[Federal Register Volume 77, Number 32 (Thursday, February 16, 2012)]
[Proposed Rules]
[Pages 9179-9187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-3642]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 401 and 405

[CMS-6037-P]
RIN 0938-AQ58


Medicare Program; Reporting and Returning of Overpayments

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would require providers and suppliers 
receiving funds under the Medicare program to report and return 
overpayments by the later of the date which is 60 days after the date 
on which the overpayment was identified; or any corresponding cost 
report is due, if applicable.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on April 16, 2012.

ADDRESSES: In commenting, please refer to file code CMS-6037-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-6037-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-6037-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier)

[[Page 9180]]

your written comments before the close of the comment period to either 
of the following addresses:
    a. For delivery in Washington, DC--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-1066 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Tiana Korley, (410) 786-9702.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

    The Medicare program (title XVIII of the Social Security Act (the 
Act)) is the primary payer of health care for approximately 47 million 
enrolled beneficiaries. Providers and suppliers furnishing Medicare 
items and services must comply with the Medicare requirements set forth 
in the Act and in our regulations. The requirements are meant to ensure 
compliance with applicable statutes, promote the furnishing of high 
quality care, and to protect the Medicare Trust Funds against fraud and 
improper payments. As Medicare spending has grown, we have increased 
our efforts to reduce fraud, waste, and abuse in the Medicare program.
    As part of these efforts we have twice proposed--but did not 
finalize--rules that would have amended our regulations related to 
Medicare overpayments. (See the March 25, 1998 (63 FR 14506) and 
January 25, 2002 (67 FR 3662) proposed rules.)
    On March 23, 2010, the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) was enacted. The Health Care Education Reconciliation 
Act of 2010 (Pub. L. 111-152) then amended certain provisions of Public 
Law 111-148. These public laws are collectively known as the Affordable 
Care Act. The Affordable Care Act makes a number of changes to the 
Medicare program that enhance our efforts to recover overpayments and 
combat fraud, waste and abuse in the Medicare program.
    Section 6402(a) of the Affordable Care Act established a new 
section 1128J(d) of the Act entitled ``Reporting and Returning of 
Overpayments.'' Section 1128J(d)(1) of the Act requires a person who 
has received an overpayment to report and return the overpayment to the 
Secretary, the State, an intermediary, a carrier, or a contractor, as 
appropriate, at the correct address, and to notify the Secretary, 
State, intermediary, carrier or contractor to whom the overpayment was 
returned in writing of the reason for the overpayment. Section 
1128J(d)(2) of the Act requires that an overpayment be reported and 
returned by the later of-- (1) the date which is 60 days after the date 
on which the overpayment was identified; or (2) the date any 
corresponding cost report is due, if applicable. Section 1128J(d)(3) of 
the Act specifies that any overpayment retained by a person after the 
deadline for reporting and returning an overpayment is an obligation 
(as defined in 31 U.S.C. 3729(b)(3)) for purposes of 31 U.S.C. 3729.
    Section 1128J(d)(4)(A) defines ``knowing'' and ``knowingly'' as 
those terms are defined in 31 U.S.C. 3729(b); the terms ``knowing'' and 
``knowingly'' ``mean that a person with respect to information--(i) has 
actual knowledge of the information; (ii) acts in deliberate ignorance 
of the truth or falsity of the information; or (iii) acts in reckless 
disregard of the truth or falsity of the information.'' There need not 
be ``proof of specific intent to defraud.'' Section 1128J(d)(4)(B) of 
the Act defines the term ``overpayment'' as any funds that a person 
receives or retains under title XVIII or XIX to which the person, after 
applicable reconciliation, is not entitled under such title. Finally, 
section 1128J(d)(4)(C) of the Act defines the term ``person'' as a 
provider of services, supplier, Medicaid managed care organization 
(MCO) (as defined in section 1903(m)(1)(A) of the Act), Medicare 
Advantage organization (MAO) (as defined in section 1859(a)(1) of the 
Act) or PDP sponsor (PDP) (as defined in section 1860D-41(a)(13) of the 
Act) but the definition does not include a beneficiary.

II. Provisions of the Proposed Regulation

    To implement section 6402(a) of the Affordable Care Act, we propose 
establishing a new subpart D in Part 401 of our regulations. In this 
section, we outline the content of the proposed provisions of this new 
subpart D.

A. Scope of Subpart (Proposed Sec.  401.301)

    In proposed Sec.  401.301, we state that subpart D sets forth the 
policies and procedures for reporting and returning overpayments to the 
Medicare program for providers and suppliers of services under Parts A 
and B of title XVIII. At this time, we are proposing to implement the 
requirements set forth in section 1128J(d) of the Act only as they 
relate to Medicare Part A and Part B providers and suppliers. Other 
stakeholders, including, without limitation, MAOs, PDPs, and Medicaid 
MCOs will be addressed at a later date.
    Notwithstanding the foregoing, we remind all stakeholders that even 
without a final regulation they are subject to the statutory 
requirements

[[Page 9181]]

found in section 1128J(d) of the Act and could face potential False 
Claims Act liability, Civil Monetary Penalties Law liability, and 
exclusion from Federal health care programs for failure to report and 
return an overpayment. Additionally, providers and suppliers continue 
to be obliged to comply with our current procedures when we, or our 
contractors, determine an overpayment and issue a demand letter.

