments to be reported and
returned in a consistent manner across all Medicare contractors. Until
such uniform reporting form is made available, we stated in the
preamble that providers and suppliers should utilize the existing form
available from the Web site of the applicable Medicare contractor.
Comment: Many commenters appreciated CMS' use of an existing
process, the voluntary refund process, as the method for reporting and
returning overpayments. Generally, commenters agreed that using an
existing process to implement the 60-day rule will ease the burden for
reporting and returning overpayments. However, many commenters
requested clarification about how this rule affected other existing
processes that enable providers and suppliers to report and return
claims-based overpayments. Commenters confirmed that providers and
suppliers sometimes use the voluntary refund process. Commenters also
noted that this process is not the only way to make overpayment refunds
and is usually only used when a refund is made by check and the
overpayment was calculated using a sampling methodology.
Commenters stated that, in most overpayment cases, other processes
are used that are effective and efficient both for the Medicare program
and providers and suppliers. Commenters repeatedly noted the claims
adjustment and reversal process for Part A and B claims. The claims
adjustment process for Part A claims is electronically accomplished
through access to the Fiscal Intermediary Standard System (FISS). The
claim adjustment is then recorded on the Provider Statistical &
Reimbursement Report (PS&R). Commenters uniformly stated that it is
critical that providers and suppliers be permitted to continue to use
the claims adjustment process to refund overpayments, when appropriate,
to ensure that the claims data is adjusted in the FISS. Claims
adjustment for Part B claims is currently a paper-based process, but
one in which commenters stated providers and suppliers frequently use.
In both Part A and B, claims adjustments include an adjustment reason
code on the claim. The claim is reprocessed and the overpayment is
recouped via the remittance advice.
In addition, commenters noted that hospitals are required to submit
the
[[Page 7675]]
Medicare Credit Balance Report (CMS-838; OMB control number 0938-0600)
within 30 days of the close of each calendar quarter to disclose any
credits due to the Medicare program as a result of patient billing or
claims processing errors, for example, being paid by Medicare and
another payer for the same services, or overpayments resulting from
incorrect calculation of the beneficiary's deductible or coinsurance.
Any amounts due to Medicare must be repaid or claims adjusted at the
time the CMS-838 is filed.
Commenters suggested that CMS permit the use of the claims
adjustment and credit balance report process for returning overpayments
because these existing processes are well-known to providers,
suppliers, and Medicare contractors and work effectively and
efficiently for all parties at recouping overpayments. In many
commenters' experience, Medicare contractors prefer that providers and
suppliers submit adjusted bills so that each beneficiary's account
properly reflects how and why the payment was adjusted or how the
contractors recouped a full or partial overpayment.
Response: We agree with commenters and amended the final rule
accordingly in Sec. 401.305(d)(1) by allowing for additional processes
beyond the voluntary refund process. Providers and suppliers may use
the claims adjustment, credit balance, self-reported refund process, or
another appropriate process to report and return overpayments. This
position preserves our existing processes and preserves our ability to
modify these processes or create new processes in the future.
Comment: Commenters requested clarification on how the timing of
the credit balance reporting process interacts with the timing of the
report and return obligation in the proposed rule. Under the credit
balance reporting process, the credit balance report is due 30 days
after the end of each quarter, which would mean that overpayments
received during the first 2 months of each quarter may be reported
after the 60-day time period under the proposed rule has passed.
Commenters requested guidance on how to comply with the proposed rule
and follow the credit balance reporting process.
Response: We have revised the requirement to include the credit
balance reporting process as a way to report and return overpayments
under this final rule.
Comment: Some commenters requested that CMS permit electronically
correcting or adjusting claims for the self-reported refund process as
opposed to completing a form, cutting a check, and mailing it to the
contractor for processing. It would reduce the administrative burden
and allow for expeditious return of overpayments, while furthering the
move to electronic processing of records.
Response: We will continue to review our processes and will
consider this suggestion in future process improvements. Any changes to
our administrative processes, including the self-reported refund
process, will be addressed in the applicable manual.
Comment: Commenters questioned whether, instead of submitting a
check with the overpayment reporting form, a provider continue to be
able to request a voluntary offset.
Response: Yes, providers and suppliers may request a voluntary
offset from the contractor.
Comment: Several commenters questioned how providers and suppliers
should handle delays by the Medicare contractor in processing the
refund, whether submitted through the electronic claims adjustment
system, filing of the CMS-838, or by submitting a check or requesting
an offset through the self-reported refund process. Commenters reported
that there is great variability in how the contractors handle voluntary
refunds. Some commenters reported that contractors at times have
returned a refund check submitted by a provider or supplier or refused
to accept it. Other commenters noted that some contractors claimed to
be unable to process a refund if the claims were for a time period
before that particular company was engaged as the contractor.
Commenters requested that the rule should be modified to expressly
state that a provider or supplier satisfies its repayment obligation
under the statute and the rule by making good faith efforts to submit a
valid form of payment to the contractor or government entity that the
provider or supplier reasonably believes to be the appropriate
recipient of a particular repayment. Other commenters suggested that
the contractor inform the provider or supplier when it has
preliminarily determined that the overpayment report complied with the
rule. Commenters also suggested a processing deadline for the
contractors.
Response: We agree with commenters that the obligations of this
final rule are satisfied when the provider or supplier follows the
appropriate process for the overpayment issue in good faith to report
and return the overpayment, including calculating the amount of the
overpayment. Publication 100-08, Chapter 4, Section 4.16 of the
Medicare Program Integrity Manual requires contractors to process all
voluntary refunds. The Program Integrity Manual specifically prohibits
contractors from returning voluntary refund checks. We see no basis for
a contractor to refuse a refund because a different company was the
contractor during the period covered by the refund. Finally, we may
consider a processing deadline for contractors in the future.
Regarding obtaining a preliminary determination, we believe
contractors may not be able to conclude whether the overpayment refund
complied with this rule on the face of the report. The provider or
supplier is ultimately responsible for complying with this rule.
Contractors are instructed to refer suspected fraud to law enforcement.
Any overpayment refund does not negate any potential liability the
provider or supplier may have for the overpayment issue.
Comment: Several commenters raised the situation where a contractor
notifies a provider or supplier of an overpayment due to the
contractor's error. Commenters stated that in this situation, where the
contractor identifies and takes responsibility for collecting the
overpayment by adjusting claims, the provider or supplier should not
also be required to conduct an inquiry and report and return the
overpayment on its own. Commenters noted that it may take the
contractor more than 60 days to adjust the claims related to its error.
