The Centers for Medicare and Medicaid Services (CMS) has not finalized its original proposal to materially change the regulations on the obligation of Medicare providers and suppliers to report and repay Medicare overpayments so that such regulations exactly track the federal False Claims Act. The decision to refrain from finalizing the proposed changes may cause sighs of relief among Medicare providers and suppliers – but perhaps only temporarily.
In 2016, CMS adopted regulations addressing the statutory requirement that Medicare providers and suppliers report and repay Medicare overpayments within 60 days of “identifying” such overpayments or be subject to liability pursuant to the federal False Claims Act. Following years of debate around what exactly “identified” meant, the 2016 regulations defined identification as when one “has or should have, through the exercise of reasonable diligence”, determined not only that the provider or supplier had received an overpayment, but also the amount of the overpayment. CMS provided sub-regulatory guidance that, absent unusual circumstances, such investigations and quantifications should not take more than six months from when the provider or supplier first had an indication that it may have received an overpayment. The “quantification” element of the definition provided a welcome objective standard for calculating the time frame for reporting and repaying, even though the “exercise of reasonable diligence” still created some ambiguity.
In December 2022, following a lawsuit where the court found that the difference between the regulatory language and the terminology in the federal False Claims Act was material to the outcome, CMS proposed scrapping the current regulatory language in favor of defining “identification” by reference to the knowledge standard in the federal False Claims Act – actual knowledge of the existence of the overpayment or acting in reckless disregard or deliberate ignorance of having received an overpayment. The proposed change caused great concern among Medicare providers and suppliers as it would (presumably) hinder their ability to rely upon the date when they had quantified overpayments as the start date for the 60-day reporting/repayment period.
On April 12, 2023, CMS finalized a number of regulatory changes it had proposed in December 2022, but not the revision of the overpayment identification definition. Instead, CMS noted that:
“CMS intends to address all of the remaining proposals from the December 2022 proposed rule in subsequent rulemaking.”
In addition, CMS noted that any subsequently finalized regulatory changes would go into effect no earlier than January 1, 2025.
Therefore, Medicare providers and suppliers have been granted a reprieve from this significant regulatory change, although the matter has not been permanently foreclosed.