B. Definitions (Proposed Sec.  401.303)

    For purposes of this subpart only, we propose the following 
definitions:
1. Overpayment
    Section 1128J(d) of the Act provides that an overpayment means ``* 
* * any funds that a person receives or retains under title XVIII * * * 
to which the person, after applicable reconciliation, is not entitled 
under such title.'' In Sec.  401.303, we propose to include this same 
definition in our proposed rule. Examples of overpayments under this 
proposed definition could include all of the following:
     Medicare payments 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.
     Receipt of Medicare payment when another payor had the 
primary responsibility for payment.
    In certain circumstances, Medicare makes estimated payments for 
services with the knowledge that a reconciliation of those payments to 
actual costs will be done when the actual costs or related information 
becomes available, usually at a later date. Interim payments made to a 
provider throughout the cost year are reconciled with covered and 
reimbursable costs at the time the cost report is due. The statutory 
and proposed regulatory definition of the term overpayment acknowledges 
this practice and provides that an overpayment does not exist until 
after an applicable reconciliation takes place. When a provider files a 
cost report, the provider is attesting to the accuracy of the 
information contained on the cost report and must maintain the 
appropriate documentation supporting the costs that are claimed on the 
cost report. We rely upon the information that providers submit through 
the cost report and we believe that providers must accurately report 
any overpayments at the time they submit any cost reports to CMS--
whether it is an initial submission of a cost report or an amended one.
2. Medicare Contractor
    We propose that the term ``Medicare contractor'' means a fiscal 
intermediary, carrier, durable medical equipment Medicare 
administrative contractor (DME MAC), or Part A/Part B Medicare 
administrative contractor. We believe that this proposed definition 
captures the different contractors that would be involved in receiving 
reports of overpayments as well as handling the return of overpayments, 
consistent with the statutory requirement.
3. Person
    We propose that a person means a provider (as defined in Sec.  
400.202) or supplier (as defined in Sec.  400.202). This definition 
does not include a beneficiary. Our proposal is consistent with the 
definition of a ``person'' in section 1128J(d) of the Act.

C. Requirements for Reporting and Returning of Overpayments (Proposed 
Sec.  401.305)

1. General
    Section 1128J of the Act provides that if a person has received an 
overpayment, the person shall ``(i) report and return the overpayment 
to the Secretary * * * an intermediary, a carrier, or a contractor, as 
appropriate, at the correct address; and (ii) notify the Secretary * * 
* intermediary, carrier, or contractor to whom the overpayment was 
returned in writing of the reason for the overpayment.''
    We propose to implement these requirements by using the existing 
voluntary refund process, which will be renamed the ``self-reported 
overpayment refund process.'' This process is described in Publication 
100-06, Chapter 4 of the Medicare Financial Management Manual. Under 
the existing voluntary refund process, providers and suppliers report 
overpayments using a form that each Medicare contractor makes available 
on its Web site. The form requires that providers and suppliers provide 
information to allow CMS to identify the affected claims, such as the 
health insurance claim number (HICN); the provider's or supplier's 
name, number and tax identification number; and the date of service. 
The voluntary refund process also requires providers and suppliers to 
summarize why the refund is being made including the following 
information: (1) How the error was discovered; (2) a description of the 
corrective action plan implemented to ensure the error does not occur 
again; (3) the reason for the refund; (4) whether the provider or 
supplier has a corporate integrity agreement (CIA) with the OIG or is 
under the OIG Self-Disclosure Protocol; (5) the timeframe and the total 
amount of refund for the period during which the problem existed that 
caused the refund; (6) Medicare claim control number, as appropriate; 
(7) Medicare National Provider Identification (NPI) number; (8) a 
refund in the amount of the overpayment; and (9) if a statistical 
sample was used to determine the overpayment amount, description of the 
statistically valid methodology used to determine the overpayment. We 
are proposing that providers and suppliers would be required to use the 
self-reported overpayment refund process set forth by the applicable 
Medicare contractor to report and return overpayments.
    Some clarification may be helpful in defining potential reasons for 
an overpayment since such information must be reported under section 
1128J(d) of the Act. While we cannot provide an exhaustive list of all 
potential reasons for the overpayment as required to be reported at 
Sec.  401.305(d), we can provide examples. Examples of what a person 
may report as the reason for the overpayment include the following: (1) 
Incorrect service date; (2) duplicate payment; (3) incorrect CPT code; 
(4) insufficient documentation; and (5) lack of medical necessity. We 
note that many of the forms currently available from our contractors 
provide a ``check the box'' format that allows providers and suppliers 
to easily identify the reason for the overpayment. For overpayments 
that are not listed on the form that is available from the Medicare 
contractor, there is an associated ``other'' box that allows providers 
and suppliers to clarify the reason for the overpayment.
    We make these proposals because we believe that the information 
requested under the existing voluntary refund process, such as the date 
of service and the HICN, is necessary to allow CMS to appropriately 
match claims information with the information that is reported by the 
provider or supplier and to understand the nature of the overpayment. 
Furthermore, we recognize that the reporting forms may differ among the 
different Medicare contractors and plan to develop a uniform reporting 
form that will enable all overpayments to be reported and returned in a 
consistent manner across all Medicare contractors. Until such uniform 
reporting form is made available, providers and suppliers should 
utilize the existing form available from the Web site of the applicable 
Medicare contractor as discussed earlier in this proposed rule.

