[Federal Register Volume 67, Number 17 (Friday, January 25, 2002)]
[Proposed Rules]
[Pages 3662-3665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1688]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 401

[CMS-6011-P]
RIN 0938-AK45


Medicare Program; Reporting and Repayment of Overpayments

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would supplement and modify the notice of 
proposed rulemaking that was published on March 25, 1998 (63 FR 14506). 
That notice proposed to amend the Medicare regulations governing 
liability for overpayments from the Centers for Medicare & Medicaid 
services (CMS) to providers, suppliers, and individuals to eliminate 
application of certain regulations of the Social Security 
Administration and to replace them with regulations more specific to 
circumstances involving Medicare overpayments.
    This proposed regulation would supplement and modify that notice in 
order to establish, in regulations, the longstanding resp[onsibility of 
providers, suppliers, individuals and also managed care organizations 
contracting with us to report and return overpayments to us. This 
proposed would establish the timeframe and process for making the 
reports and returning the overpayments.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on March 
26, 2002.

ADDRESSES: Mail written comments (one original and three copies) to the 
following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-6011-P, PO Box 
8013, Baltimore, MD 21244-8013.
    If you prefer, you may deliver, by courier, your written comments 
(one original and three copies) to one of the following addresses: 
Hubert H. Humphrey Building, Room 443-G, 200 Independence Avenue, SW., 
Washington, DC 20201, or Centers for Medicare & Medicaid Services, C5-
14-03, Central Building, 7500 Security Boulevard, Baltimore, MD 21244-
1850.
    Comments mailed to those addresses designated for courier delivery 
may be delayed and could be considered late. Because of staffing and 
resource limitations, we cannot accept comments by facsimile (FAX) 
transmission. Please refer to file code CMS-6011-P on each comment.
    Comments received timely will be available for public inspection as 
they are received, beginning approximately 3 weeks after publication of 
this document, in room C5-12-08 of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, Maryland, Monday through 
Friday of each week from 8:30 a.m. to 5 p.m. Please call (410) 786-7197 
to make an appointment to view comments.

FOR FURTHER INFORMATION CONTACT: Paul Reed (410) 786-4001.

SUPPLEMENTARY INFORMATION:

I. Background

    On March 25, 1998 we published in the Federal Register (63 FR 
14506) a notice of proposed rulemaking that would amend the Medicare 
regulations governing liability for overpayments to eliminate 
application of certain regulations of the Social Security 
Administration and to replace them with regulations more specific to 
circumstances involving Medicare overpayments.
    Section 401.310 of those proposed regulations defined overpayment 
as those Medicare funds that a provider, supplier, or individual has 
received in excess of amounts payable under the Medicare statute and 
regulations. The notice of proposed rulemaking described the types of 
overpayments, and gave examples of causes of overpayments, such as 
payments made by Medicare for noncovered services, Medicare payments in 
excess of the allowable amount for an identified covered service, 
errors and nonreimbursable expenditures in cost reports, duplicate 
payments, and Medicare payment when another entity had the primary 
responsibility for payment (63 FR 14517). It also stated that once a 
determination and any adjustments in the amount of the overpayments 
have been made, the remaining amount is a debt owed to the United 
States Government. After publishing that notice of proposed rulemaking, 
we received several comments on their provisions. In addition, on June 
26, 1998, we published the Medicare+Choice (M+C) interim final rules 
(63 FR 34968) in which we addressed a process for reporting to us 
violations of the law, including overpayments. We stated that we wanted 
M+C organizations to self identify when they had been overpaid. While 
the amount of estimated overpayments has decreased in recent years, the 
number and amount of overpayments continue to be a significant issue in 
the Medicare program.
    The June 29, 2000 final M+C regulation (65 FR 40170) eliminated any 
requirement for self-reporting of overpayments on the basis that it was 
arguably unfair to impose a self-reporting requirement on M+C 
organizations, but not on other types of providers and suppliers 
participating in the Medicare program. The preamble to that regulation 
stated:
    ``While we are withdrawing all requirements for self-reporting in 
this rule, we believe that the required reporting of overpayments is an 
effective tool for promoting Medicare