Response: We agree that where the contractor identifies a payment
error by the contractor and notifies the provider or supplier that the
contractor will adjust the claims to correct the error, the provider or
supplier does not need to report and return the overpayment separately.
Comment: Many commenters objected to the proposed list of data
elements in Sec. 401.305(d) for several reasons, including that the
data elements exceed the statutory requirements, are not necessary for
Medicare to reconcile the payments, and create unnecessary burden.
Commenters believed that the proposed list exceeded the requirements of
section 1128J(d)(1)(B) of the Act, which states that the person must
notify the Secretary in writing of the reason for the overpayment.
Commenters specifically objected to the following items in the list of
data elements in Sec. 401.305(d) as overly burdensome: (3) How the
error was discovered; (9) description of the corrective action plan to
ensure the error does not occur again; and (12) if a statistical sample
was used to determine the overpayment amount, a description of the
statistically valid
[[Page 7676]]
methodology used to determine the overpayment. The discovery and
corrective action plan elements were objected to because commenters
stated that these elements appeared to assume that the overpayment were
the fault of the provider or supplier. Overpayments may be caused by
various reasons for which a corrective action plan is not necessary,
such as an error or a routine adjustment, according to commenters. In
addition, commenters noted that requiring claim-specific data, such as
the date of service, health insurance claim number, and the Medicare
claim control number for all of the claims associated with the
overpayment would be impossible when a sampling and extrapolation
methodology are used. Finally, commenters stated that compliance with
the proposed reporting requirements would result in additional time and
expense in reporting.
Response: We appreciate the comments and have adjusted the final
rule in several ways. As discussed previously, this final rule permits
using the most applicable process set forth by the Medicare contractor
to report and return overpayments. As a result, we eliminated the
specific list of data elements from the rule as proposed in Sec.
401.305(d) to accommodate these existing processes. While we believe
that the facts about how the overpayment was discovered and corrective
action plans are relevant information relating to the reason for the
overpayment, and thus within the purview of the statute, we also
recognize that the additional burden of providing this information may
not be necessary in all overpayment situations. In addition, we note
that providers and suppliers submitting self-disclosures to the OIG
Self-Disclosure Protocol (SDP) and the CMS Voluntary Self-Referral
Disclosure Protocol (SRDP) must use the reporting process described in
the respective protocol.
However, we continue to believe that, where the overpayment amount
is extrapolated based on a statistical sampling methodology, it is
necessary for the overpayment report to explain how the overpayment
amount was calculated. The statute requires the return of an amount of
money for the overpayment; therefore, it is a reasonable interpretation
of the statute to require an explanation of how the overpayment amount
was calculated by the provider or supplier by extrapolation. As
commenters noted, statistical sampling is already used by providers and
suppliers in the voluntary refund process. Therefore, we believe that
requiring an explanation of the statistical sampling methodology
results in little, if any, additional burden.
Comment: Many commenters stated that the differences between the
regulatory requirement in proposed Sec. 401.305(d) and various
contractors' existing voluntary refund forms created confusion.
Specifically, commenters requested clarity on how the provider or
supplier could comply with the regulation by using a contractor form
that did not contain all of the elements required by the regulation.
Commenters noted that we stated in the preamble that we intended to
create a standardized reporting form in the future and, until we issued
a standardized reporting form, providers and suppliers should utilize
the existing form available from the Web site of the applicable
Medicare contractor. Commenters requested guidance on whether they
would need to supplement the contractor's form to include any missing
regulatory elements to be in compliance with the regulation. Many
commenters expressed this concern in connection with using sampling to
calculate the overpayment. These commenters noted that, when a provider
or supplier identifies a systemic error, it is frequently most
efficient and effective to determine the overpayment amount utilizing
extrapolation. In such cases, commenters noted that it would be
impossible to identify specific data items, such as specific dates of
service and Medicare claim control numbers, for claims included in an
extrapolation estimate other than for the specific claims in the
sample. Thus, many commenters requested that we create an exception in
the regulation to identify the data elements that were required only as
appropriate, such as health insurance claim and Medicare claim control
numbers, and specific dates of service. In addition, many commenters
requested that we create the standardized refund form before or at the
same time as issuing the final rule to avoid confusion and potential
inconsistency among the contractors in the way that overpayments are
handled.
Response: We recognize commenters' concerns and believe the
revisions presented in this final rule address these concerns. We
removed the proposed data element list from the regulation to eliminate
confusion between compliance with the regulation and compliance with
the applicable refund process, with the exception of the statistical
sampling methodology explanation. We understand that providers and
suppliers currently report extrapolated overpayments through the
current voluntary reporting process. In these circumstances, providers
and suppliers should make a good faith effort to provide the
information on their contractor's refund form, which would include
providing details of the statistical sampling methodology and
indicating that certain data elements, such as health insurance claim
and Medicare claim control numbers, are not available for all the
claims in an extrapolation. Providers and suppliers should continue to
report extrapolated overpayments through currently available methods.
Given these changes, we do not believe it is necessary to create a
standardized refund form for the self-reported refund process prior to
finalizing this rule. We will work with the contractors to adjust their
current forms and instructions to address the requirements of Sec.
401.305(d) and will consider creating a standardized form in the
future.
Comment: Several commenters stated that we should add a section on
the refund form to allow a provider or supplier to indicate that it is
reporting an overpayment as ``contested'' or ``with reservations'' to
meet the 60-day deadline while allowing further investigation. This
would provide the opportunity for providers and suppliers to document
they do not agree that the reported amount is an overpayment, and yet,
are reporting and returning the payment to ensure that they are in
compliance with the rule.
Response: We decline to accept the commenters' suggestion.
Providers and suppliers are reporting and returning overpayments that
they have identified. Thus, we see no purpose in designating a refund
as contested or with reservations.
Comment: Some commenters requested that we direct contractors to
accept one single refund form with an attachment that contains the
required elements on a spreadsheet. Commenters stated that the current
refund process requires providers and suppliers to complete a single
refund form for each account identified as an overpayment, resulting in
an extensive resource burden with no value.
Response: We agree with the commenter that the practice they
describe (submitting one form and attaching a spreadsheet containing
the appropriate data) is acceptable for complying with this final rule.