[[Page 9182]]

2. Identified
    Section 1128J of the Act provides that the terms `knowing' and 
`knowingly' have the meaning given those terms in the False Claims Act 
(31 U.S.C. 3729(b)(3)). The statutory text, however, does not use this 
phrase other than in the definitions. In Sec.  401.305 (a)(2), we 
propose that a person has identified an overpayment if the person has 
actual knowledge of the existence of the overpayment or acts in 
reckless disregard or deliberate ignorance of the overpayment. We 
believe Congress' use of the term ``knowing'' in the ACA was intended 
to apply to determining when a provider or supplier has identified an 
overpayment. We believe defining ``identification'' in this way gives 
providers and suppliers an incentive to exercise reasonable diligence 
to determine whether an overpayment exists. Without such a definition, 
some providers and suppliers might avoid performing activities to 
determine whether an overpayment exists, such as self-audits, 
compliance checks, and other additional research.
3. Reporting and Returning Deadlines
    Section 1128J of the Act provides that an overpayment must be 
reported and returned by the later of--(i) the date which is 60 days 
after the date on which the overpayment was identified; or (ii) the 
date any corresponding cost report is due, if applicable. Proposed 
Sec.  401.305(b) contains an identical requirement. If an overpayment 
is claims related, the provider or supplier would be required to report 
and return the overpayment within 60 days of identification. However, 
for those providers that submit cost reports, if the overpayment is 
such that it would generally be reconciled on the cost report by the 
provider, the provider would be permitted to report and return the 
overpayment either 60 days from the identification of the overpayment 
or on the date the cost report is due, whichever is later. For example, 
issues involving upcoding must be reported and returned within 60 days 
of identification because the upcoded claims for payment are not 
submitted to Medicare in the form of cost reports. However, for an 
overpayment that would generally be reconciled on the cost report, such 
as overpayments related to graduate medical education payments, the 
provider must report and return the overpayment either 60 days after it 
has been identified or on the date the cost report is due, whichever is 
later. We believe that the qualifying language ``if applicable'' 
supports the proposed approach of only permitting providers to rely 
upon the cost report deadline when relevant to the determination of 
whether an actual overpayment exists. We make this clarification to 
avoid situations in which providers improperly delay reporting and 
returning a claims-related, identified overpayment until the date a 
cost report is due. We do not believe that Congress intended to create 
a loophole that would allow providers to delay reporting and returning 
an identified overpayment until a cost report is due if the overpayment 
would not ordinarily be reconciled on the cost report.
    The proposed 60-day requirement to report and return overpayments 
would run from the date on which the person had identified the 
overpayment. As previously discussed, an overpayment has been 
identified at the time that a person acts with actual knowledge of, in 
deliberate ignorance of, or with reckless disregard to the 
overpayment's existence. In some cases, a provider or supplier may 
receive information concerning a potential overpayment that creates an 
obligation to make a reasonable inquiry to determine whether an 
overpayment exists. If the reasonable inquiry reveals an overpayment, 
the provider then has 60 days to report and return the overpayment. On 
the other hand, failure to make a reasonable inquiry, including failure 
to conduct such inquiry with all deliberate speed after obtaining the 
information, could result in the provider knowingly retaining an 
overpayment because it acted in reckless disregard or deliberate 
ignorance of whether it received such an overpayment. For example, a 
provider that receives an anonymous compliance hotline telephone 
complaint about a potential overpayment has incurred an obligation to 
timely investigate that matter. If the provider diligently conducts the 
investigation, and reports and returns any resulting overpayments 
within the 60-day reporting and repayment period, then the provider 
would have satisfied its obligations under the proposed rule. If, 
however, the provider fails to make any reasonable inquiry into the 
complaint, the provider may be found to have acted in reckless 
disregard or deliberate ignorance of any overpayment.
    In order to assist providers and suppliers with understanding when 
an overpayment has been identified, we provide the following examples:
     A provider of services or supplier reviews billing or 
payment records and learns that it incorrectly coded certain services, 
resulting in increased reimbursement.
     A provider of services or supplier learns that a patient 
death occurred prior to the service date on a claim that has been 
submitted for payment.
     A provider of services or supplier learns that services 
were provided by an unlicensed or excluded individual on its behalf.
     A provider of services or supplier performs an internal 
audit and discovers that overpayments exist.
     A provider of services or supplier is informed by a 
government agency of an audit that discovered a potential overpayment, 
and the provider or supplier fails to make a reasonable inquiry. (When 
a government agency informs a provider or supplier of a potential 
overpayment, the provider or supplier has an obligation to accept the 
finding or make a reasonable inquiry. If the provider's or supplier's 
inquiry verifies the audit results, then it has identified an 
overpayment and, assuming there is no applicable cost report, has 60 
days to report and return the overpayment. As noted previously, failure 
to make a reasonable inquiry, including failure to conduct such inquiry 
with all deliberate speed after obtaining the information, could result 
in the provider or supplier knowingly retaining an overpayment because 
it acted in reckless disregard or deliberate ignorance of whether it 
received such an overpayment).
     A provider of services or supplier experiences a 
significant increase in Medicare revenue and there is no apparent 
reason--such as a new partner added to a group practice or a new focus 
on a particular area of medicine--for the increase. Nevertheless, the 
provider or supplier fails to make a reasonable inquiry into whether an 
overpayment exists. (When there is reason to suspect an overpayment, 
but a provider or supplier fails to make a reasonable inquiry into 
whether an overpayment exists, it may be found to have acted in 
reckless disregard or deliberate ignorance of any overpayment.)
    We emphasize that these examples are not an exhaustive list of 
situations where a person has identified an overpayment.
    We recognize that there are also intersections between the 
obligation to report and return overpayments under section 6402(a) of 
the Affordable Care Act and the existing procedures for providers and 
suppliers to self-disclose actual or potential violations of the 
physician self-referral statute to CMS through the Medicare Self-
Referral Disclosure Protocol (SRDP). Providers and suppliers self-
disclose violations under the SRDP with the intention of resolving 
overpayment liability