[[Page 3663]]

program integrity generally. Accordingly, HCFA intends to develop 
policies through separate notice and comment rulemaking in cooperation 
with the HHS Office of Inspector General that would require all 
Medicare providers, suppliers, and contractors to report overpayments 
to HCFA.'' (65 FR 40265)
    With this proposed modification to the March 25, 1998 notice of 
proposed rulemaking, we intend to issue one comprehensive rule on this 
subject.
    The obligation to report and return overpayments is derived from 
sections 1870, 1871, and 1102 of the Social Security Act (the Act). 
Section 1870 of the Act establishes that providers and suppliers are 
liable for overpayments unless determined to be without fault, as 
defined in proposed Sec. 401.323, with respect to the overpayments. 
Individuals may be liable in certain circumstances unless the 
individual is determined to be without fault, as defined in proposed 
Sec. 401.355, and the recovery of the overpayment would either defeat 
the purposes of the statute or be against equity and good conscience.
    Section 1102 of the Act requires that the Secretary make and 
publish such rules and regulations, not inconsistent with the Act, as 
may be necessary for the efficient administration of the functions with 
which the Secretary is charged under the Act. Under section 1871 of the 
Act, the Secretary must prescribe such regulations as may be necessary 
to carry out the administration of the insurance programs under the 
Medicare statute. In certain contexts, formal guidance requires 
providers to report overpayments through our Medicare Credit Balance 
Report, and suppliers to report overpayments through their reporting 
mechanisms. This proposed rule would further memorialize the 
longstanding responsibility for all providers, suppliers, individuals, 
and other entities, including managed care organizations contracting 
with us, to report overpayments and establish the time frame and 
process for making those reports.
    In addition, section 1128B(a)(3) of the Act establishes that 
persons are under a legal duty to disclose the occurrence of events 
affecting the right to payment or benefits by a Federal health care 
program. Specifically, this section makes it a felony for a person, 
``having knowledge of the occurrence of any event affecting * * * his 
initial or continued right to any [Federal health care] benefit or 
payment * * *, [to conceal or fail] to disclose such event with an 
intent fraudulently to secure such benefit or payment * * *.'' Thus, 
failure to notify us of an overpayment within a reasonable period of 
time may, in certain circumstances, establish criminal liability, and 
result in a referral to the Office of Inspector General.

