Affordable Care Act Overpayments in the CY 2025 Medicare Physician Fee Schedule Proposed Rule: Implications for False Claims

Stakeholders are continuing to analyze the implications of the mammoth proposed rule on “Medicare and Medicaid Programs: [Calendar Year (CY)] 2025 Payment Policies under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; Medicare Prescription Drug Inflation Rebate Program; and Medicare Overpayments” (the “CY 2025 PFS Proposed Rule”).

While it’s not easy to reach the end of the title, let alone the 1053-page rule, False Claims Act (FCA) attorneys should note with interest that last topic—Medicare overpayments. As the CY 2025 PFS Proposed Rule would, if finalized, change Medicare regulations regarding requirements for reporting and returning Parts A and B overpayments, stakeholders and their counsel need to understand their obligations.

If finalized, the CY 2025 PFS Proposed Rule, issued by the Centers for Medicare & Medicaid Services (CMS) in July, would do the following:

1. retain the Medicare Parts A (hospital insurance) and B (medical insurance) provisions published in CMS’s Medicare Program Contract Year 2024 Proposed Rule of December 27, 2022 (the “December 2022 Overpayments Proposed Rule”),[1] and
2. revise existing regulations at 42 CFR § 401.305(b) regarding the deadline for reporting and returning overpayments.[2]

This blog post will discuss both of those points in turn.

CY 2025 PFS Proposed Rule Retains the Parts A and B Provisions of the December 2022 Overpayments Proposed Rule

As explained in the CY 2025 PFS Proposed Rule, Section 6402(a) of the Patient Protection and Affordable Care Act of 2010—entitled “Enhanced Medicare and Medicaid Program Integrity Provisions—established an Overpayment Rule in Section 1128J(d) of the Social Security Act. As currently enacted, Sections 1128J(d)(1) and (2) require persons to report and return overpayments to Medicare to “the Secretary, the State, an intermediary, a carrier, or a contractor.” “Overpayments” are defined in Section 1128J(d)(4)(b) as any funds that a person receives or retains to which they are not entitled under title XVIII or XIX of the Social Security Act. “Persons” as defined in Section 1128J(d)(4)(C) include providers, suppliers, Medicaid managed care organizations, Medicare Advantage organizations, and prescription drug plan sponsors.

Payments must be returned by the later of:

1. the date that is sixty (60) days after the date on which the overpayment was identified, or
2. the date any corresponding cost report is due, if applicable.

An overpayment also must be reported and returned if a person identifies an overpayment within six (6) years of receiving it. This is known as the “lookback period.”

Section 1128J(d)(3) of the Social Security Act, “Enforcement,” specifies that any overpayment retained by a person after the deadline for reporting and returning an overpayment is an “obligation” under section 3729(b)(3) of the FCA.[3] That provision defines an “obligation” as an established duty arising “from the retention of any overpayment.”

2016 Overpayments Final Rule

According to CMS’s February 2016 final rule entitled “Medicare Program, Reporting and Returning of Overpayments” (the “2016 Overpayments Final Rule”) regarding Medicare Parts A and B,[4] a provider or supplier has identified an overpayment when the provider or supplier determines, or should have determined through the exercise of “reasonable diligence,” that it has received an overpayment and quantified the amount.

December 2022 Overpayments Proposed Rule

The December 2022 Overpayments Proposed Rule, if finalized, would amend 42 C.F.R. § 401.305, “Requirements for reporting and returning of overpayments,” to apply the definitions of “knowing” and “knowingly” in the FCA to CMS regulations regarding Medicare payments. This amendment removed the standard of “reasonable diligence” from the 2016 Overpayments Final Rule. Under Section 3729(b)(1) of the FCA, “knowing” and “knowingly” are defined to mean that a person:

1. has actual knowledge of information;
2. acts in deliberate ignorance of the truth or falsity of the information; or
3. acts in reckless disregard of the truth or falsity of the information.

The definitions of “knowing” and “knowingly” require no proof of specific intent to defraud.

CY 2025 PFS Proposed Rule

In the CY 2025 PFS Proposed Rule, issued in July 2024, CMS declined to change the December 2022 Overpayments Proposed Rule, as the agency is still reviewing comments to the latter. CMS plans to respond to that feedback, as well as the new comments it receives from the CY 2025 PFS Proposed Rule, in the final version of the CY 2025 PFS Proposed Rule.