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exposure for the identified conduct. The SRDP is available on the CMS 
Web site at https://www.cms.gov/PhysicianSelfReferral/Downloads/6409_SRDP_Protocol.pdf. Under the SRDP, we may reduce the amount due and 
owing for violations of the physician self-referral statute. We have 
suspended the obligation to return overpayments under section 6402(a) 
of the Affordable Care Act when we acknowledge receipt of a disclosure 
made pursuant to the process established by the SRDP. Because the SRDP 
only suspends the running of the 60-day deadline to return a physician 
self-referral-related overpayment, the provider or supplier would be 
obligated still to report the overpayment using the process that we are 
proposing in Sec.  401.305(a)(1). Specifically with regard to the SRDP, 
we seek comment on alternative approaches that would allow providers 
and suppliers to avoid making multiple reports of identified 
overpayments.
    We note that there are also intersections between the obligation to 
report and return an overpayment under section 6402(a) of the 
Affordable Care Act and the existing procedures for reporting self-
discovered evidence of potential fraud to the OIG through the OIG Self-
Disclosure Protocol (OIG SDP). The OIG SDP is available on the OIG Web 
site at http://oig.hhs.gov/authorities/docs/selfdisclosure.pdf. 
Disclosures resolved through the OIG SDP result in a settlement with 
OIG that releases the OIG's applicable Civil Monetary Penalties Law 
(CMPL) and permissive exclusion authorities in exchange for a 
negotiated monetary payment that includes the overpayment as well as 
certain penalties and assessments. In Sec.  401.305(b), we propose to 
suspend the obligation to return overpayments under section 6402(a) of 
the Affordable Care Act when OIG acknowledges receipt of a submission 
to the OIG SDP. The obligation to return overpayments consistent with 
the processes established in this proposed rule would be suspended 
until a settlement agreement is entered, or the provider or supplier 
withdraws or is removed from the OIG SDP. We also propose that once the 
provider or supplier notifies OIG of the identified overpayment through 
the OIG SDP, such notice would constitute a report for purposes of the 
reporting requirement set forth at Sec.  401.305 of this proposed rule. 
However, we note that such reports must be made in accordance with the 
timeliness requirements set forth at Sec.  401.305.
    Providers and suppliers should ensure that they are using the most 
appropriate process to report and return overpayments. In the October 
30, 1998 Federal Register, (63 FR 58400) the OIG published a notice 
stating--

[the SDP] is intended to facilitate the resolution of only matters 
that, in the provider's reasonable assessment, are potentially 
violative of Federal, criminal, civil or administrative laws. 
Matters exclusively involving overpayments or errors that do not 
suggest that violations of law have occurred should be brought 
directly to the attention of the entity (e.g. a contractor such as a 
carrier or an intermediary) that processes claims and issues payment 
on behalf of the Government agency responsible for the particular 
Federal health care program (e.g., [CMS] for matters involving 
Medicare). The program contractors are responsible for processing 
the refund and will review the circumstances surrounding the initial 
overpayment. If the contractor concludes that the overpayment raises 
concerns about the integrity of the provider, the matter may be 
referred to the OIG. Accordingly, the provider's initial decision of 
where to refer a matter involving non-compliance with program 
requirements should be made carefully.

    We believe the distinctions drawn previously are relevant because 
the process of reporting and returning overpayments pursuant to section 
1128J of the Act cannot resolve any potential False Claims Act or OIG 
administrative liability associated with the overpayment (even though 
returning an overpayment may, among other benefits, limit any FCA or 
administrative liability arising from the retention of an overpayment). 
Providers and suppliers should be aware that the contractors will 
scrutinize overpayments received through this process and may make 
referrals to OIG whenever the contractors believe circumstances warrant 
such a referral.
    We are aware that providers and suppliers may be concerned about 
scenarios in which they have identified an overpayment but because of 
the magnitude of the overpayment, need additional time to make 
repayment. Providers and suppliers may not delay the identification 
date in these situations to meet the deadline prescribed for reporting 
and returning the overpayment. Instead, if a provider or supplier needs 
additional time due to financial constraints, the provider or supplier 
must use the existing Extended Repayment Schedule (ERS) \1\ process 
that is outlined in Publication 100-06, Chapter 4 of the Financial 
Management Manual. Because the statute is clear as to the deadline for 
reporting and returning overpayments, we believe that using the 
existing ERS process would be the best means of addressing potential 
financial limitations associated with the ability to repay the 
overpayment. We note that requests for ERS are not automatically 
granted and that providers and suppliers seeking to repay an identified 
overpayment using the ERS are required to submit significant 
documentation to allow CMS to verify that timely repayment of the 
overpayment represents a true financial hardship to the provider or 
supplier. The ERS is the only means by which extended repayment of an 
overpayment will be permitted. We propose to amend the definition of 
``hardship'' at Sec.  401.607 to ensure that providers and suppliers 
can seek to utilize the ERS to return identified overpayments for 
purposes of section 1128J(d) of the Act when financial constraints 
suggest that use of the ERS is appropriate.
---------------------------------------------------------------------------