Comment: Some commenters recommended that we create a process for
providers and suppliers to report potential overpayments without a
requirement to return the overpayment pending further review by the
contractor or the government. Commenters acknowledged that the
requirement that providers and suppliers report and
[[Page 7677]]
refund an overpayment is consistent with the statutory language.
However, commenters recommended that CMS consider situations where it
is not easy to determine whether the identified issue is an
overpayment. The commenters recommended that we create a process
permitting the submission of a written report to the Medicare
contractor, which would satisfy the rule's reporting obligation. The
Medicare contractor would then review the report to determine whether
an overpayment existed, at which time the returning obligation
requirement would be triggered.
Response: We decline to adopt the commenters' suggestion. As the
commenters acknowledge, section 1128J(d) of the Act requires providers
and suppliers to report and return overpayments they have received. It
does not cover overpayments determined and demanded by a Medicare
contractor or government agency.
Comment: A commenter recommended that we remove the reference to
statistical samples because it may be interpreted to suggest a
statistically valid sample is always required. The commenter stated
that there are many situations where the size of the potential
overpayment is small and does not warrant the expense of creating a
statistical sample to calculate a refund amount. In these situations,
the commenter believes providers and suppliers should do the best job
they can to estimate the overpayment and give all benefit of the doubt
to the government. The commenter believes requiring statistical
validity for all estimated refunds will create the largest burden on
small providers and suppliers. The commenter suggested that the final
regulation instead require the explanation of the methodology used in
any sample to protect the government's interest.
Response: We decline to adopt the commenter's suggestion. We
structured the final rule to have certain flexibilities for providers
and suppliers to account for the various circumstances that may involve
an overpayment. However, providers and suppliers need to calculate an
overpayment amount that is reliable and accurate, which in some cases
can be accomplished using statistically valid sampling methodologies.
This final rule expressly anticipates that providers and suppliers may,
but are not required to, use statistical sampling and extrapolation for
calculating the overpayment amount. We note that reasonable diligence
requires that any statistical sampling be conducted in a manner that
conforms to sound and accepted principles. These principles include
randomly selecting claims from the population and extrapolating only
within the time period covered by the population from which the sample
was drawn.
Comment: Many commenters questioned whether the existing self-
reported refund process would need to be used to report and return
overpayments associated with cost reports. Commenters noted that the
proposed rule does not specifically identify a separate process for
cost report-related overpayments. If we intended to propose using the
self-reported refund process for cost report overpayments, commenters
suggested that we reconsider. Commenters stated that the voluntary
refund process is not designed for providers, such as federally
qualified health centers, returning overpayments identified through the
cost reimbursement process, where the overpayment amount is based on
the reimbursement of allowable costs, particularly where an overpayment
resulted from the inclusion of costs in error or that are otherwise
non-reimbursable (in which case no specific claims for payment can be
identified for repayment). Requiring the use of the self-reported
refund process for these overpayments would be ineffective and
inefficient according to commenters. Commenters recommended we clarify
that overpayments associated with cost reports be reported and returned
through the existing cost reporting process.
Response: We agree with commenters and note that Sec.
401.305(d)(1) allows for overpayments associated with cost reports to
be reported through the existing cost report reconciliation process,
and does not require the use of the self-reported refund process for
overpayments based on cost reports. If an overpayment is identified
through the initial submission of a cost report, the cost report should
state that the overpayment resulted from reimbursements made at an
estimated rate exceeding actual reimbursable costs and the overpayment
is submitted along with the transmittal of the cost report to the
contractor. Where an overpayment is identified in connection with cost-
based reimbursement paid to a provider during a previous cost reporting
cycle, the overpayment should be reported by amending or reopening the
cost report and the overpayment should be returned by submitting
payment along with the amended or reopened cost report.
Comment: A number of commenters requested creation of a materiality
or de minimis exception for small-dollar overpayments from the rule.
Commenters expressed concern that in many situations the cost and
resources associated with reporting and refunding the overpayment would
exceed the amount of the overpayment. Commenters stated that the
administrative burden to process an overpayment could have a
significant negative financial impact on the provider's ability to
offer future services. In support of their position, commenters noted
that a materiality standard is included in other areas of Medicare
payment policy and related fraud and abuse enforcement policies. For
example, the Medicare Financial Management Manual (MFMM) instructs
Medicare contractors not to attempt recovery of overpayments under $10.
(See MFMM Ch. 3, section 170.2 (Rev. 29, January 2, 2004). Similarly,
under the physician self-referral law regulations, certain incidental
medical staff benefits with limited value (less than $31 for 2012) are
exempted. (See 42 CFR 411.357(m)). Moreover, commenters stated that CMS
currently follows a materiality threshold of $300 for Medicare
Secondary Payer liability recoveries. Under the CMPL, OIG stated that
they may enforce the prohibition against improper remuneration to
patients when the remuneration exceeds $10 for each item or $50 in the
aggregate. (See the August 30, 2002 HHS OIG Special Advisory Bulletin
on Offering Gifts and Other Inducements to Beneficiaries (67 FR 55855).
Finally, in its Corporate Integrity Agreements (``CIAs''), OIG
recognizes a materiality threshold by permitting the offset of
underpayments to overpayments for purposes of calculating a net
financial error rate, which then is used to determinate whether a
sample review must be expanded to a larger review. As such, commenters
requested a regulatory de minimis standard for this rule. Suggested
minimum monetary thresholds ranged from $5 to $5,000. Alternatively,
commenters requested CMS acknowledge that providers and suppliers can
and should perform responsible cost and benefit analyses before
committing resources to investigate low-dollar overpayments. Some
commenters requested a minimum threshold for the voluntary refund
program that permitted aggregating small-dollar overpayments identified
over a period of time into one submission.
Response: We decline to adopt a minimum monetary threshold in this
final rule. We believe adopting a regulatory de minimis standard would
be susceptible to abuse, especially in the
[[Page 7678]]
context of claims-based overpayments. We also note that some of the
examples provided by commenters require clarification. For example, the
referenced Medicare Secondary Payer threshold relates to the size of
certain liability insurance settlements, not the amount of the debt. In
addition, the physician self-referral law's exception for medical staff
incidental benefits of low value is not only unrelated to overpayments
made to providers, but is also subject to additional program safeguards
in order for the exemption to be available. With the exception of the
physician self-referral law, we note that the remaining examples are
detailed in subregulatory guidance, program instructions, or a
negotiated contract with OIG that is applicable only to a specific
party. We also disagree with commenter's request to acknowledge cost
and benefit analyses before committing resources to investigating a
potential overpayment. Providers and suppliers need to take reasonable
steps to determine whether they have received overpayments and are
required to return any funds received or retained under title XVIII of
the Act to which they, after applicable reconciliation, are not
entitled under such title.
