CMS Proposes Rules on Reporting and Returning Overpayments: Providers May Have Duty to Make Reasonable Inquiry With Deliberate Speed


The Centers for Medicare and Medicaid Services (CMS) on February 16, 2012 proposed rules1 implementing Section 6402(a) of the Affordable Care Act,2 requiring persons to report and return Medicare overpayments by the later of 60 days after an overpayment is identified or the date any corresponding cost report is due. Twice in the past, CMS had proposed rules requiring the return of Medicare overpayments, but did not finalize the regulations. However, with the passage of the Affordable Care Act, CMS may now discover that the third time is the charm for publishing final regulations on this subject.

Under CMS’s current proposed rules, Medicare providers will have an obligation to make a reasonable inquiry to determine whether an overpayment exists. While the Affordable Care Act requires the return of an overpayment within 60 days of identifying an overpayment, CMS has now clarified that a Medicare provider “identifies” an overpayment when it has actual knowledge of the existence of an overpayment, or acts in reckless disregard or deliberate ignorance of the existence of an overpayment. CMS explained that that this definition of "identification" gives "providers and suppliers incentive to exercise reasonable diligence to determine whether an overpayment exists." CMS further opined that if a provider receives information concerning a potential overpayment, the provider has "an obligation to make a reasonable inquiry" as to whether an overpayment exists. "[F]ailure to make a reasonable inquiry, including failure to conduct such inquiry with all deliberate speed after obtaining the information, could result in the provider knowingly retaining an overpayment." Thus, failure to comply with this rule could result in False Claims Act liability.3 Indeed, the proposed rule specifically states that “any overpayment retained by a person after the deadline for reporting and returning the overpayment…is an obligation for purposes of 31 U.S.C. § 3729.”

Medicare providers must return an overpayment 60 days after it is identified, or the date any corresponding cost report is due, "if applicable." CMS stressed that the cost report deadline could only be used if the overpayment would normally be reconciled by a cost report, and opined that “we do not believe that Congress intended to create a loophole that would allow providers to delay reporting and returning an overpayment.” Once an overpayment is identified, a report must be made in writing and should contain detailed information including how the error was discovered, the reason for the overpayment, as well as a description of the corrective plan of action. CMS proposed that providers use their Medicare contractor's existing voluntary refund process, renamed the "self-reported overpayment refund process," to report overpayments.

The deadline for returning overpayments is suspended if: (1) 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 protocol, or the person is removed from the protocol; or (2) CMS acknowledges receipt of a submission to the Self-Referral Disclosure Protocol until such time as a settlement agreement is entered, the person withdraws from the protocol, or the person is removed from the protocol. However, even if the return of the overpayment is suspended, Medicare providers are still required to report overpayments under the proposed rule.

The proposed rule includes a 10-year look-back period. Thus, an overpayment must be reported and returned "if a person identifies the overpayment within 10 years of the date the overpayment was received." CMS selected the 10-year period to correspond with the outer limit of the FCA statute of limitations. At this time, the proposed rule only applies to Medicare Part A and Part B providers and suppliers. CMS will accept comments on the proposed rule until April 16, 2012.

For more information about the Affordable Care Act, or any other health law questions, please contact any one of the following Haynes and Boone attorneys.

1 77 Fed. Reg. 9179 (Feb. 16, 2012), available at
2 Codified at 42 U.S.C. § 1320a-7k(d).
3 The FERA amendments to the FCA prohibit “knowingly conceal[ing] or knowingly and improperly avoid[ing] or decreas[ing] an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G); see also Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, 123 Stat. 1617 (May 20, 2009). The FCA defines an obligation to include “the retention of any overpayment.” 31 U.S.C. § 3729(b)(3).

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