    \1\ The ``Extended Repayment Schedule'' was formerly referred to 
as the ``Extended Repayment Plan.''
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    Finally, we note the following with regard to overpayments that 
arise due to a violation of the anti-kickback statute (section 
1128B(b)(1) and (2) of the Act). Compliance with the anti-kickback 
statute is a condition of payment. Claims that include items and 
services resulting from a violation of this law are not payable and 
constitute false or fraudulent claims for purposes of the False Claims 
Act. We recognize that, in many instances, a provider or supplier is 
not a party to, and is unaware of the existence of, an arrangement 
between third parties that causes the provider or supplier to submit 
claims that are the subject of a kickback. For example, a hospital may 
be unaware that a device manufacturer has paid a kickback to a 
physician on the hospital's medical staff to induce the physician to 
implant the manufacturer's device in procedures performed at the 
hospital. Moreover, even if a provider or supplier becomes aware of a 
potential third party payment arrangement, it would generally not be 
able to evaluate whether the payment was an illegal kickback or whether 
one or both parties had the requisite intent to violate the anti-
kickback statute.
    For this reason, we believe that providers who are not a party to a 
kickback arrangement are unlikely in most instances to have 
``identified'' the overpayment that has resulted from the kickback 
arrangement and would therefore have no duty to report it or, as 
discussed later in this section, to repay it. To the extent that a 
provider or supplier who is not a party to a kickback arrangement has 
sufficient knowledge of the arrangement to have identified the 
resulting overpayment, the provider or supplier must report the 
overpayment to CMS in accordance with section 1128J(d) of the Act and 
corresponding

[[Page 9184]]

regulations. Although the government may always seek repayment of 
claims paid that do not satisfy a condition of payment, where a 
kickback arrangement exists, HHS's enforcement efforts would most 
likely focus on holding accountable the perpetrators of that 
arrangement. Accordingly, we would refer the reported overpayment to 
OIG for appropriate action and would suspend the repayment obligation 
until the government has resolved the kickback matter (either by 
determining that no enforcement action is warranted or by obtaining a 
judgment, verdict, conviction, guilty plea, or settlement). Thus, if 
the provider has not identified the kickback or if it reported it when 
it did identify the kickback, our expectation is that only the parties 
to the kickback scheme would be required to repay the overpayment that 
was received by the innocent provider or supplier, except in the most 
extraordinary circumstances.
4. Applicable Reconciliation
    As previously noted, the statutory and our proposed regulatory 
definition of an overpayment acknowledges that, in some instances, we 
make interim payments to a provider through the cost year and that the 
provider reconciles these payments with covered and reimbursable costs 
at the time the cost report is due. In Sec.  401.305(c), we propose 
that ``applicable reconciliation'' will occur with the provider's 
submission of a cost report. We believe that this would include an 
initial cost report submission or an amended cost report. We expect 
providers to accurately report and return overpayments at these points 
in time, because we rely upon the information that providers include on 
cost reports.
    We propose to recognize two exceptions to the general rule that the 
applicable reconciliation occurs with the provider's submission of a 
cost report. The first exception is related to Supplemental Security 
Income (SSI) ratios used in the calculation of disproportionate share 
hospital (DSH) payment adjustment. We publish these ratios annually on 
our Web site and providers are expected to use the appropriate ratio 
when submitting the cost report for that cost year, unless the 
published ratios are not available at the time the cost report is due. 
In instances where the provider later receives more recent information 
regarding its SSI ratio, we propose that the provider would not be 
required to amend the cost report or calculate the change in 
reimbursement and return the potential overpayment until the final 
reconciliation of the provider's cost report occurs. The second 
exception is related to the outlier reconciliation. We perform an 
outlier reconciliation at the time the cost report is settled if 
certain thresholds are exceeded. Prior to this reconciliation the 
actual amount of any overpayment is not known. In instances where the 
provider is aware it has exceeded the established thresholds and an 
outlier reconciliation will be performed, we propose that the provider 
would not be required to estimate the change in reimbursement and 
return the estimated overpayment until the final settlement of that 
cost report.
5. Enforcement
    Section 1128J(d) of the Act provides that any overpayment retained 
by a person after the deadline for reporting and returning the 
overpayment is an obligation for purposes of 31 U.S.C. 3729. Any person 
who ``knowingly conceals or knowingly and improperly avoids or 
decreases an obligation to pay or transmit money or property to the 
Government'' may be found liable under the False Claims Act. (See 31 
U.S.C. 3729 et seq.) Proposed Sec.  401.305(f) contains a similar 
statement. Additionally, any person who ``knows of an overpayment [as 
defined in section 1128J(d)(4) of the Act] and does not report and 
return the overpayment in accordance with such section'' may be found 
liable under the Civil Monetary Penalties Law (section 1128A(a)(10) of 
the Act) and accordingly could be excluded from participation in 
Federal health care programs (section 1128A of the Act).
6. Lookback Period and Related Issues
    In Sec.  401.305(g), we are proposing that overpayments must be 
reported and returned only if a person identifies the overpayment 
within 10 years of the date the overpayment was received. We selected 
10 years because this is the outer limit of the False Claims Act 
statute of limitations. We believe that the proposed 10-year lookback 
period is appropriate for several reasons. First, we believe that 
providers and suppliers should have certainty after a reasonable period 
that they can close their books and not have ongoing liability 
associated with an overpayment. We also believe that the length of the 
lookback period is long enough to sufficiently further our interest in 
ensuring that overpayments are timely returned to the Medicare Trust 
Funds.
    We propose to amend the reopening rules at Sec.  405.980(b) to 
provide that overpayments reported in accordance with Sec.  401.305 may 
be reopened for a period of 10 years. We make this proposal in order to 
ensure that our reopening regulations are consistent with the lookback 
period that we are proposing. We seek comment on the proposed 10-year 
lookback period. In addition, we seek comment on our proposal to amend 
the reopening rules to provide for a 10-year reopening period.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before 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 Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our 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.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):
    Proposed Sec.  401.305 states that a provider or supplier must 
report and return an overpayment to the Secretary, the State, an 
intermediary, a carrier or a contractor to the correct address by the 
later of 60 days after the overpayment was identified or the date the 
corresponding cost report is due and notify the Secretary, the State, 
an intermediary, a carrier or a contractor in writing of the reason for 
the overpayment. The burden associated with this requirement would be 
the time and effort necessary to report and return the overpayment in 
the manner described at Sec.  401.305.
    For purposes of this section only, we estimate that approximately 
125,000 providers and suppliers (or roughly 8.5 percent of the total 
number of Medicare providers and suppliers) would report and return 
overpayments in a typical year under our proposed provisions. In 
addition, we project that each of these providers and suppliers would, 
on average, separately report and return approximately 3 to 5 
overpayments. We also estimate that it would take a provider or 
supplier approximately 2.5

