In its recently released 2025 proposed Medicare Physician Fee Schedule ("MPFS"), the Centers for Medicare & Medicaid Services ("CMS") proposed two important modifications to the Medicare 60-day overpayment refund rule—a new "identified overpayment" standard and codification of a 6-month timeframe to investigate and quantify an overpayment.
A product of the Affordable Care Act, the 60-day rule requires a person to report and return Part A and B overpayments within 60 days of identification. In 2016, CMS clarified that an overpayment is "identified" when a person, "through the exercise of reasonable diligence," should have identified and quantified an overpayment. In the preamble to the 2016 rule, CMS established that "reasonable diligence" is demonstrated through a timely, good faith investigation, which is, at most, 6 months from the receipt of credible information of a potential overpayment.
Identified overpayment standard
In December 2022, CMS proposed a rule revising the "identified overpayment" standard to align with the False Claims Act ("FCA") by replacing "the exercise of reasonable diligence" language with the FCA's knowledge standard. In other words, an overpayment would be "identified" only if the person had "actual knowledge of the existence of the overpayment" or acted "in reckless disregard or deliberate ignorance of the overpayment." CMS, however, never finalized the proposed rule.
In the 2025 MPFS, CMS is revisiting its December 2022 proposal deeming an overpayment "identified" only upon a person's "actual knowledge" or "reckless disregard or deliberate ignorance" of its existence.
Additional 6-month investigatory period
In recognition of "the importance of allowing time to investigate and calculate overpayments," CMS is formalizing the 6-month investigatory period introduced in the preamble to the 2016 rule. Currently, an overpayment must be reported by the later of: (1) 60 days after the overpayment was identified or (2) the due date of any corresponding cost report.
The new proposed regulation at 42 C.F.R. § 401.305(b)(3) will suspend the 60-day deadline if a person:
- "has identified an overpayment but has not yet 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;" and
- "conducts a timely, good-faith investigation to determine whether related overpayments exist."
If both conditions are met, "the deadline for reporting and returning the initially identified overpayment and related overpayments that arise from the same or similar cause or reason as the initially identified overpayment will remain suspended" until the earlier of:
- "the date that the investigation of related overpayments has concluded and the aggregate amount of the initially identified overpayments and related overpayments is calculated;" or
- "the date that is 180 days after the date on which the initial identified overpayment was identified."
CMS provided the following hypothetical to illustrate the proposed rule:
Assume that, on day 1, a person identifies an overpayment arising from a physician's failure to properly document the medical record to support the coding of a specific claim, and the person has reason to believe that this may be a common practice of the physician, so there could be more affected claims. At this point, the person has up to 180 days to conduct and conclude a good faith investigation to determine whether related overpayments that arise from the same or similar cause or reason as the initially identified overpayment exist. If the person does NOT conduct an investigation, or the investigation is not timely or not conducted in good faith, the identified overpayment must be reported and returned by day 60. If the person does conduct a timely, good faith investigation, suspension of the report and return obligation under § 401.305(b)(3) begins on day 1. The suspension ends when the investigation is concluded and the initially identified overpayment and related overpayments, if any, are calculated, or by day 180, whichever is earlier. The overpayment must be reported and returned within 60 days after either completion of the investigation or day 180, whichever is earlier. However, the suspensions described in § 401.305(b)(2) may also be applicable. For example, if the person is reporting the overpayment to the OIG Self-Disclosure Protocol, as provided for in § 401.305(b)(2) the overpayment return requirement may be further suspended in accordance with that provision.
What is next?
The 2025 MPFS is set to be published in the Federal Register on July 31, 2024 and comments must be submitted by September 9, 2024.
If this proposal is finalized, it will be included in the final rule which is expected to be published in November and will take effect on January 1, 2025.
This article is presented for informational purposes only and is not intended to constitute legal advice.