Given the differences in cost report-related payments and the
resources needed on both the provider and the contractor's part in the
cost report process, we are considering establishing a minimum monetary
threshold for cost report-related overpayments. This threshold would be
published in program guidance or future rulemaking.
Comment: Some commenters requested that we exempt small-dollar
overpayments from the voluntary refund process. Under the proposed
rule, any overpayment would have to be reported and returned through
the voluntary refund process, which requires submitting a significant
amount of information. Therefore, commenters recommended establishing a
minimum threshold overpayment amount under which providers can use
existing claims adjustment processes to return the overpayment.
Commenters offered the New York State Office of the Medicaid Inspector
General (NY OMIG) as an example of a reporting process that has
established a $5,000 threshold. According to the comments, if the
amount of the overpayment falls below this threshold, providers are
permitted to return the overpayment through existing claims adjustment
processes.
Response: We decline to establish a regulatory minimum threshold
amount for the voluntary refund process. However, we believe that we
addressed commenters' concerns by clarifying in the final rule that
providers and suppliers may use the most applicable process established
by the contractor to report and return, including the claims adjustment
process. We note that even under the NY OMIG process offered as an
example, overpayments of any size need to be reported and returned.
Comment: Many commenters agreed with the treatment of the CMS
Voluntary Self-Referral Disclosure Protocol (SRDP) and the OIG Self-
Disclosure Protocol (SDP) as tolling the deadline for returning the
overpayment. Commenters requested that CMS clarify that self-disclosure
by providers and suppliers to other government entities, such as DOJ
and MFCU, would similarly suspend the 60-day deadline.
Response: We finalized the treatment of the SRDP and SDP as tolling
the obligation to return the overpayment as proposed. With regard to
the SRDP, the requirement to return the overpayment within 60 days of
identification is tolled for the full duration of the time that the
provider or supplier is negotiating a potential settlement with CMS in
accordance with the requirements of the SRDP. While engaged in the
SRDP, a provider or supplier is subject to all the requirements of the
SRDP, and any subsequent changes or updates to the SRDP instructions
issued by CMS, independent of any similar requirements imposed by this
rule. At such time that a provider or supplier is no longer actively
negotiating a settlement or is not considered to be engaged in the SRDP
process, the tolling will no longer be in effect and the provider or
supplier is expected to comply with the 60-day returning requirements
of this rule. This treatment applies to all providers and suppliers
already engaged in the SRDP at the time this final rule is effective as
well as those who submit a reported overpayment to the SRDP after the
effective date of this rule.
We decline to extend this treatment to self-disclosure to entities
outside of the SRDP and SDP in this final rule. The SRDP and SDP are
both formal processes managed by agencies within the Department, CMS
and OIG respectively. As such, we believe it is appropriate to include
those processes in this rule. However, DOJ is a separate department and
we are not aware of any formal self-disclosure process by DOJ that is
analogous to the SRDP or SDP. Also, we are not aware of a similar MFCU
process and, more importantly, Medicaid is not covered in this
rulemaking.
Comment: Many commenters questioned treating the SRDP and SDP
differently for purposes of satisfying the reporting obligation. In the
proposed rule, the SDP submission satisfied the reporting obligation
but the SRDP did not, which required the provider to file reports with
both the overpayment refund process and the SRDP. Commenters questioned
the utility of this duplicative reporting and requested that CMS
eliminate it in the final rule.
Response: We agree with commenters and have revised Sec.
401.305(d)(2) to permit the SRDP report to satisfy the reporting
obligation in addition to the SDP.
Comment: A commenter requested confirmation that a provider or
supplier may provide a single notification to the Department or its
contractors to satisfy the report and return requirement and does not
also need to use the SDP or SRDP.
Response: Providers and suppliers need to decide who is the most
appropriate recipient of the overpayment report and refund as provided
in Sec. 401.305(d)--the applicable Medicare contractor, the SDP, or
the SRDP. Providers and suppliers should review the SDP and SRDP to
determine whether either of those avenues is available. The commenter
also appears to believe that overpayments can be reported and returned
to the Department, which is incorrect. Sending an overpayment report
and refund to anyone other than the appropriate Medicare contractor
according to the applicable administrative process (or otherwise
following Sec. 401.305(d)) does not conform to any applicable process
as discussed in this final rule.
Comment: Some commenters requested guidance on when a contractor
would refer an overpayment report to OIG.
Response: Medicare contractors have long been instructed to refer
potential fraudulent conduct to law enforcement.
Comment: Many commenters questioned using CMS or OIG's
acknowledgement of receipt of the disclosure as the action that
suspends the returning deadline. Commenters expressed concern that they
do not always receive this acknowledgement in a timely way. Commenters
requested CMS use the date the submission was sent to CMS or OIG as the
suspension date and require the provider or supplier to retain the
appropriate documentation.
Response: We decline to adopt this suggestion. While we understand
the concern about receiving a timely acknowledgement response, we
believe that this concern does not outweigh the benefit of using the
government's acknowledgement to avoid any potential
[[Page 7679]]
question as to whether the government actually received the submission.
Self-disclosures to the SRDP must be submitted by email to
[email protected]. Parties that send their submission to
[email protected] receive a response email acknowledging receipt of
the submission. This response email serves as CMS' acknowledgement of
receipt. We understand that parties that send their submission through
OIG's SDP online submission portal, http://oig.hhs.gov/compliance/self-disclosure-info/index.asp, also receive a response email. We also
understand that SDP hard-copy submitters receive an acknowledgement
letter from OIG confirming receipt. Either of these communications from
OIG serves as the acknowledgement of receipt for purposes of this final
rule.
Comment: A commenter questioned what would happen if the provider
or supplier and OIG are unable to reach a settlement in the SDP. The
proposed rule provided that the deadline for returning overpayments
will be suspended when the OIG acknowledges receipt of a submission to
the OIG Self-Disclosure Protocol until such time as a settlement
agreement is entered, the person withdraws from the OIG Self-Disclosure
Protocol, or the person is removed from the Self-Disclosure Protocol.