[[Page 9185]]

hours to complete the applicable reporting form and return an 
overpayment. Lastly, the two main categories of individuals believed to 
complete and submit the applicable reporting form include: (1) 
Accountants and auditors (external and in-house); and (2) miscellaneous 
in-house administrative personnel. Each provider and supplier's 
individual operations is different and, as a result, it is not possible 
to break down the percentage of total affected providers of suppliers 
that would fall within the two aforementioned categories (for example, 
percentage of providers that would use an accountant). Consequently, in 
order to determine the burden cost, we utilize the average hourly wage 
of these two occupational categories based on the most recent wage data 
provided by the Bureau of Labor Statistics (BLS) data for May 2010. The 
mean hourly wage for the category of ``accountants and auditors'' is 
$33.15 (see http://www.bls.gov/oes/current/oes132011.htm) and the mean 
hourly wage for the category of ``bookkeeping, accounting, and auditing 
clerks'' is $16.99 (http://www.bls.gov/oes/current/oes433031.htm). The 
average of these two figures, including fringe benefits and overhead, 
is $37.10. This, in turn, leads to an aggregate annual ICR burden cost, 
attributable to the impacted 125,000 providers and suppliers for the 
range of 3 to 5 overpayments, of $34.78 million and $57.97 million, 
respectively. Again these are rough estimates, as the number of 
overpayments reported and returned will vary per provider and supplier. 
Therefore, we solicit comment on our burden assumptions and associated 
calculations.

   Table 1--Annual Burden Requirements and Costs Associated With Reporting and Returning of Overpayments (Sec.
                                                    401.305)
----------------------------------------------------------------------------------------------------------------
                       Number of
    Number of         overpayments        Burden per
     impacted        processed per       overpayment        Total annual    Hourly labor cost    Total cost (in
  providers and       provider and       reported and     burden  (hours)      of reporting        millions)
    suppliers           supplier      returned  (hours)
----------------------------------------------------------------------------------------------------------------
        125,000                3-5                2.5    937,500-1,562,500           $37.10      $34.78-$57.97
----------------------------------------------------------------------------------------------------------------

    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
[CMS-6037-P], Fax: (202) 395-5806; or Email: [email protected].

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, 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, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Statement

A. Statement of Need

    This proposed rule is necessary to implement section 6402(a) of the 
Affordable Care Act, which established a new section 1128J(d) of the 
Act entitled ``Reporting and Returning of Overpayments.'' Section 
1128J(d)(1) of the Act requires a person who has received an 
overpayment to report and return the overpayment to the Secretary, the 
State, an intermediary, a carrier, or a contractor, as appropriate, at 
the correct address, and to notify the Secretary, State, intermediary, 
carrier or contractor to whom the overpayment was returned in writing 
of the reason for the overpayment. Section 1128J(d)(2) of the Act 
requires that an overpayment must be reported and returned by the later 
of--(1) the date which is 60 days after the date on which the 
overpayment was identified; or (2) the date any corresponding cost 
report is due, if applicable. Section 1128J(d)(3) of the Act specifies 
that any overpayment retained by a person after the deadline for 
reporting and returning an overpayment is an obligation (as defined in 
31 U.S.C. 3729(b)(3)) for purposes of 31 U.S.C. 3729. As a result, this 
proposed rule clarifies to providers and suppliers their legal 
obligations regarding the reporting and returning of overpayments.

