On February 16, 2012, the Centers for Medicare & Medicaid Services (“CMS”) released a proposed regulation regarding Medicare provider obligations to report and return overpayments (the “Proposed Regulation”). Under the Proposed Regulation, providers are required to report and return an "overpayment" within the later of (a) 60 days after the overpayment is “identified,” or (b) the date any corresponding cost report is due, if applicable. An “overpayment” is defined as any funds a person received or retains under Medicare or Medicaid to which the person, after “applicable reconciliation,” is not entitled. An improperly retained overpayment constitutes an “obligation” under the federal civil False Claims Act, which imposes liability upon any person who knowingly conceals or knowingly and improperly avoids or decreases an obligation to the government. Each unpaid obligation under the False Claims Act 
could result in a civil penalty of anywhere between $5,000 and $10,000 per obligation (adjusted by inflation) and three times the damages suffered by the United States. Providers who fail to comply with the 60-day rule may also be subject to Medicare and Medicaid exclusion and civil monetary penalties under the federal Civil Monetary Penalty statute.The Proposed Regulation states that a provider has “identified” an overpayment if the provider has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment.” Additionally, the Proposed Regulation suggests that a provider who receives information concerning a potential overpayment would have an obligation “to make a reasonable inquiry” to determine whether an overpayment exists and that a failure to make such an inquiry “with deliberate speed” could result in the provider knowingly retaining an overpayment because it acted in reckless disregard or deliberate ignorance of whether it received an overpayment.
The Proposed Regulation also subjects providers to a 10-year lookback period requiring a provider to report and return any identified overpayment “within 10 years of the date the overpayment was received.” CMS selected the 10-year lookback period to reflect the outer limit of the federal False Claims Act statute of limitations and proposes to amend the claims reopening rules to provide that reported overpayments may be reopened for a period of 10 years from the date of initial determination or redetermination. Read in combination with the proposed definition of “identification,” the Proposed Regulation seems to create a new 10-year medical record keeping requirement for Medicare claims filed.
Another notable provision in the Proposed Regulation relates the submission of cost reports. The Proposed Regulation limits “applicable reconciliation” as used in the definition of overpayment to cost reports and further clarifies that applicable reconciliation occurs when a cost report is filed, unless the provider receives updated Supplemental Security Income ratio information, or knows that an outlier reconciliation will be performed, in which case the provider is not required to return any resulting overpayment until the final reconciliation of the applicable cost report.
CMS is accepting comments to the Proposed Regulation until April 16, 2012. This offers providers the opportunity to suggest alternative approaches to CMS.