The commenter requested CMS clarify that, if a settlement could not be
reached through the SDP, then the provider would have a reasonable
amount of time to make a report to the relevant Medicare contractor to
meet its obligations under this rule.
Response: This final rule contains the same language as the
proposed rule concerning the returning obligation. In the event that a
SDP settlement is not reached, the provider or supplier has the balance
of the 60-day time period remaining from identification to the
suspension of that 60-day period when OIG acknowledged receiving the
SDP submission to report and return any overpayment to the contractor.
If the overpayment has been identified, we believe that the balance of
the 60-day period is a reasonable amount of time to report and return
the overpayment to the contractor if the SDP does not result in a
settlement. We revised this final rule to clarify that the same rule
would apply to a failure to reach a SRDP settlement.
Comment: A commenter requested additional exceptions from the rule
or lengthier timeframes for reporting and returning overpayments based
upon the size of the provider. The commenter stated that small
providers and suppliers may lack the infrastructure to audit claims at
the frequency required to be in compliance with the proposed rule.
Response: We decline to adopt the commenter's suggestion. The
timeframe is established by the statute does not create different
obligations based on provider type or size. We recognize that there is
great diversity in the health care industry in provider type and size.
All members of that industry who participate in the Medicare program
are obligated to ensure they bill Medicare properly and to return
overpayments they have received.
Comment: Several commenters objected to the 60-day deadline for
reporting and returning an overpayment. Some commenters expressed
concern that certain providers and suppliers might not have the
resources to complete an investigation within 60 days and that CMS
should establish a process for requesting an extension to the 60-day
deadline. A commenter suggested that CMS adopt a process that allows
the provider to report, but not to return, the overpayment within 60
days. Similarly, another commenter requested that the final rule
clarify whether the obligation to report an overpayment is distinct
from the obligation to return an overpayment.
Response: The 60-day deadline to report and return is contained in
section 1128J(d) of the Act. We believe we addressed the concerns that
underlie these comments by clarifying the provider or supplier's
ability to conduct reasonable diligence and that this reasonable
diligence time period of 6 months is in addition to the 60-day report
and return time period, as discussed previously. We considered but
declined to establish a new process for reporting, but not returning,
overpayments. We believe we have addressed those comments by both the
reasonable diligence clarifications and the expansion to using other
processes to report and return besides the self-reported refund
process.
Comment: Some commenters recommended that that 60-day timeframe for
reporting and returning overpayments be reduced to 30 days. These
commenters did not believe providers and suppliers should have such a
long grace period to keep taxpayer money to which they are not
entitled.
Response: We understand the commenters' concerns, but the 60-day
deadline to report and return is contained in section 1128J(d) of the
Act.
Comment: Several commenters questioned the proposed rule's use of
the Extended Repayment Schedule (ERS) and requested that the definition
of ``hardship'' and the documentation requirements be changed so that
providers and suppliers could more easily utilize ERS. These commenters
stated that the hardship standard was too difficult to meet. Commenters
also requested more guidance on the documentation requirements for
using the ERS. Commenters suggested changing the definition of
``hardship'' to focus on the provider's financial stability and not
simply the amount of their Medicare payments and overpayments in
comparison to their total Medicare billing. Some commenters suggested
that the process be streamlined so that small providers and suppliers
may more easily take advantage of ERS. Finally, commenters recommended
that the ERS include a provision allowing for a waiver of an obligation
to repay an overpayment ``if circumstances exist to merit such
waiver.''
Response: We appreciate the comments. In the February 16, 2012
proposed rule (77 FR 9183), we stated that providers or suppliers who
needed additional time to return the overpayment due to financial
limitations should use the existing ERS process as outlined in
Publication 100-06, Chapter 4 of the Financial Management Manual. We
also proposed modifying the definition of ``hardship'' in Sec. 401.607
to ensure that providers and suppliers could seek to use ERS by
amending the definition to include overpayments reported in accordance
with Sec. 401.301 through Sec. 401.305. We noted in the proposed rule
(77 FR 9183) that requests for ERS are not automatically granted and
that providers and suppliers seeking to use ERS must submit significant
documentation to verify true financial hardship. We have added Sec.
401.305(b)(2)(iii) in this final rule to allow for the suspending of
the deadline for returning overpayments when a person requests an ERS
as defined in Sec. 401.603. Explanation of the ERS and its
documentation requirements are contained in Publication 100-06, Chapter
4 of the Financial Management Manual.
Comment: A commenter stated that providers and suppliers do not
have access to the same data formats and elements as the contractor.
This commenter recommended that CMS create a portal with a unique
provider identifier that would allow unlimited access to the National
Data Repository.
Response: We appreciate the comment. Questions about data format
and elements should be directed to the provider or supplier's
applicable contractor. We will consider ways to
[[Page 7680]]
further educate providers and suppliers on these issues in the future.
Comment: Some commenters expressed concern about increasing billing
errors, and consequent overpayments, when ICD-10 is implemented. These
commenters recommended a grace period to accommodate these changes.
Response: We understand the commenters' concerns, but decline to
adopt a grace period as suggested. It is unclear from the comments
whether they are advocating for a grace period from the requirement to
report and return overpayments relating to ICD-10 miscoding or an
extension of the 60-day timing requirement. Regardless, we see no basis
in section 1128J(d) of the Act to permit either suggestion.
III. Provisions of the Final Regulations
For the most part, this final rule incorporates the provisions of
the proposed rule, with the following exceptions:
In Sec. 401.305 we modified our proposals as follows:
++ In paragraph(a)(1), we revised the requirements for reporting
and returning of overpayments to more clearly distinguish between the
concepts of receiving and identifying an overpayment. A person that has
received an overpayment must report and return in the form and manner
required.
++ In paragraph (a)(2), we revised the requirements for reporting
and returning of overpayments slightly to remove the terms ``actual
knowledge'', ``reckless disregard'', and ``deliberate ignorance'' and
to state that a person has identified an overpayment when the person
has or should have through the exercise of reasonable diligence
determined that the person has received an overpayment and quantified
the amount of the overpayment. A person should have determined that the
person received an overpayment if the person fails to exercise
reasonable diligence and the person in fact received an overpayment.
