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Providers Responsible for Overpayments from Past Six Years

April 19, 2016:

The Centers for Medicare and Medicaid Services (CMS) published a final rule February 11, 2016, clarifying the requirements for reporting and returning self-identified overpayments under Medicare Parts A and B. Providers who do not comply with this rule could face penalties and exclusion from federal health care programs.

The rule clearly places the burden of identifying payment errors on providers and suppliers. Under the regulations, those without proactive compliance programs will face a stiff challenge—they are responsible for ensuring that they received no overpayments from Medicare for the past six years. As CMS puts it in the final rule, “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.”

In particular, this rule clarifies what overpayment identification entails, what the look-back period is for identifying overpayments, and how to report and return the overpayment to CMS.


This final rule contains the regulations implementing a requirement laid out in the Affordable Care Act of 2010. The act stipulated that anyone who receives an overpayment must report and return the overpayment along with written notification of why the overpayment was made. The timeframe for the refund is the later of:

  • 60 days after the overpayment was identified
  • The date any corresponding cost report is due, if applicable

Definition of overpayment: (whether or not it was the fault of the provider):

  • Medicare payments for noncovered services
  • Medicare payments in excess of the allowable amount for an identified covered service
  • Increases in reimbursement resulting from errors and nonreimbursable expenditures in cost reports
  • Duplicate payments
  • Receipt of Medicare payment when another payer had the primary responsibility for payment

Definition of identification: The rule specifies that someone has “identified” an overpayment when a provider of services, supplier, Medicaid managed care organization (MCO), Medicare Advantage (MA) organization, or prescription drug plan (PDP) sponsor “has or should have, through the exercise of reasonable diligence, determined that the [entity] has received an overpayment and quantified the amount of the overpayment.” Of note is that CMS used to use much stronger language, saying that the 60-day refund clock started ticking also when someone acted in “reckless disregard or deliberate ignorance” of the existence of the overpayment. This phrase has been eliminated.

Reasonable diligence includes proactive actions ensuring compliance as well as specific reviews for payment errors. For example, if a provider notices a sudden and unexplained increase in Medicare revenue, it is incumbent upon him or her to conduct an audit promptly.

Look-back period: Providers and suppliers are responsible for spotting overpayments within six years from the date they were received. CMS changed this from the proposed 10-year look-back period after commenters pointed out how burdensome maintaining 10 years of records would be for physicians.

Reporting and returning overpayments: Providers and suppliers can use any number of familiar options, such as claims adjustment, credit balance, or self-reported refund, to report and return excess payments. The deadline for repayment (principal plus interest) may be extended if overpayments are reported through the Self-Referral Disclosure Protocol (CMS) or the Self-Disclosure Protocol (OIG).

The rule is available online at http://federalregister.gov/a/2016-02789


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