QUESTION:        Our hospital believes that it has received Medicare Part A and Part B reimbursement to which it is not entitled.  Must the hospital immediately return the money that it owes?

ANSWER:            While the hospital must refund overpayments of Medicare Part A and Part B reimbursement to which it is not entitled, you have 60 days from the date in which you identify the overpayment to refund the money.  However, even the federal government understands that you must be given a certain period of time to accurately identify whether an overpayment has occurred and to quantify the amount of that overpayment.

The Affordable Care Act’s overpayment rule for Medicare Parts A and B went into effect on March 23, 2010.  However, final regulations were not published until February 12, 2016 (the “Overpayment Rule”).  (See, 42 C.F.R. §401.301 to §401.305.)  We should note that the Overpayment Rule described in this response is limited to Medicare Part A and Part B claims.  There is a separate overpayment rule for Medicare Part C and Part D claims.

The Overpayment Rule requires providers to repay any overpayments of Medicare Part A and Part B payments within 60 days of the overpayment being “identified.”  However, the Overpayment Rule does not define exactly when an overpayment has been “identified,” which has caused a certain amount of confusion as to when the 60-day repayment period begins to run.

The Preamble to the Overpayment Rule recognized that the “identification” process will take time.  CMS appears to want to afford providers a certain amount of flexibility and recognizes that part of the identification process is quantifying the amount of the overpayment, which requires a reasonable and diligent investigation.  At the same time, CMS expects providers to use “reasonable diligence” and stated that “a total of 8 months (6 months for timely investigation and 2 months for reporting and retaining) is a reasonable amount of time, absent extraordinary circumstances affecting the provider, supplier or the community.”  However, it should be noted that while this time period was discussed in the Preamble, CMS did not include it in the final Overpayment Rule.

The Overpayment Rule also makes it clear that the repayment period is six years from the date that the overpayment is received.  So, you should see if similar overpayments were made at any time during this six-year look-back period.  The Overpayment Rule then provides that a Self-Disclosure to either the OIG’s Self-Disclosure Protocol or the Stark Self-Referral Disclosure Protocol (“SRDP”) is an exception to the 60-day repayment obligation.  The Overpayment Rule states that if a provider makes a Self-Disclosure to either the OIG or CMS, then no overpayment is due the government until the Self-Disclosure has been resolved (despite the fact that it typically takes years to resolve a Self-Disclosure).

What is important to keep in mind is that once an overpayment has been identified, the hospital must act.  If the hospital knows, or should know, that it has received an overpayment, but fails to repay the overpayment within the 60-day period required by the Overpayment Rule, the hospital could be alleged to violate the False Claims Act.