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Medicare/Medicaid Overpayments—Return to Sender

Jun 24, 2015 08:47PM ● By MED Magazine
By Scott Leuning

Question: What is 60-days in length, not yet fully defined, and could result in criminal prosecution, civil monetary penalties and possible exclusion from federal healthcare programs? 


Answer:  Section 1128J(d)(2) of the Patient Protection and Affordable Care Act (ACA), known as the 60-day Rule. 


This provision of the ACA that may adversely affect many healthcare providers with its 10-year look back period.  Under the 60-day Rule when a person or entity receives a Medicare overpayment, it must be “reported and returned” within 60 days after the overpayment is “identified.”  Any payment that is not returned within the 60-day window is an obligation under the False Claims Act (FCA) and may subject the person or entity that retained the overpayment to criminal prosecution, civil monetary penalties and possible exclusion from federal healthcare programs. 


Delays to Final Rule Does Not Mean a Free Pass Until 2016.


Presently, there is no final regulation regarding the 60-day Rule.  The deadline for the final implementation of the 60-day Rule has been pushed back to 2016 due to the volume of public comments and internal stakeholder feedback received.  CMS has noted that even without a final regulation in place physicians and hospitals are still subject to the statutory requirements of the ACA and could still face penalties, including exclusion from Federal healthcare programs for failure to report and return overpayments. 


Physicians and hospitals may already be on the hook if they do not promptly identify and refund Medicare overpayments even with the one-year delay in finalizing CMS’s regulations implementing the 60-day Rule. 


Step 1:  Defining What Constitutes an Overpayment


The threshold issue behind the 60-day Rule is whether you have received an “overpayment” from Medicare.  The 60-day Rule defines an “overpayment” as any funds received by a healthcare entity that are in excess of the amounts to be paid under Medicare statutes and regulations. 


Overpayments may occur from operational or payment errors, including non-covered services, duplicated services, or ineligible services.  CMS recognizes that in certain situations Medicare makes estimated payments for services with the acknowledgement that a reconciliation of those payments to actual costs will be done at a later date.  Under the proposed CMS rules an overpayment does not exist until after an applicable reconciliation takes place.  But any excess funds retained after payment reconciliation place the physician or entity in violation of the 60-day Rule.


Step 2:  Identifying Overpayments—Maintain Due Diligence


The 60-day Rule places an affirmative duty on providers and suppliers to identify overpayments.  The proposed CMS regulations state 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.” 

According to CMS, this definition gives providers and suppliers “an incentive to exercise reasonable diligence to determine whether an overpayment exists.”  In other words, CMS expects that physicians and hospitals will conduct compliance checks, self-audits, and other research to discover overpayments, because turning a blind eye to potential overpayments will not excuse physicians and hospitals from liability and penalties.


Step 3:  Reporting Overpayments


The proposed CMS implementation regulations for the 60-day Rule follow the existing voluntary refund process.  Under that process, providers and suppliers report the overpayment on a form provided by the Medicare contractor and must include information that allow CMS to identify the affected claims.  That information would include the health insurance claim number, the provider or supplier’s name, number and tax ID number, as well as a summary as to why the refund is being made, including: 


  • how the error was discovered;
  • description of the corrective implemented to ensure error is not repeated;
  • reason for the refund;
  • whether the provider/supplier is subject to an OIG corporate integrity agreement;
  • timeframe and total amount of refund;
  • Medicare claim control number;
  • Medicare National Provider Identification number;
  • refund in the amount of the overpayment;


An Ounce of Prevention


The 60-day Rule has significant ramifications for healthcare providers.  Even an inadvertent violation of this rule could expose an individual or organization to unacceptable risks.  As CMS has noted, you cannot avoid penalties by turning a blind eye to the situation.  A proactive compliance and audit program should be the cornerstone of any medical practice moving forward. 


If you or your organization has not yet prepared for the 60-day Rule, now is the time to act proactively.  Contact a health law attorney to help you navigate the requirements of the 60-day Rule so that you are not caught off guard by this ACA provision.


Scott Leuning is an Attorney at Goosmann Law Firm. 


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