B. Overall Impact

    We have examined the impact of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 (Pub. L. 
104-4), Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulation impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any one year).
    As discussed earlier in the preamble, even without a final 
regulation, all stakeholders are subject to the statutory requirements 
found in section 1128J(d) of the Act and could face potential False 
Claims Act liability, Civil Monetary Penalties Law liability, and 
exclusion from Federal health care programs for failure to report and 
return an overpayment. This proposed rule would impose a new deadline 
on the return of any overpayment that has been identified. We believe 
that this change would spur providers to be more diligent in reporting 
and returning overpayments. That will likely increase the overpayments 
that we collect, but we do not have a basis for estimating the 
magnitude of that change, and note the substantial uncertainty 
surrounding the magnitude of new collections. The burden costs for 
reporting and returning of overpayments, as discussed in section III. 
of this proposed rule, are estimated annually between $34.78 million to 
$57.97 million. As a result, this

[[Page 9186]]

proposed rule is not an economically significant rule under Executive 
Order 12866. We solicit comment on the analysis and conclusions 
provided in the RIA.
    The RFA requires agencies to analyze options for regulatory relief 
for small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other health care 
providers and suppliers are small entities, either by being nonprofit 
organizations or by meeting the Small Business Administration (SBA) 
definition of a small business and having revenues of less than $7 
million to $34.5 million in any 1 year. (For details, see the Small 
Business Administration's Table of Size Standards at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf.) 
Individuals and States are not included in the definition of a small 
entity. We do not believe that the reporting and returning of 
overpayments identified by providers and suppliers of services will 
have a significant impact on a substantial number of small entities. 
The requirements of this rule add another program integrity tool, but 
do not replace existing overpayment recovery efforts. We are not 
preparing an analysis for the RFA because the Secretary has determined 
that this proposed rule will not have a significant impact on a 
substantial number of small entities.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a rule may have a significant impact 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 
purposed of section 1102(b) of the Act, we define a small rural 
hospital as a hospital located outside of the Metropolitan Statistical 
Area and has 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. We are not preparing an analysis for section 1102(b) of the 
Act because the Secretary has determined that this proposed rule will 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits before issuing any 
rule whose mandates require spending in any 1 year by State, local, or 
tribal governments, in the aggregate, or by the private sector, of $136 
million. This proposed rule would have no effect on the annual 
expenditures of any State, local or tribal government, or the private 
sector.
    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 cost on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this proposed rule does not impose any costs on 
State or local governments, the requirements of Executive Order 13132 
are not applicable.

C. Alternatives Considered

    In light of the statutory mandate in section 6402(a) of the 
Affordable Care Act, we did not consider any alternatives to the 
implementation of this provision. We did, however, contemplate several 
operational mechanisms to alleviate the burden on the provider and 
supplier communities.
    First, we considered and elected to utilize the existing voluntary 
refund process. This would allow providers and suppliers to use a 
reporting mechanism with which they are already familiar.
    Second, we contemplated the appropriate length of time in which 
overpayments must be reported and returned. A time period of less than 
10 years was considered, as this would ease the burden on providers and 
suppliers. However, and as explained earlier, we selected 10 years 
because this is the outer limit of the False Claims Act statute of 
limitations. More importantly, we believe that the need to protect the 
Medicare Trust Fund was of primary importance. It is not possible for 
us to calculate the costs associated with a 10-year period versus, for 
instance, a 5-year period. We do, though, solicit comments on this 
issue, similar to our earlier solicitation of comments on the propriety 
of a 10-year period.
    Third, as with the overpayment reporting period, we contemplated a 
reopening timeframe of less than 10 years. Yet we selected a 10-year 
timeframe in order to ensure that our reopening regulations are 
consistent with the 10-year lookback period. The costs of a shorter 
lookback period cannot be estimated, though we welcome comments on this 
issue.
    We solicit comment on the analysis provided in this section.

D. Beneficiary Access

    We do not anticipate any impact on beneficiary access to care as a 
result of this proposed rule. As mentioned, the only burden associated 
with our proposed provisions involves the ICR aspects of reporting and 
returning overpayments. We do not believe that this burden--which, in 
any event, would only affect a small percentage of providers and 
suppliers--would cause a particular provider or supplier to reduce the 
services it furnishes to beneficiaries.

List of Subjects

42 CFR Part 401

    Claims, Freedom of information, Health facilities, Medicare, 
Privacy.

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend Chapter IV as set forth below:

PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS

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

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

    2. Part 401 is amended by adding subpart D to read as follows:

Subpart D--Reporting and Returning of Overpayments

Sec.
401.301 Basis and scope.
401.303 Definitions.
401.305 Requirements for reporting and returning of overpayments.


Sec.  401.301  Basis and scope.

