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Medicare Final Rule: What Happens If I Find an Overpayment?

August 2, 2016


Have you received any Medicare overpayments? If you don’t know (if you’re not examining your claims data and doing regular internal compliance audits), you may be in for an unpleasant surprise. In March, CMS issued a final rule regarding Medicare overpayments, and while the rules don’t necessarily mandate a formal internal compliance regime, many health law experts think such a strategy is implicitly implied, given that CMS calls for a level of diligence that includes “proactive compliance activities to monitor claims and reactive investigative activities undertaken in response to receiving credible information about a potential overpayment.”

Here’s what you need to know about the new rule and what to do if you identify a Medicare overpayment. 

What New Rule Says

Although the rule gives practices 60 days to repay any overpayment, the look-back period actually extends for six years. This means you’re on the hook for any errant reimbursements you identify in claims as much as six years old. This also means that if an internal compliance audit reveals a pattern of improper reimbursements, you are required to examine all relevant claims going back for the full six-year period. 

The rule also gives a broad definition to the term “overpayment.” An overpayment may be due to no fault of the practice, such as mistake made by the MAC, or it could be the result of upcoding, inadequate documentation, or any failure to comply with Medicare’s reimbursement rules. 

Finally, the rules establishes a level of diligence required of all providers, stating that “undertaking no or minimal compliance activities to monitor the accuracy and appropriateness of…Medicare claims…exposes [a provider]…to liability under the identified standard.” In other words, there is no “head in the sand” defense to the rule.

What to do if you’ve identified an overpayment

Until a standard reporting form is developed, a provider who identifies an overpayment must use the MAC’s claims adjustment, credit balance, or self-reported refund. You’ll also need to notify the appropriate authority of the reason for the overpayment in writing. 

There are methods to suspend the 60-day rule regarding repayment:

  • You can file a request for an extended repayment schedule (ERS). The 60-day period is suspended pending a decision by CMS, or until the practice fails to comply with any terms granted by CMS. 
  • You can follow the Office of the Inspector General’s Protocol for Self-Disclosure. In this case, the 60-day clock stops until a settlement is reached or you withdraw from the process. 
  • If the overpayments result from Stark Law violations, you can follow the CMS Voluntary Self-Disclosure Protocol, which also stops the clock until a settlement agreement is in place. 

How to reduce your exposure

Although CMS insists the rule will not impose significant burdens or costs on providers, in practice, the agency also admits the regulatory compliance costs will run to $161 million. That being said, it may be worth investing in a professional internal auditor or compliance specialist in-house on a full-time basis if the practice can afford it. If not, at the least, you should consider bringing in a compliance consultant to take a deep dive into your Medicare claims process. In the long run, the potential savings from avoiding costly pay-backs will pay for the consultation. 

You should also develop an internal compliance program scaled to the needs of the practice. This should involve training your coding and billing staff, updating your documentation procedures with your providers, and instituting a regular schedule for internal audits. It’s a good idea to consult with legal expertise to make sure you’re properly identifying any claims subject to the rule. 

If you have questions about your Medicare claims exposure, or your billing process and regulatory compliance, schedule a free consultation with the billing professionals at M-Scribe today.


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