II. Provisions of the Proposed Rule

    In this rule we are proposing to modify and supplement the notice 
of proposed rulemaking that was published in the Federal Register on 
March 25, 1998 (63 FR 14506). We are revising the definition of 
overpayment to cover not just excess Medicare funds received by a 
provider, supplier, or individual, but also funds received by other 
entities. We are also adding a definition of other entities, which 
defines them as entities, including managed care organizations 
contracting with us in accordance with 42 CFR parts 417 or 422, that 
are not providers, suppliers, or individuals, that provide Medicare 
services to Medicare beneficiaries. The new definition makes clear that 
other entities include managed care organizations contracting with us 
in accordance with 42 CFR parts 417 or 422. We are also adding a 
paragraph to memorialize in regulations the responsibility and 
procedures for returning overpayments to us. The March 25, 1998 notice 
of proposed rulemaking would amend the Medicare regulations governing 
liability for overpayments in order to eliminate application of certain 
regulations of the Social Security Administration and replace them with 
regulations more specific to circumstances involving Medicare 
overpayments. This proposed rule would modify and supplement the March 
25, 1998 notice of proposed rulemaking. It would require providers, 
suppliers, and individuals that have identified a Medicare payment 
received in excess of amounts payable under the Medicare statute and 
regulations to report and return the overpayment, within 60 days of 
identifying the overpayment, to the appropriate intermediary or carrier 
at the correct address. In the case of a managed care organization 
contracting with us, the managed care organization must, within 60 days 
of identifying the overpayment, notify us either in a manner consistent 
with certification of payment data requirements described at 42 CFR 
422.502(l) or in a manner consistent with our cost settlement processes 
described at 42 CFR part 417, subparts O and U, so that we can adjust 
the identified overpayment appropriately. For overpayments identified 
by managed care organizations for a period beyond which payment data 
have already been certified or settled, the managed care organization 
must notify us in writing of the overpayment within 60 days of 
identifying or learning of the excess payment, so that we can recover 
the identified overpayment appropriately. For overpayments identified 
by other entities, other than managed care organizations, the other 
entities must notify us in writing of the overpayment within 60 days of 
identifying or learning of the excess payment, so that we can recover 
the identified overpayment appropriately. Submission of corrected bills 
in conformance with our policy, within 60 days, fulfills these 
requirements for providers, suppliers, and individuals. Our existing 
certification requirements for M+C organizations, described at 
Sec. 422.502(l), and cost settlement processes for cost-based 
contractors, described at 42 CFR part 417, subparts O and U, and this 
new requirement for overpayments reported after payment certifications 
have already been submitted, provide the process for notifying, 
documenting, and correcting overpayments for managed care organizations 
contracting with us.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 60 days notice in the Federal Register and solicit public 
comment when a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comment on the following issues:
     Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
     The accuracy of our estimate of the information collection 
burden;
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting comments from the public, including 
the provider and supplier community, on each of these issues for the 
information collection requirements discussed below.
    Sec. 401.310(e)--If a provider, supplier, or individual identifies 
a Medicare payment received in excess of the amounts payable under the 
Medicare statute and regulations, the provider, supplier, or individual 
must, within 60 days of identifying or learning of the

[[Page 3664]]

excess payment, notify the intermediary or carrier, in writing, of the 
reason for the overpayment, and return the overpayment to the 
appropriate intermediary or carrier, at the correct address.
    It is estimated that there will be approximately 906,724 
notifications submitted on an annual basis and that it will take 5 
minutes per instance for providers, suppliers, or individuals to notify 
the appropriate intermediary or carrier. The total annual burden 
associated with this requirement is 75,560 hours.
    If a managed care organization contracting with us in accordance 
with 42 CFR parts 417 or 422 identifies a Medicare payment received in 
excess of amounts payable under the Medicare statute and regulations 
before the payment data have been certified or settled, the managed 
care organization must notify us either in accordance with 
certification of payment data requirements described in Sec. 422.502(l) 
or in accordance with cost settlement processes described in 42 CFR 
part 417, subparts O and U.
    It is estimated that there will be no additional notifications 
submitted on an annual basis and that it will take 5 minutes per 
instance to notify us. The total annual burden associated with this 
requirement is zero hours.
    If a managed care organization contracting with us in accordance 
with 42 CFR parts 417 or 422 identifies a Medicare payment received in 
excess of amounts payable under the Medicare statute and regulations 
after payment data have been certified or settled, it must notify us, 
in writing, of the overpayment within 60 days of identifying or 
learning of the overpayment so that we can recover the identified 
overpayment appropriately.
    It is estimated that there will be no additional notifications 
submitted on an annual basis and that it will take 5 minutes per 
instance to notify us. The total annual burden associated with this 
requirement is zero hours.
    If an other entity, other than a managed care organization 
contracting with us in accordance with 42 CFR parts 417 or 422, 
identifies a Medicare payment received in excess of amounts payable 
under the Medicare statute and regulations, it must notify us, in 
writing, of the overpayment within 60 days of identifying or learning 
of the overpayment so that we can recover the identified overpayment 
appropriately.
    It is estimated that there will be no additional notifications 
submitted on an annual basis and that it will take 5 minutes per 
instance to notify us. The total annual burden associated with this 
requirement is zero hours.
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirements in Sec. 401.310. 
These requirements are not effective until they have been approved by 
OMB.
    If you have any comments concerning any of these information 
collection and record keeping requirements, please mail one original 
and three copies within 60 days of this publication date to the 
following addresses:

Centers for Medicare & Medicaid Services, Office of Information 
Services, Information Technology Investment Management Group, Division 
of CMS Enterprise Standards, Room N2-14-26, 7500 Security 
Boulevard,Baltimore, MD 21244-1850, Attn: John Burke CMS-6011-P, and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Allison Herron Eydt, CMS Desk Officer.

