Section 6402(a) of the Affordable Care Act established a new Section 1123J(d) of the Social Security Act entitled “Reporting and Returning Overpayments.” This new provision requires a person who has received an overpayment to report and return the overpayment, and to provide written notification for the reason of the overpayment. On February 16, 2012, CMS published the proposed regulations implementing this new requirement. 

Prior to this time there was an “urban myth” that providers could retain mistaken overpayments and return them with impunity if caught as being simple mistakes. This rationale flies in the face of the concept you are required to return incorrect change. 

The new provisions add the overpayment return requirement to Section 1128J of the Social Security Act, which are part of the Medicare and Medicaid Program Integrity provisions. To make sure it is abundantly clear this is now a criminal offense, the new provision of the Affordable Care 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 USC Section 3729(b)(3), which is the False Claims Act. Not only is the overpayment return obligation codified now, it is also subject to whistleblower and qui tam enforcement.

The proposed regulations apply only to payment under Medicare Part A and Part B at this point, but please recognize that the statute applies to all Medicare and Medicaid obligations, even if the regulations do not specifically address those at this point.

Overpayments are defined as any funds that a person received or retains under Title XVIII, which is “Health Insurance for the Aged and Disabled,” which includes all parts of Medicare. 

Examples of overpayments under this proposed definition could include all of the following:

·       Medicare payments for non-covered services

·       Medicare payments in excess of the allowable amount for an identified covered service

·       Errors and non-reimbursable expenditures and cost reports

·       Duplicate payments

·       Receipt of Medicare payment when another payor had the primary responsibility for payment

The preferred refund process will be the existing voluntary refund process, which will be renamed as the “Self-Reported Overpayment Refund Process” as distinguished from the Self-Disclosure Protocol (SDP), which comes into play when the provider has discovered a violation of laws or regulations, rather than an overpayment, which is being categorized basically as mistakes unless not refunded.

The voluntary refund obligation also raises compliance concerns. The Act requires that an overpayment must be reported and returned by the later of (i) the date which is 60 days after the date in which the overpayment was identified, or (ii) the date any corresponding cost report is due. 

The overpayment is identified when you knew or should have known that you had received an overpayment. That can arise out of your common billing practices, i.e. you see that you have two payments, your accounting system reports unapplied receipts, or in an example given by CMS, “a provider of services or supplier experiences a significant increase in Medicare revenue when there is no apparent reason.” CMS is proposing that a person will be deemed to have 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. 

The overpayment refund obligation obviously ties directly into your compliance program. When you identify billing errors via your compliance program, I would suggest it is a very good bet that you will be deemed to be aware of the associated overpayments. On a final note, please note that 10 years is a long time. CMS is proposing to define the “look back period” as the period within 10 years of the date the overpayment was received.