Revenue Cycle Management Blog | GroupOne Health Source

What You Need to Know About the Medicare Overpayment Rule

Written by Kaitlyn Houseman | March 9, 2016

Remember in 2012 when CMS issued a rule requiring healthcare providers who discover past overpayments by Medicare or Medicaid to refund it within 60 days or risk the overpayment being labeled as a false claim? Well the final rule was published by CMS just last month (February). Here's what you need to know about the Medicare Overpayment Final Rule.

A Brief History of the Medicare Overpayment Rule

When the rule was issued in 2012, the American Medical Association took issue with it, citing unclear definitions of when overpayments occur, and when the 60-day clock started running. CMS had proposed that physicians review 10 years' worth of Medicare and Medicaid claims history to find and repay overpayments, and the AMA found this requirement to be overly burdensome.

The AMA also sought clarification of what it meant for a physician to identify an overpayment. CMS had stated that the rule created an “incentive to exercise reasonable diligence to determine whether an overpayment exists.” But the rule should not imply that doctors must actively search for overpayments from a decade’s worth of claims without some piece of information that would signal that an excess payment might have been received, the Association said.

Long-Awaited Final Rule Takes Effect March 14, 2016

The Final Rule pertains to Medicare Part A and B overpayments, and becomes effective March 14. It says that healthcare providers must use "reasonable diligence" which includes "timely, good faith investigation of credible information" to identify Medicare overpayments. And this is something they must do on their own, and not just in the event of an audit or complaint.

The 60-day clock starts ticking after the end of the "reasonable diligence" period, which is defined as a maximum of six months from receipt of "credible information" unless there are extraordinary circumstances. Essentially, a provider has a maximum of six months to quantify a claim and a further 60 days to report and refund overpayments.

Risks of Failure to Comply

If providers don't comply with Final Rule requirements, they may be subject to federal False Claims Act liability. Specifically, failure to comply is considered a "reverse" false claim. In other words, compliance is mandatory.

However, whereas the original proposed rule designated a 10-year look-back period (which was based on the False Claims Act's statute of limitations), the Final Rule designates a six-year look-back period. This shorter look-back period could reduce the final amounts that need to be repaid, and along with clarity on quantification and the 60-day countdown the rule makes clearer what healthcare providers' responsibilities are.

Burden Is on Your Practice to Find and Address Overpayments

Under the Final Rule, the responsibility of discovering and rectifying overpayments is on the healthcare provider practice. The best way to do this is to regularly audit your practice's billing records, and if you don't have a formal process for doing this, you need to create one.

If possible, bringing in an outside auditor for their "outsider's perspective" can be valuable as long as it's done through legal counsel to ensure attorney-client privilege. Furthermore, all agreements with auditors must be designed to comply with HIPAA requirements.

Many providers may feel overwhelmed even with the rule clarification, but developing compliance processes is something they cannot avoid, and an independent audit may help.

Compliance Tips

The American Society of Anesthesiologists came up with a number of tips to help practices comply with the CMS Final Rule. They include:

  • Do not ignore any credible questions about payment on a claim. Lack of action can be construed by CMS as reckless disregard of the truth.
  • Be aware that payments for incorrectly coded or under-documented services could also be considered overpayments under the Final Rule.
  • Be aware that claims with modifiers that weren't supported by documentation but allowed the claim to bypass payer edits could also be considered overpayments under the Final Rule.
  • Always review third part audit results for accuracy.
  • Keep track of all policy changes affecting billing, coding, and documentation practices.
  • Develop sound processes to proactively and reactively reply to potential overpayment situations.

Read and make sure you understand the scope of the Final Rule. If there's something you don't understand, it's wise to consult with legal counsel for further guidance.

The requirements under this CMS Final Rule were meant to increase compliance with applicable laws, so as to protect the Medicare Trust Funds from fraud or improper payments. While the Final Rule is clearer than the original rule proposed in 2012, it still places the burden of auditing past payments onto healthcare providers.

The more well-established a practice's coding and billing processes the easier it will be for the practice to comply with this rule. 

Prepare for Overpayments with GroupOne's Complete RCM Services

Worried about the overpayment rule impacting your revenue cycle? Partner with GroupOne Health Source today for complete revenue cycle management services.

We notify our clients every month of patient and insurance refunds that are needed to be released. For insurance refunds, we also supply all supporting documentation that needs to be sent with the refund. Request a proposal today to learn more.