The Centers for Medicare and Medicaid Services (CMS) recently issued its Proposed Rules for implementing provisions of the Patient Protection and Affordable Care Act (Act) on reporting and returning overpayments made under Medicare. The Act made a number of changes to Medicare that enhanced the program’s ability to recover overpayments and combat fraud, waste and abuse.

Section 6402(a) of the Act requires a person who has received an overpayment to return and report it to the Secretary of the U.S. Department of Health and Human Services; the state; an intermediary; a carrier; or a contractor, as appropriate; and to notify such entity in writing of the reason for the overpayment. To implement this particular section of the Act, CMS, on February 16, 2012, proposed certain rules with respect to:

identifying overpayments;
deadlines for reporting and returning overpayments;
the contents of reports involving overpayments;
the process for reporting;
enforcement; and
establishing a look-back period
It is important to note that at this time these proposed reporting requirements only relate to Medicare Part A and Part B providers and suppliers.

An overpayment under the Act means any funds that a person receives or retains under Medicare to which the person, after applicable reconciliation, is not entitled. Examples of overpayments in the proposed regulations are: Medicare payments for non-covered services; Medicare payments in excess of the allowable amount for identified covered services; errors and non-reimbursable expenditures in cost reports; duplicate payments; and receipt of Medicare payment when another payor has a primary responsibility for payment.

Under the applicable proposed regulations, an overpayment does not have to be reported until 60 days after it is identified. An important concern is what is meant by “identified.” CMS takes the position that an overpayment is identified at the time a person acts with actual knowledge of, in deliberate ignorance of, or with reckless disregard to the overpayment’s existence.

The proposed regulations require that the report must be in writing and include, among other things:

a written description of the reasons for overpayment;
a description of the corrective action plan to ensure that the error does not occur again;
an indication as to whether the organization has a corporate integrity agreement with the Office of the Inspector General;
an indication as to whether a statistical sample was used to determine the overpayment amount, and, if so, a description of the statistically valid methodology used to determine the overpayment.
If the above described procedures are part of the final rules, they would impose significant new requirements on providers concerning any overpayment.

Under the proposed enforcement provisions, any person who knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government may be found liable under the False Claims Act (FCA). Additionally, any person who knows of an overpayment and does not report and return it in accordance with the requirements may be found liable under the Civil Monetary Penalties Act.

These proposed rules are consistent with the government’s aggressive approach in seeking to recover money from medical providers. There is a disconnect between the concept of punishing wrongdoing for allegedly fraudulent conduct and these rules which, in a somewhat disingenuous fashion, seek reimbursement from providers who may very well be unaware of the receipt of overpayments. Indeed, the definition proposed set forth that the provider “identified” the overpayment at the time the person acted with reckless disregard to the overpayment’s existence. This “knowing” behavior is totally unknowing. By using this definition for purposes of “identification of overpayment,” the government has again placed the burden upon providers to self-police and self-audit or face dire unknown financial consequences.

The government’s self-reporting (self-abuse??) process began with Sentencing Guidelines “encouraging” corporations to self-police. The guidelines imposed significant sanctions if corporations didn’t institute “effective” corporate compliance programs that detected wrongdoing. The False Claims Act and its expansion through the 2009 and 2010 amendments of FERA and the Act continue with this theme. This trend will clearly continue and the government will continue to seek sources of “reimbursement” from providers while encouraging “wrongdoers” to turn themselves in.