CY 2025 PFS Proposed Rule Proposes Revisions to 42 C.F.R. § 401.305(b), “Deadlines for Reporting and Returning Overpayments”

As noted above, under 42 C.F.R. § 401.305(b)(1), a person who has received an overpayment must report and return it by the later of: (i) the date that is sixty (60) days after the date on which the overpayment was identified or (ii) the date any corresponding cost report is due. Section 401.305(b)(2) currently states, however, that this deadline will be suspended if:

1. the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) acknowledges receipt of a submission to the OIG Self-Disclosure Protocol,
2. CMS acknowledges receipt of a submission to the CMS Voluntary Self-Referral Disclosure Protocol, or
3. a person requests an extended repayment schedule under the regulations.

Per the CY 2025 PFS Proposed Rule, a new 42 C.F.R. § 401.305(b)(3)(i) and (ii)  would add to the circumstances under which the deadline for returning payments will be suspended under Section 401.305(b)(2). The proposed amendments to Section 401.305(b)(3)(i) would additionally provide that the deadline would also be suspended if:

1. a person has identified an overpayment but has not yet completed a good-faith investigation to determine the existence of related overpayments that may arise from the same or similar cause or reason as the initially identified overpayment, and
2. the person conducts a timely, good-faith investigation to determine whether related overpayments exist.

Proposed 42 C.F.R. § 401.305(b)(3)(ii) would provide that if the conditions for proposed 42 C.F.R. § 401.305(b)(3)(i) are met, the obligation to return the initially identified overpayment and related payments will remain suspended until the earlier of the date that:

1. the investigation of related overpayments has concluded, and the aggregate amount of the initially identified overpayments and related overpayments is calculated, or
2. is one hundred and eighty (180) days after the date on which the identified overpayment was identified.

By way of illustration, CMS cites a hypothetical example in the CY 2025 PFS Proposed Rule where a person identifies an overpayment arising from a physician’s failure to document a medical record with regard to the coding of a claim. That person has 180 days in which to conduct a good-faith investigation. The overpayment must be reported and returned by day 60 if:

• the person does not conduct an investigation,
• the investigation is not timely, or
• the investigation is not conducted in good faith.

If the person does complete a timely, good-faith investigation, suspension of the obligation starts on day one. Overpayments must be reported and returned within 60 days of the completion of the investigation or by day 180, whichever is earlier. The suspensions in Section 401.305(b)(2) (generally relating to submissions to either the OIG or CMS self-disclosure protocols) may also apply, resulting in further suspensions.

The addition of this proposed Section 401.305(b)(3) would result in the existing (b)(1) and (2) being slightly amended for reference.

Takeaways

As with other portions of the lengthy CY 2025 PFS Proposed Rule, stakeholders are encouraged to comment. Comments are due no later than 5 p.m. ET on September 9, 2024.

Providers, suppliers, and others should exercise care with respect to reporting and returning overpayments, lest they find themselves facing the potential for FCA liability. These stakeholders also need to keep in mind that Medicare overpayment cases are covered in the U.S. Department of Justice’s Civil Resource Manual Section of the Justice Manual in Section 85. Medicare payments to suppliers may be suspended, in whole or in part, when overpayments are found or reasonably suspected.

Significantly, the CY 2025 PFS Proposed Rule recognizes that it can take additional time to conduct a timely, good-faith investigation into the facts and circumstances surrounding a potential overpayment. While the term “good-faith” is not defined, and regardless of whether the proposed rule is adopted, it continues to be critical for health care providers and organizations to well document when and what they did to determine whether an overpayment actually exists.

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If you have any questions about the issues discussed in this blog post or are concerned about potential Medicare overpayments, please contact this post’s author or the Epstein Becker Green Health Care and Life Sciences attorney who regularly handles your legal matters.

Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this blog post.

ENDNOTES

[1] The December 2022 Overpayments Proposed Rule includes the Medicare Parts A, B, C, and D overpayment provisions of the Patient Protection and Affordable Care Act of 2010.

[2] As explained in 42 C.F.R. § 401.301, Subpart D—Reporting and Returning of Overpayments—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, as required by Section 1128J of the Social Security Act. See CMS, Medicare Reporting and Returning of Self-Identified Overpayments (Feb. 11, 2016).

[3] 31 U.S.C. § 3729.

[4] The 2016 Overpayments Final Rule applies to Medicare Part A and B providers and suppliers. A separate rule of May 23, 2014 (79 Fed. Reg. 29844), addresses Medicare Parts C and D overpayments. See CMS, Medicare Reporting, supra note 1.