++ Added a new paragraph (b)(2)(iii) to specify that the deadline
for returning overpayments will be suspended when a person requests an
extended repayment schedule as defined in Sec. 401.603.
++ Removed proposed paragraph (d), which specified 13 specific data
elements that were to be included in the report that providers and
suppliers use to report and return overpayments. We subsequently
renumbered paragraphs (e) through (g) as (d) through (f).
++ In paragraph (d)(1) (which was proposed paragraph (e)(1)), we
revised the allowable reporting process to include an applicable claims
adjustment, credit balance, self-reported refund, or other reporting
process set forth by the applicable Medicare Contractor. We specified
that if the person calculates the overpayment amount using a
statistical sampling methodology, the person must describe the
statistically valid sampling and extrapolation methodology in the
report.
++ In paragraph (d)(2) (which was proposed paragraph (e)(2)), we
added disclosure to the CMS Voluntary Self-Referral Disclosure Protocol
(SRDP) as a method of satisfying the reporting obligations for self-
identified overpayments.
++ In paragraph (f) (which was proposed paragraph(g)), we revised
the lookback period from 10 years to 6 years to specify that
overpayments must be reported and returned only if a person identifies
the overpayment within 6 years of the date the overpayment was
received. We carefully considered all of the comments on the lookback
period and concluded that a 6-year time period is the most appropriate
time period.
In Sec. 405.980, we--
++ Removed proposed paragraph (b)(6). This paragraph would only
apply to reopenings initiated by the contractor.
++ Added paragraph (c)(4) to clarify that a reopening may be
requested under Sec. 405.980(c).
IV. Collection of Information Requirements
A. Background
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
OMB for review and approval. In order to fairly evaluate whether an
information collection should be approved by OMB, section 3506(c)(2)(A)
of the Paperwork Reduction Act of 1995 requires that we solicit comment
on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
The following is a discussion of the provisions, as stated in
section II. of this final rule, that contain information collection
requirements.
B. ICR Estimates in the Proposed Rule
Proposed Sec. 401.305 stated that a provider or supplier must (1)
report and return an overpayment to the Secretary, the state, an
intermediary, a carrier or a contractor to the correct address by the
later of 60 days after the overpayment was identified or the date the
corresponding cost report is due, and (2) notify the Secretary, the
state, an intermediary, a carrier, or a contractor in writing of the
reason for the overpayment. The burden associated with this requirement
was the time and effort necessary to report and return the overpayment
in the manner described at Sec. 401.305.
For purposes of Sec. 401.305 only, we estimated that approximately
125,000 providers and suppliers (or roughly 8.5 percent of the total
number of Medicare providers and suppliers) would report and return
overpayments in a typical year under our provisions. We estimated this
based on the improper payment rate for the Medicare Fee-for-Service
program, which was approximately 12 percent in FY 2014 and FY 2015,\4\
and we expect that some number of improper payments will be identified
by sources other than providers and suppliers themselves. We projected
that each of these providers and suppliers would, on average,
separately report and return approximately 3 to 5 overpayments. In
addition, we estimated that it would take a provider or supplier
approximately 2.5 hours to complete the applicable reporting form and
return an overpayment.
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We are developing an information collection request for OMB review
and approval that will authorize the collection of the applicable
reporting form. The public will have an opportunity to review the
information collection and submit comments. We plan to announce the
information collection request under the required 60-day and 30-day
Federal Register notice and comment periods. These notices will
incorporate the process described below and the burden calculated in
Table 1, among other processes.
We determined that the two main categories of individuals who would
most likely complete and submit the applicable reporting form included:
(1) Accountants and auditors (external and in-house); and (2)
miscellaneous in-house administrative personnel. Each provider's and
supplier's individual operations are different and, as a result,
[[Page 7681]]
it was not possible to break down the percentage of total affected
providers or suppliers that would fall within the 2 previously stated
categories (for example, percentage of providers that would use an
accountant). Consequently, in order to determine the burden cost, we
utilized the average hourly wage of these 2 occupational categories
based on the most recent wage data provided by the Bureau of Labor
Statistics (BLS) data for May 2010. The mean hourly wage for the
category of ``accountants and auditors'' was $33.15 (see http://www.bls.gov/oes/current/oes132011.htm) and the mean hourly wage for the
category of ``bookkeeping, accounting, and auditing clerks'' was $16.99
(http://www.bls.gov/oes/current/oes433031.htm). The average of these 2
figures, including fringe benefits and overhead, was $37.10. This lead
to an aggregate annual ICR cost burden--attributable to the impacted
125,000 providers and suppliers, and using the range of 3 to 5
overpayments, of $34.78 million and $57.97 million, respectively.
C. Comments Received
We received a number of comments regarding our proposed ICR
estimates:
Comment: Several commenters suggested that the burden analysis
offered by CMS in the proposed rule was inadequate because it only
considered two types of individuals involved in the reporting and
returning of overpayments, accountants/auditors and in-house
administrative personnel. Commenters suggested that additional and more
costly individuals, such as legal counsel and compliance consultants,
would be necessary to comply with this rule.
Response: We disagree. We believe only the rarest of circumstances
(such as potential fraud or certain investigations of potential
violations of the physician self-referral law) would necessitate more
costly personnel, such as legal counsel, to comply with this final
rule. In the overwhelming majority of cases, we expect overpayment
identification and return to be sufficiently handled by accountants,
auditors, and in-house administrative personnel.
Comment: Several commenters stated that CMS--(1) underestimated the
administrative burden imposed by this rule; and (2) failed to
adequately support the assumptions underlying the regulatory impact
analysis.
Response: We understand the commenters' concerns regarding the
underestimation of the administrative burden and the failure to
adequately support assumptions underlying the regulatory impact
analysis. Therefore, we have increased the projected ``per report''
burden--which includes researching, reporting, and returning the
overpayment--from 2.5 hours to 6 hours to address these concerns. Our
assumptions also include our belief that the majority of these 6 hours
will be spent researching and identifying the overpayment, and that the
time burden for reporting and returning the overpayment after it is
identified is minimal.
D. Final Estimated ICR Burden
There are two major changes from our projected burden in the
proposed rule. First, as noted previously, we are increasing the ``per
report'' hour burden from 2.5 hours to 6 hours. Second, we must use
more recent BLS data in calculating the hourly wage.