    This subpart sets forth the policies and procedures for reporting 
and returning overpayments to the Medicare program for providers and 
suppliers of services under Parts A and B of title XVIII of the Act as 
required by section 1128J of the Act.


Sec.  401.303  Definitions.

    For purposes of this subpart--
    Medicare contractor means a fiscal intermediary, carrier, durable 
medical equipment Medicare administrative contractor (DME MAC), or Part 
A/Part B Medicare administrative contractor.
    Overpayment means any funds that a person has received or retained 
under

[[Page 9187]]

title XVIII of the Act to which the person, after applicable 
reconciliation, is not entitled under such title.
    Person means a provider (as defined in Sec.  400.202) or a supplier 
(as defined in Sec.  400.202).


Sec.  401.305  Requirements for reporting and returning of 
overpayments.

    (a) General. (1) If a person has identified that it has received an 
overpayment the person must report and return the overpayment in the 
form and manner set forth in this section.
    (2) A person has identified an overpayment if the person has actual 
knowledge of the existence of the overpayment or acts in reckless 
disregard or deliberate ignorance of the existence of the overpayment.
    (b) Deadline for reporting and returning overpayments. (1) A person 
with an identified overpayment must report and return the overpayment 
by the later of either of the following:
    (i) The date which is 60 days after the date on which the 
overpayment was identified.
    (ii) The date any corresponding cost report is due, if applicable.
    (2) The deadline for returning overpayments will be suspended when 
either of the following occurs:
    (i) OIG acknowledges receipt of a submission to the OIG Self-
Disclosure Protocol until such time as a settlement agreement is 
entered, the person withdraws from the OIG Self-Disclosure Protocol, or 
the person is removed from the OIG Self-Disclosure Protocol.
    (ii) CMS acknowledges receipt of a submission to the Self-Referral 
Disclosure Protocol until such time as a settlement agreement is 
entered, the person withdraws from the Self-Referral Disclosure 
Protocol, or the person is removed from the Self-Referral Disclosure 
Protocol.
    (c) Applicable reconciliation. (1) The applicable reconciliation 
occurs when a cost report is filed; and
    (2) In instances when the provider--
    (i) Receives more recent CMS information on the SSI ratio, the 
provider is not required to return any overpayment resulting from the 
updated information until the final reconciliation of the provider's 
cost report occurs; or
    (ii) Knows that an outlier reconciliation will be performed, the 
provider is not required to estimate the change in reimbursement and 
return the estimated overpayment until the final reconciliation of that 
cost report.
    (d) Contents of report. An overpayment required to be reported 
under this section to a Medicare contractor must be made in writing and 
must contain all of the following:
    (1) Person's name.
    (2) Person's tax identification number.
    (3) How the error was discovered.
    (4) The reason for the overpayment.
    (5) The health insurance claim number, as appropriate.
    (6) Date of service.
    (7) Medicare claim control number, as appropriate.
    (8) Medicare National Provider Identification (NPI) number.
    (9) Description of the corrective action plan to ensure the error 
does not occur again.
    (10) Whether the person has a corporate integrity agreement with 
the OIG or is under the OIG Self-Disclosure Protocol.
    (11) The timeframe and the total amount of refund for the period 
during which the problem existed that caused the refund.
    (12) If a statistical sample was used to determine the overpayment 
amount, a description of the statistically valid methodology used to 
determine the overpayment.
    (13) A refund in the amount of the overpayment. A person may 
request an extended repayment schedule as that term is defined in Sec.  
401.603.
    (e) Reporting. (1) A person must use the self-reported overpayment 
refund process set forth by the applicable Medicare contractor to 
report and return overpayments except as provided in paragraph (e)(2) 
of this section.
    (2) A person satisfies the reporting obligations of this section by 
making a disclosure under the OIG's Self-Disclosure Protocol resulting 
in a settlement agreement using the process described in the OIG Self-
Disclosure Protocol.
    (f) Enforcement. Any overpayment retained by a person after the 
deadline for reporting and returning the overpayment specified in 
paragraph (b) of this section is an obligation for purposes of 31 
U.S.C. 3729.
    (g) Lookback period. An overpayment must be reported and returned 
in accordance with Sec.  401.305 only if a person identifies the 
overpayment within 10 years of the date the overpayment was received.

Subpart F--Claims Collection and Compromise


Sec.  401.607  [Amended]

    3. In Sec.  401.607(c)(2)(i), the definition of ``Hardship'' is 
amended by removing the phrase ``outstanding overpayments (principal 
and interest)'' and adding in its place the phrase ``outstanding 
overpayments (principal and interest and including overpayments 
reported in accordance with Sec. Sec.  401.301 through 401.305.)''

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

    4. The authority for part 405 continues to read as follows:

    Authority:  Secs. 1102, 1862, and 1871 of the Social Security 
Act as amended (42 U.S.C.1302, 1395y, and 1395hh).

    5. Section 405.980 is amended by adding paragraph (b)(6) to read as 
follows:


Sec.  405.980  Reopenings of initial determinations, redeterminations, 
and reconsiderations, hearings and reviews.

* * * * *
    (b) * * *
    (6) Within 10 years from the date of initial determination or 
redetermination if the overpayment is reported in accordance with Sec.  
401.305.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: August 18, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: February 10, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-3642 Filed 2-14-12; 8:45 am]
BILLING CODE 4120-01-P