Complying with the New Mechanics of the CMS “60-Day” Overpayment Rule
The Centers for Medicare and Medicaid Services (“CMS”) “60-Day” overpayment rule (“60-Day Rule”) was established as part of the Affordable Care Act (“ACA”) in 2010.[i] In a nutshell, Section 1128J(d)[ii] of the ACA provides that a person who has received an overpayment shall report and return the overpayment to CMS[iii] in writing, stating the reason for the overpayment, within 60 days after the overpayment was identified (or the date the corresponding cost report is due).
To encourage and enforce reporting of overpayments, Section 1128J(d) is clear that any improperly retained overpayments become a potential false claim under the False Claims Act (“FCA”).[iv]
The obligation to return overpayments in a timely manner seems deceptively simple, but the mechanics of the process has been the subject of debate since it was enacted in 2010, and CMS again set forth regulatory direction for the 60-Day Rule on December 9, 2024.[v] This article sets forth the current steps expected by CMS when a provider identifies and returns overpayments.
The end of “Reasonable Diligence.”
In 2016, CMS set forth guidance regarding the 60-Day Rule, including how to know when a person has “identified” an overpayment that should be returned within 60 days. At this time, CMS stated that “a person has identified an overpayment 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.”[vi]
Medicare Advantage Organizations filed suit concerning CMS’s use of the concept of “the exercise of reasonable diligence,” arguing that this standard impermissibly imposed FCA liability for mere negligence.[vii] The District Court agreed, finding that the statute (Section 1128J(d)) imposed liability for the “knowingly” receipt or retaining of an overpayment, as that standard is defined in the FCA.
The standard for “identifying” an overpayment, as clarified by CMS in December, is now “when a person has actual knowledge of the information; acts in deliberate ignorance of the truth or falsity of the information; or acts in reckless disregard of the truth or falsity of the information” (a standard in line with the FCA Act).[viii] At first glance, this may seem to be a less strict standard for providers, but CMS makes it clear that the 60-day period can begin not only on the day the provider has actual knowledge of the overpayment, but also on the day that a fact-specific inquiry shows that the provider acted with deliberate ignorance or reckless disregard regarding information surrounding the overpayment.[ix]
The end of “Quantification.”
As noted previously, in 2016, CMS tied the identification of an overpayment to not only the knowledge the person received an overpayment, but that the person also “quantified” the amount of the overpayment.[x] This gave providers the time needed to calculate the exact amount to be refunded.
CMS has now removed the practical leeway needed in some cases to determine the exact amount of an overpayment. CMS states “the person has 60 days to report and return the overpayment under § 401.305(b)(1)(i), even if the person has not yet calculated the precise amount of the overpayment at the time of identification. Because a person cannot return an indefinite sum, as a practical matter the overpayment amount must be calculated within 60 days of identification to meet the 60-day deadline.”[xi] Therefore, unless a provider can meet a specific regulatory allowance for a suspension of the 60-Day rule, the provider must quantify the overpayment and return it within 60 days. Nonsensical and impossible in some situations? Yes, so keep in mind this inflexible approach to the 60-Day Rule when working on overpayment matters.
When the 60 days can be suspended.
The good news is that there are several situations in which the 60-Day deadline for returning overpayments can be suspended. First, the 60-day deadline will be suspended when the OIG acknowledges receipt of a Self-Disclosure Protocol submission, CMS acknowledges receipt of a CMS Voluntary Self-Referral Disclosure Protocol, or a person requests an extended payment schedule.[xii]
In addition, the 60-Day deadline can be suspended when a person has identified an overpayment but has not “completed a good-faith investigation to determine the existence of related overpayments that may arise from the same or similar cause or reason as the initially identified overpayment.” In this case, the provider has up to 180 days from the date the initial overpayment was identified to return the overpayments.[xiii] Under these circumstances, the provider will return both the initially identified overpayment along with any additional overpayments uncovered by the investigation at the same time.[xiv]
No changes to the “Lookback” period.
The lookback period for returning overpayments continues to be six years from the date the overpayment was received.[xv]
In summary, the obligation to return overpayments in a timely manner remains, and failure to return overpayments in line with the FCA “knowingly” concept can result in potential FCA violations. Therefore, while the mechanics for returning overpayments according to the 60-Day Rule have changed through the years, the importance of returning overpayments is still a vital concern.
If you need assistance with potential overpayment issues, defending reimbursement audits, compliance issues, or other healthcare regulatory issues please reach out to Maynard Nexsen for assistance.
[i] See Section O.2. in 89 F.R. 97710 at Federal Register :: Medicare and Medicaid Programs; CY 2025 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; Medicare Prescription Drug Inflation Rebate Program; and Medicare Overpayments.
[ii] Codified at 42 U.S.C. 1320a-7k(d).
[iii] The overpayment can be returned though a CMS intermediary, carrier, or contractor. 42 U.S.C. 1320a-7k(d)(1)(A).
[iv] 31 U.S. Code §3729.
[v] 89 F.R. 97710.
[vi] https://www.cms.gov/newsroom/fact-sheets/medicare-reporting-and-returning-self-identified-overpayments
[vii] See Section O.2.B in 89 F.R. 97710.
[viii] See Section O.2.C.1 in 89 F.R. 97710.
[ix] See id.
[x] https://www.cms.gov/newsroom/fact-sheets/medicare-reporting-and-returning-self-identified-overpayments
[xi] See Section O.2.C.1 in 89 F.R. 97710.
[xii] 42 C.F.R. §401.305(b)(2)(i-iii).
[xiii] 42 C.F.R. §401.305(b)(3).
[xiv] See Section O.2.C.1 in 89 F.R. 97710
[xv] 42 C.F.R. §401.305(f).
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