According to BLS information for May 2014, the national estimated
mean hourly wage for the category of ''accountants and auditors'' was
$35.42 (see http://www.bls.gov/oes/current/oes132011.htm) and the
national estimated mean hourly wage for the category of ''bookkeeping,
accounting, and auditing clerks'' was $18.30 (http://www.bls.gov/oes/current/oes433031.htm). The average of these 2 figures, is $26.86. This
does not include fringe benefits and overhead which are generally
calculated as being 100% of salary. This means the cost of an hour of
work is $53.72.
The following table shows the projected annual ICR hour and cost
burdens associated with Sec. 401.305:
Table 1--Estimated ICR Burden of Sec. 401.305
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of reported and returned Burden per Hourly labor Total labor
overpayments per affected OMB Control No. Respondents Responses response Total annual cost of cost of
provider (hours) burden (hours) reporting ($) reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3................................. 0938--New........... 125,000 375,000 6 2,250,000 $53.72 $120,870,000
4................................. 0938--New........... 125,000 500,000 6 3,000,000 53.72 161,160,000
5................................. 0938--New........... 125,000 625,000 6 3,750,000 53.72 201,450,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Therefore, we project an annual ICR cost burden of between $120.87
million and $201.45 million. The former represents our low-end
estimate, while the latter is our high-end estimate. The $161.16
million estimate represents our primary, or mid-range, projection.
While we have used a range of values to illustrate the possible burden
estimates that providers may incur, we cannot submit a range of values
for OMB approval. For purposes of OMB review and approval, we will use
the mid-range estimate related to 4 reported and returned overpayments.
V. Regulatory Impact Statement
A. Background
We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. A regulatory impact analysis (RIA) must be prepared for
major rules with economically significant effects ($100 million or more
in any one year).
As discussed earlier in the preamble, even without a final rule,
all stakeholders are subject to the statutory requirements found in
section 1128J(d) of the Act and could face potential FCA
[[Page 7682]]
liability, CMPL liability, and exclusion from federal health care
programs for failure to report and return an overpayment. This final
rule imposes a new deadline on the return of any overpayment that has
been identified. We believe that this change will spur providers and
suppliers to be more diligent in reporting and returning overpayments.
That will likely increase the overpayments that we collect, but we do
not have a basis for estimating the magnitude of that change, and note
the substantial uncertainty surrounding the magnitude of new
collections. The annual burden costs for reporting and returning of
overpayments, as discussed in section IV. of this final rule, are
estimated between $120.87 million and $201.45 million. Since there may
be years where the burden costs exceed $100 million, we believe this
rule is a major rule and economically significant.
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
less than $7.5 million to $38.5 million in any 1 year. With a maximum
cost of $201,450,000, we do not believe that the reporting and
returning of overpayments identified by providers and suppliers of
services will have a significant impact on a substantial number of
small entities. We are not preparing an analysis for the RFA because we
have determined, and the Secretary certifies, that this final rule will
not have a significant economic impact on a substantial number of small
entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital located outside of the Metropolitan Statistical
Area for Medicare payment regulations and that has fewer than 100 beds.
We are not preparing an analysis for section 1102(b) of the Act because
we have determined and the Secretary certifies that this final rule
will not have a significant impact on the operations of a substantial
number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits before issuing any
rule whose mandates require spending in any 1 year of $100 million in
1995 dollars, updated annually for inflation. In 2015, that threshold
is approximately $144 million. This rule will have no consequential
effect on state, local, or tribal governments or on the private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it announces a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on state
and local governments, preempts state law, or otherwise has Federalism
implications. Since this final rule does not impose any costs on states
or local governments, the requirements of Executive Order 13132 are not
applicable.
Comment: A commenter expressed concern that the proposed rule
creates an unfunded requirement that forces medical practices to
implement self-audits and internal compliance plans, and that CMS did
not address this burden in the RIA.
Response: We disagree that this rule creates a requirement for any
formal compliance plan or audit strategy; rather, it requires that
providers and suppliers maintain responsible business practices and
conduct a reasonably diligent inquiry when information indicates that
an overpayment may exist.
B. Accounting Statement and Table
As required by OMB Circular A-4 (available at link http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), we have prepared an accounting
statement. The entries in Table 2 reflect the application of a 7
percent and 3 percent annualized rate to the high-end, primary, and
low-end estimates referred to in section V. of this final rule. The 7
and 3 percent figures were applied over a 10-year period beginning in
2015, with the figures in the accounting statement reflecting the
average annualized costs over this period.
The accounting statement does not address the potential financial
benefits of this final rule from the standpoint of its effectiveness in
recouping overpayments. We do not have sufficient data on which to base
a monetary estimate of recovered funds. We note that the only costs
associated with this final rule for providers and suppliers involve the
actual researching, reporting, and returning of overpayments. For
purposes of our RIA estimates, we do not deem the actual refunded
overpayment as a cost since it constitutes money to which the provider
or supplier was not entitled.
Table 2--Accounting Statement: Estimated Costs Resulting From Reporting and Returning of Overpayments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary Low estimates High
Category estimates (in (in $ estimates (in Year dollars Discount rate Period
$ millions) millions) $ millions) (%) covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs:
Resulting from reporting and returning of $161.16 $120.87 $201.45 2015 7 2015[dash]2024
overpayments.......................................
161.16 120.87 201.45 2015 3 2015[dash]2024
-----------------------------------------------------------------------------------------------
Who Is Affected......................................... Providers and Suppliers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
C. Alternatives Considered
In light of the statutory mandate in section 6402(a) of the
Affordable Care Act, we did not consider any alternatives to the
implementation of the proposed provisions. However, we contemplated
several operational mechanisms to alleviate the burden on the provider
and supplier communities.
First, we proposed a new, unified form as part of the reporting and
returning process in our proposed rule. However, the comments received
indicated that this could cause needless additional burden. Instead, we
elected to utilize existing processes for reporting and returning,
including the voluntary refund process. This would allow providers and
suppliers to use a reporting mechanism with which they are already
familiar. After reviewing the
[[Page 7683]]
comments, we raised the burden to 6 hours for identifying and reporting
and returning, but that is lower than if we had finalized our plan to
develop a new singular form for reporting and returning.
