On November 15, 2016, as part of its 2017 Medicare Physician Fee Schedule update, the Center for Medicare and Medicaid Services reissued its prohibition on certain unit-based rental arrangements with referring physicians, adopted updates to the list of CPT/HCPCS codes defining certain of the Stark Law’s designated health services and implemented a minor technical change to its instructions for submitting a request for an Stark advisory opinion. These revisions can be found at 81 Fed. Reg. 80170, 80524-36.
CMS Issues Final Rule Governing the Return of Overpayments within 60 Days
On February 11, 2016, the Center for Medicare and Medicaid Services (CMS) issued the much-anticipated final rule concerning Section 6402(a) of the Affordable Care Act, the so-called “60 Day Rule.” This section requires Medicare and Medicaid providers, suppliers and managed care contractors to report and return an overpayment by the later of “60 days after the date upon which the overpayment was identified or the date any corresponding cost report was due, if applicable.” CMS delayed adopting the rule to address public comments concerning, among other things, (1) the meaning of “identify” (i.e., what starts the 60-day clock); and (2) the length of the “lookback period.” This rule is of critical importance to healthcare providers seeking to avoid liability for reverse false claims under the False Claims Act (FCA).
Under the new regulation, 42 C.F.R. § 401.305, the 60-day clock starts when a provider has identified an overpayment, which is defined as “when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.” Backing off from the proposed 10-year lookback period, CMS finalized a six-year lookback period.
The key element of the final rule clarifies that the 60-day clock does not start to tick while the provider is conducting its “reasonable diligence” into whether the provider has received an overpayment and is quantifying the amount of the overpayment. While this concept was discussed in the proposed rule’s preamble, many commenters expressed concern about the meaning of the proposed rule’s “reckless disregard or deliberate ignorance of the overpayment” standard and whether it allowed time for the provider to take the steps necessary to determine whether it received an overpayment and, if so, its amount. In addition, some viewed the court’s interpretation of the statute in United States ex rel. Kane v. Healthfirst, Inc. (see our prior blog post), as stating that the 60-day clock began as soon as the provider was “put on notice” of a potential overpayment. CMS’ final rule clearly states that this interpretation of Kane is incorrect – providers have the ability to conduct “reasonable diligence” into the fact and amount of the overpayment prior to the 60-day time period starting. However, CMS does not view the reasonable diligence period as never-ending. The preamble discusses a six-month time frame as a “benchmark” for how long the reasonable diligence should take absent “extraordinary circumstances” such as a physician self-referral law (Stark Law) issue. The rule also says that the 60-day clock begins on the day the provider received the information about the potential overpayment and failed to exercise reasonable diligence.
These “should have determined” and “reasonable diligence” concepts have implications for how the government and defendants will [...]
CMS Delays Implementation of the 60-Day Overpayment Final Rule
On February 13, 2015, the Center for Medicare and Medicaid Services (CMS) announced a one-year extension to its normal three-year deadline to finalize the proposed rule explaining the Affordable Care Act’s “60-Day Rule” – leaving providers and their counsel with the same unanswered questions on how to comply and manage potential False Claims Act (FCA) risk.
When Congress passed the Affordable Care Act in 2010, it amended the Social Security Act to add Section 1128J. This section requires Medicare and Medicaid providers, suppliers and managed care contractors to report and return an overpayment by the later of “60 days after the date upon which the overpayment was identified or the date any corresponding cost report was due, if applicable.”
CMS published a proposed rule applying this provision to Medicare Part A and B overpayments on February 16, 2012. The proposed rule defines when an overpayment is “identified” as when the provider or supplier has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate indifference of the overpayment.” CMS also stated in the preamble that the 60-day clock would not start running until after the provider or supplier had an opportunity to undertake a “reasonable inquiry” into the basis of the alleged overpayment “with all deliberate speed” after receiving information concerning a potential overpayment. The proposed rule also contained a lengthy ten-year “look back” period.
In the extension announcement, CMS explained that both public and internal stakeholder comments raised “significant policy and operational issues that need to be resolved in order to address all of the issues raised … and ensure appropriate coordination with other government agencies.” CMS specifically pointed to the need to collaborate with the U.S. Department of Health and Human Services Office of Inspector General and the U.S. Department of Justice in developing the final rule. These outstanding issues met the Secretary’s standard for showing “extraordinary circumstances” to obtain the rulemaking extension.
This extension indicates that the agencies recognize the far-reaching impact the final rule will have on the healthcare industry and development of the “reverse false claims” theory under the FCA. The deadline for publishing the final rule is February 16, 2016. In the interim, the statutory requirement is in effect in the absence of a final rule.
We will keep watch for further guidance from CMS on this issue.