IV. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the comments in the preamble to that 
document. Because this document proposes to modify and supplement a 
notice of proposed rulemaking published on March 25, 1998 in the 
Federal Register (63 FR 14506), we will respond to all comments 
received concerning both that notice of proposed rulemaking and this 
proposed modification in the preamble to the combined subsequent 
document.

V. Regulatory Impact

A. Overall Impact

    We have examined the impact of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review) 
and the Regulatory Flexibility Act (RFA) (September 19, 1980, Public 
Law 96-354). Executive Order 12866 directs agencies to assess all costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects; distributive impacts; and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any one year). This 
proposed rule is not a major rule. The requirements of this rule add 
another program integrity tool, but do not replace existing overpayment 
recovery efforts. Additionally, providers, suppliers, individuals, and 
other entities already report and return many overpayments. Any 
overpayments made by us are not amounts that are due to these entities. 
The cost of the required reporting should be minimal for providers, 
suppliers, individuals, and other entities, including managed care 
organizations contracting with us in accordance with 42 CFR parts 417 
or 422.
    The RFA also requires agencies to analyze options for regulatory 
relief of small businesses. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and governmental 
agencies. Most hospitals and most other providers and suppliers are 
small entities, either by nonprofit status or by having revenues of 
between $5 million and $25 million annually. Individuals and States are 
not included in the definition of small entities. Under this proposed 
rule, providers, suppliers, individuals, and other entities, including 
managed care organizations contracting with us in accordance with 42 
CFR parts 417 or 422, would be required to notify the Medicare 
intermediary or carrier, or us, as appropriate, in writing, within 60 
days of identifying any payment that exceeds the amount payable under 
the Medicare statute and regulations.
    The cost of the required reporting should be minimal for providers, 
suppliers, individuals, and other entities, including managed care 
organizations contracting with us in accordance with 42 CFR parts 417 
or 422. Because standard business practices dictate keeping accurate 
records concerning monies due and/or payable, the required reporting of 
overpayments will add minimal cost for some providers, suppliers, 
individuals, and other entities, and no cost for providers, suppliers, 
individuals, and other entities already reporting overpayments. 
Therefore, we have determined, and we certify, that this proposed 
regulation would not result in a significant impact on a substantial 
number of small entities.
    In addition, section 1102(b) of the Social Security Act (the Act) 
requires us to prepare a regulatory impact analysis if a rule may have 
a significant impact

[[Page 3665]]

on the operations of a substantial number of small rural hospitals. 
This analysis must conform to the provisions of section 603 of the RFA. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital located outside of a Metropolitan Statistical 
Area with fewer than 100 beds. The cost of the required reporting 
should be minimal for small rural hospitals. Because standard business 
practices dictate keeping accurate records concerning monies due and/or 
payable, the required reporting of overpayments will add minimal cost 
for some small rural hospitals and no cost for those hospitals already 
reporting overpayments. Therefore, we have determined, and we certify, 
that this proposed rule would not have a significant effect on the 
operations of a substantial number of rural hospitals.

B. The Unfunded Mandates Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits before issuing any 
rule that may result in an expenditure in any 1 year by State, local, 
or tribal governments, in the aggregate, or by the private sector, of 
$110 million. This proposed rule would have no effect on the annual 
expenditures of any State, local, or tribal government, or the private 
sector. Any overpayments made by us to a provider, supplier, 
individual, or other entity that are reported and returned to us are 
not expenditures. The overpayments are not amounts owed to the 
provider, supplier, individual, or other entity and their return would 
have no economic impact. Therefore, we have determined, and we certify, 
that this proposed regulation would not result in an annual expenditure 
by State, local, or tribal governments, in the aggregate, or by the 
private sector, of $100 million.

C. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This proposed rule would impose no direct requirement 
costs on State and local governments, would not preempt State law, or 
have any Federalism implications. We are requiring providers, 
suppliers, individuals, and other entities that identify that we have 
overpaid them to report the overpayment to us and return the amount 
overpaid.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget. This 
proposed rule is not a major rule as defined at 5 U.S.C 804(2).

List of Subjects in 42 CFR Part 401

    Claims, Freedom of information, Health facilities, Medicare, 
Privacy.
    Accordingly, the Centers for Medicare & Medicaid Services proposes 
to amend the notice of proposed rulemaking at 63 FR 14506 (March 25, 
1998), which proposed to amend 42 CFR chapter IV, part 401 by adding 
subpart D, as follows:

PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS

Subpart D--Recovery of Overpayments, Suspension of Payment, and 
Repayment of Scholarships and Loans

    1. The authority citation for part 401, subpart D, continues to 
read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    2. Proposed Sec. 401.310 is amended by revising paragraph (a), 
adding a new paragraph (b)(4), and adding a new paragraph (e) as 
follows:


Sec. 401.310  Overpayments.

    (a) Definitions. As used in this section, the following definitions 
apply:
    Other entity means an entity, including a managed care organization 
contracting with CMS in accordance with parts 417 or 422 of this 
chapter, that is not a provider, a supplier, or an individual, that 
provides Medicare services to Medicare beneficiaries.
    Overpayment means Medicare funds a provider, a supplier, an 
individual, or other entity, including a managed care organization 
contracting with CMS in accordance with parts 417 or 422 of this 
chapter, has received in excess of amounts payable under the Medicare 
statute and regulations.
* * * * *
    (b) * * *
    (4) Medicare overpayment to an other entity, including a managed 
care organization contracting with CMS in accordance with parts 417 or 
422 of this chapter.
* * * * *
    (e) Reporting and returning overpayments. Identified payments in 
excess of amounts payable under the Medicare statute and regulations 
must be reported and returned as follows:
    (1) If a provider, supplier, or individual identifies a Medicare 
payment received in excess of amounts payable under the Medicare 
statute and regulations, the provider, supplier, or individual must, 
within 60 days of identifying or learning of the excess payment, return 
the overpayment to the appropriate intermediary or carrier, at the 
correct address, and notify the intermediary or carrier, in writing, of 
the reason for the overpayment.
    (2) If a managed care organization contracting with CMS in 
accordance with parts 417 or 422 of this chapter identifies a Medicare 
payment received in excess of amounts payable under the Medicare 
statute and regulations before the payment data have been certified or 
settled, the managed care organization must, within 60 days of 
identifying or learning of the excess payment, notify CMS, either--
    (i) In accordance with certification of payment data requirements 
described in Sec. 422.502(1) of this chapter; or
    (ii) In accordance with cost settlement processes described in part 
417, subparts O and U of this chapter.
    (3) If a managed care organization contracting with CMS in 
accordance with parts 417 or 422 of this chapter identifies a Medicare 
payment received in excess of amounts payable under the Medicare 
statute and regulations after payment data have been certified or 
settled, it must, within 60 days of identifying or learning of the 
excess payment, notify CMS, in writing so that CMS can recover the 
identified overpayment appropriately.
    (4) If an other entity, other than a managed care organization 
contracting with CMS in accordance with 42 CFR parts 417 or 422, 
identifies a Medicare payment in excess of amounts payable under the 
Medicare statute and regulations it must, within 60 days of identifying 
or learning of the overpayment, notify CMS, in writing, so that CMS can 
recover the identified overpayment appropriately.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: August 30, 2001.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: October 2, 2001.
Tommy G. Thompson,
Secretary.
[FR Doc. 02-1688 Filed 1-24-02; 8:45 am]
BILLING CODE 4120-01-P