Second, we contemplated the appropriate length of time in which
overpayments must be reported and returned. A time period of 10 years
was proposed, as this is the outer limit of the FCA statute of
limitations. We solicited comment on this issue, and as discussed at
length in section II.C.3. of this final rule, we agreed with commenters
that a period of 6 years was more appropriate and will reduce the
burden imposed on providers and suppliers by this final rule compared
to the longer proposed lookback period of 10 years.
D. Beneficiary Access
We do not anticipate any impact on beneficiary access to care as a
result of this rule. As noted previously, the only burden associated
with our proposed provisions involves the ICR aspects of reporting and
returning overpayments. We do not believe that this burden--which, in
any event, would only affect a small percentage of providers and
suppliers--would cause a particular provider or supplier to reduce the
services it furnishes to beneficiaries.
In accordance with the provisions of Executive Order 12866, this
rule was reviewed by OMB.
List of Subjects
42 CFR Part 401
Claims, Freedom of information, Health facilities, Medicare,
Privacy.
42 CFR Part 405
Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medical devices, Medicare, Reporting and
recordkeeping requirements, Rural areas, X-rays.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS
0
1. The authority citation for part 401 continues to read as follows:
Authority: Secs. 1102, 1871, and 1874(e) of the Social Security
Act (42 U.S.C. 1302, 1395hh, and 1395w-5).
0
2. Part 401 is amended by adding subpart D to read as follows:
Subpart D--Reporting and Returning of Overpayments
Sec.
401.301 Basis and scope.
401.303 Definitions.
401.305 Requirements for reporting and returning of overpayments.
Subpart D--Reporting and Returning of Overpayments
Sec. 401.301 Basis and scope.
This subpart sets forth the policies and procedures for reporting
and returning overpayments to the Medicare program for providers and
suppliers of services under Parts A and B of title XVIII of the Act as
required by section 1128J(d) of the Act.
Sec. 401.303 Definitions.
For purposes of this subpart--
Medicare contractor means a Part A/Part B Medicare Administrative
Contractor (A/B MAC) or a Durable Medical Equipment Medicare
Administrative Contractor (DME MAC).
Overpayment means any funds that a person has received or retained
under title XVIII of the Act to which the person, after applicable
reconciliation, is not entitled under such title.
Person means a provider (as defined in Sec. 400.202 of this
chapter) or a supplier (as defined in Sec. 400.202 of this chapter).
Sec. 401.305 Requirements for reporting and returning of
overpayments.
(a) General. (1) A person that has received an overpayment must
report and return the overpayment in the form and manner set forth in
this section.
(2) A person has identified an overpayment when the person has, or
should have through the exercise of reasonable diligence, determined
that the person has received an overpayment and quantified the amount
of the overpayment. A person should have determined that the person
received an overpayment and quantified the amount of the overpayment if
the person fails to exercise reasonable diligence and the person in
fact received an overpayment.
(b) Deadline for reporting and returning overpayments. (1) A person
who has received an overpayment must report and return the overpayment
by the later of either of the following:
(i) The date which is 60 days after the date on which the
overpayment was identified.
(ii) The date any corresponding cost report is due, if applicable.
(2) The deadline for returning overpayments will be suspended when
the following occurs:
(i) OIG acknowledges receipt of a submission to the OIG Self-
Disclosure Protocol and will remain suspended until such time as a
settlement agreement is entered, the person withdraws from the OIG
Self-Disclosure Protocol, or the person is removed from the OIG Self-
Disclosure Protocol.
(ii) CMS acknowledges receipt of a submission to the CMS Voluntary
Self-Referral Disclosure Protocol and will remain suspended until such
time as a settlement agreement is entered, the person withdraws from
the CMS Voluntary Self-Referral Disclosure Protocol, or the person is
removed from the CMS Voluntary Self-Referral Disclosure Protocol.
(iii) A person requests an extended repayment schedule as defined
in Sec. 401.603 and will remain suspended until such time as CMS or
one of its contractors rejects the extended repayment schedule request
or the provider or supplier fails to comply with the terms of the
extended repayment schedule.
(c) Applicable reconciliation. (1) The applicable reconciliation
occurs when a cost report is filed; and
(2) In instances when the provider--
(i) Receives more recent CMS information on the SSI ratio, the
provider is not required to return any overpayment resulting from the
updated information until the final reconciliation of the provider's
cost report occurs; or
(ii) Knows that an outlier reconciliation will be performed, the
provider is not required to estimate the change in reimbursement and
return the estimated overpayment until the final reconciliation of that
cost report.
(d) Reporting. (1) A person must use an applicable claims
adjustment, credit balance, self-reported refund, or other reporting
process set forth by the applicable Medicare contractor to report an
overpayment, except as provided in paragraph (d)(2) of this section. If
the person calculates the overpayment amount using a statistical
sampling methodology, the person must describe the statistically valid
sampling and extrapolation methodology in the report.
(2) A person satisfies the reporting obligations of this section by
making a disclosure under the OIG's Self-Disclosure Protocol or the CMS
Voluntary Self-Referral Disclosure Protocol resulting in a settlement
agreement using the process described in the respective protocol.
(e) Enforcement. Any overpayment retained by a person after the
deadline for reporting and returning the overpayment specified in
paragraph (b) of this section is an obligation for purposes of 31
U.S.C. 3729.
(f) Lookback period. An overpayment must be reported and returned
in accordance with this section if a person identifies the overpayment,
as defined
[[Page 7684]]
in paragraph (a)(2) of this section, within 6 years of the date the
overpayment was received.
Sec. 401.607 [Amended]
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3. In Sec. 401.607(c)(2)(i), the definition of ``Hardship'' is amended
by removing the phrase ``outstanding overpayments (principal and
interest)'' and adding in its place the phrase ``outstanding
overpayments (principal and interest and including overpayments
reported in accordance with Sec. Sec. 401.301 through 401.305)''.
PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED
0
4. The authority citation for part 405 continues to read as follows:
Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874,
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a),
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C.
263a).
0
5. Section 405.980 is amended by adding paragraph (c)(4) to read as
follows:
Sec. 405.980 Reopenings of initial determinations, redeterminations,
reconsiderations, hearings, and reviews.
* * * * *
(c) * * *
(4) A party may request that a contractor reopen an initial
determination for the purpose of reporting and returning an overpayment
under Sec. 401.305 of this chapter.
* * * * *
Dated: August 27, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: February 5, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-02789 Filed 2-11-16; 8:45 am]
BILLING CODE 4120-01-P