On February 11, 2016, CMS released the much anticipated final rule on the so-called “60-day rule.” The long road to the final rule began when the Affordable Care Act (ACA) established the 60-day deadline for returning Medicare and Medicaid overpayments. The clock started running from the time an overpayment was “identified,” but the statute didn’t define “identified.”
Under the statute, if an overpayment isn’t returned by the 60-day deadline, it becomes an “obligation”—i.e., a false claim—under the False Claims Act. A false claim is punishable by triple damages, plus a penalty of up to $11,000 per claim.
Another part of the 60-day rule requires providers who identify one overpayment to search their records for other overpayments.
Back in 2102 CMS issued a proposed rule that suggested final quantification—i.e., the provider’s calculation of the amount of the overpayment—was not required to start the 60-day clock. Following the familiar False Claims Act standard, CMS proposed that an overpayment was “identified” when a provider had actual knowledge of an overpayment or had acted in reckless disregard or deliberate ignorance of the existence of an overpayment. 77 Fed. Reg. 9182 (Feb. 16, 2012). Under that proposed rule, if a provider became aware of a possible overpayment and failed to look into the matter with “all deliberate speed,” it might be regarded as having acted with deliberate indifference to an overpayment. Id.
Last year’s decision in U.S. ex rel. Kane v. Continuum Health Partners, Inc. et al. was the first to interpret the 60-day rule. The key issue was whether an employee’s preparation of a spreadsheet of 900 potentially improper Medicaid claims constituted the “identification” of an overpayment sufficient to start the 60-day clock running. Case No. 1:11-cv-2325, 2015 U.S. Dist. LEXIS 10178 (S.D.N.Y. Aug. 3, 2015). The court concluded that the 60-day clock began to run upon receipt of the spreadsheet, even though it contained only preliminary conclusions–many of them incorrect. So in at least one jurisdiction, awareness of likely overpayments triggered the 60-day clock. See id. at *38.
The Final Rule
The final rule contains two major differences from the proposed rule, both of them favorable to providers: (1) the lookback period is six years instead of ten, and (2) “identification” requires quantification.
In settling on a six-year lookback period, CMS stated that it “is necessary in order to avoid imposing unreasonable additional burden or cost on providers and suppliers.” CMS-6037-F at 2-3.
The standard for identification of an overpayment that starts the 60-day clock is 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.” Id.at 3, 57, 113. “Reasonable diligence” includes “both proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments and investigations conducted in good faith and in a timely manner by qualified individuals in response to obtaining credible information of a potential overpayment.” Id. at 31.
Although the final rule provides much-needed clarification, confusion will likely persist until further guidance is provided through judicial decisions and settlements. Confusion may still exist on whether to look back four years, which is customary in simple instances of errors and overpayments, or six years, when there may be a basis for a False Claims Act case. For example, since June of 2015 the OIG has issued several audit reports on claims submitted within a three-year lookback period, but recommended that hospitals “work with the contractor to return overpayments outside of the 3-year recovery period in accordance with the 60-day repayment rule.” Does this mean the hospital should look at one more year’s worth of similar claims, or three? There may also be confusion as to when information is sufficiently “credible” to warrant a full-blown investigation or audit. More confusion may stem from whether an investigation is completed in a “timely manner” if it takes six to twelve months to determine whether an overpayment exists and quantify such an overpayment.
We’ll continue to monitor developments in this important area and provide updates as warranted.