CMS recently published its final “60 Day Rule” for reporting and refunding Medicare Parts A and B overpayments. Although it took four years between the proposed rule and final rule, some groups aren’t happy about all its revisions, but most welcome the agency’s efforts.
What's in an "identification" definition?
The main clarification of the final rule is the meaning of overpayment “identification,” which states “a person has identified an overpayment when the person has or should have, through the exercise of reasonable diligence, determined the person has received an overpayment and quantified the amount of the overpayment.” This contrasts the proposed rule which stated an overpayment was identified when a person had actual knowledge of the overpayment or acted in reckless disregard or deliberate ignorance of the existence of the overpayment.
The proposed rule, originally part of the ACA, required anyone who received an overpayment to report and return it within 60 days after the date it was identified. The definition of “identified” was vague. “The proposed rule relied on a knowledge standard for “identified,” Ken Marcus, a partner with Honigman Miller Schwartz and Cohn LLP, told Healthcare Dive. “Knowledge is a legal term coming out of the federal False Claims Act, which either means actual knowledge of reckless disregard or deliberate ignorance. There are several legal terms that define 'knowledge.’”
Under the proposed rule, providers kept asking, “What does it mean I had knowledge?” Marcus said in certain situations, it’s obvious there’s been an overpayment. But in other cases -- such as when a large hospital performs thousands of the same procedures and there may have been some wrong codes used to bill for some of them, but the hospital isn’t sure how many -- the question of “identified,” he added, “becomes very murky.”
Tony Maida, a partner in the Health Industry Advisory Group at McDermott Will & Emery LLP, advised CMS while a former employee at the Office of Inspector General (OIG). He said concerns were raised not only at CMS, but also at OIG and the Department of Justice (DOJ), the final rule “would not enable an ostrich defense – where a provider sticks its head in the sand and never looks to see if they have any overpayments or have actual knowledge of it.” Maida agreed with Marcus that identification is a difficult term to define, “but,” he added “the threshold obligation of the statute is not dependent on having actual knowledge or not, it’s if you received an overpayment you have to report and return it.” He also predicted there will be a fair amount of debate around how someone determines they received something.
“This is going to be where a lot of debate originates – whether this is the right interpretation of the statute and whether it goes beyond what the statute says and how it’s going to play out in practice in different cases,” Maida stated.
The 60-day time period doesn’t start until after the required reasonable diligence has concluded. The final rule also allows a six-month benchmark which gives providers six months after receiving any credible information they have a potential overpayment to do the required due diligence. Maida said CMS wanted providers to move forward in a diligent manner and not delay the process. “It’s not a sprint, but it’s not a Sunday walk in the park either,” he added. Providers have six months to perform an audit and in some cases engage outside counsel. “I think as long as providers have a reasonable story to tell about their process -- that’s ultimately what the government is looking for and whether the provider is moving forward in a diligent manner,” he said.
Those who fail to identify and refund overpayments to Medicare within 60 days face potential False Claims liability, Civil Monetary Penalties Law liability, and possible exclusion from federal healthcare programs. However, this isn’t new - it went into effect under the ACA's 2010 implementation.
A six-year limitation
The final rule limits a provider’s obligation to repay overpayments discovered within six years of the initial Medicare reimbursement instead of the ten years CMS originally proposed. “The six years are consistent with existing law – the federal False Claims Act has a six-year statute of limitations,” said Marcus. Although he said six years is better than 10, he questioned whether this change will be considered a substantial difference. “I don’t know that it’s a great relief. Whether and to what extent providers are now going to conduct internal audits and take a look is an open question.”
The American Hospital Association (AHA) was one of many groups to criticize the proposed rule with its 10-year overpayment guideline as “regulatory overreach.” AHA executive vice president Tom Nickels said the proposed rule “would have created an extraordinary burden on hospitals and was premised on a flawed application of the False Claims Act to payment policy,” according to an AHA news release. However, in response to the final rule, Nickels said, “We welcome the federal government’s reversal of its proposed 10-year look-back period.” The six-year period is not retroactive and Maida points out that it’s not viewed as creating any extra burden to providers because “that period of time is already part of documentation requirements.”
More options to return overpayments
“The proposed rule had only one avenue to return overpayments and it happened to be an avenue people didn’t travel down all that often because it wasn’t very practical,” stated Maida. CMS had to think more broadly about how people interact with the program on a daily basis and include claims adjustments, credit balance, self-reporting refunds, and other processes to return overpayments. “You have to use a process CMS set up. I think there’s still some administrative tweaks to be made there, but from what I’ve seen, most think it’s good because hospitals can continue to use the same process for adjusting claims.” Maida added no one wants technical overpayment cases where someone is penalized for returning an overpayment the wrong way.
A mixed response
The American Academy of Family Physicians (AAFP) wasted no time in criticizing the final rule. Dr. Wanda Filer, AAFP president, took umbrage with the statement that providers and suppliers “have a clear duty to undertake proactive activities to determine if they have received an overpayment.” Dr. Filer recently told AAFP News, “This whole idea about ‘clear duty’ is disturbing. Family physicians have a clear duty to take care of their patients; it’s CMS’ clear duty to ensure that accurate payments are made to physicians within the Medicare system.”
The group voiced concerns that the rule forced physicians to run expensive and time-consuming self-audits to identify overpayments. However, CMS stated in the final rule that they disagreed it required formal compliance plans or audits and rather, it only requires providers maintain responsible business practices. Filer also said AAFP would have preferred the review period be only three years instead of six. “We will continue to encourage CMS – maybe once they’ve got the learning curve established on six years, maybe three years may become more palatable.”
The American Hospital Association (AHA), as mentioned above, welcomed the shorter look-back period, but was one of the 110 signees of a letter sent to CMS opposing the proposed rule and providing suggested changes in 2012.
What's it cost!?!?
CMS estimates the administrative costs of the final rule at more than $1.3 billion over the next 10 years. The total annual paperwork burden will be close to 3 million hours, costing those affected by the regulation $161 million a year, according to the final rule. However, both Marcus and Maida agreed most providers already have a compliance infrastructure in place and the resources to comply with the final rule. “In the context of the general requirement to report and repay overpayments, the regulation is not necessarily adding to the burden of the provider, but it does establish an easier-to-follow roadmap regarding the provider’s obligation,” Marcus added.
There’s no telling if CMS will make future revisions to the rule in the future or apply similar compliance regulations to other provider sectors. “Perhaps the next step would be for CMS to start considering issuing these compliance program regulations for different provider sectors and that might be a way to provide additional guidance to the provider community about CMS’ expectations,” suggested Maida.
The final rule goes into effect March 14. It will take some time to determine how effective the new guidelines are in recouping Medicare overpayments and whether there will be a backlash from providers. One CMS report estimates the final rule will save $145 billion over the next decade.