How The 60-Day Repayment Rule Will Impact You

July 5, 2016

The 60-Day Rule, which forces physicians to return overpayments to CMS, was recently clarified. What should physicians know about it?

On Feb, 12, 2016, CMS issued its final rule implementing the Affordable Care Act (ACA) requirement that providers and suppliers report and repay overpayments from Medicare, known as the "60-Day Rule."  The ACA requires a person who has received an overpayment to report and return the overpayment by the later of  (a) 60 days after the date the overpayment was identified; or (b) the date any corresponding cost report is due, if applicable.  Notably, the final rule imposes a look-back period of six years, a shorter time period than the ten year period set forth in a proposed version of the rule previously circulated by CMS. 

Providers and suppliers can face potential False Claims Act liability, civil monetary penalties, and exclusion from federal healthcare programs for failure to report and return overpayments.  Due to the self-reporting aspect of the rule, medical practices will need to be proactive in developing compliance plans and infrastructure to comply with the final rule.  In addition, because of the six-year look-back period, medical practices should consider revising their corporate documents as they relate to retiring physicians and other physicians who leave the practice contributing to overpayment refunds for the period when they were in the practice.

Here are some questions you may be asking yourself:

When does the 60- day period begin?

The 60-day period begins when a provider identifies an overpayment.  A person has "identified" an overpayment when such person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.  Providers will generally have six months from the receipt of "credible information" to investigate possible overpayments before the 60-day clock starts running.

How far back must providers identify overpayments?

Overpayments must be reported and returned if a provider identifies the overpayment within six years of the date the overpayment was received.

What is "credible information" of an overpayment?

"Credible information" includes information that supports a reasonable belief that an overpayment may have been received.  Providers are not required to investigate every instance or complaint concerning a potential overpayment.  Determining whether information is sufficiently credible is a fact-specific determination.  Some examples of credible information include: a provider reviewing billing or payment records learns that certain services were coded incorrectly; a provider learns that a patient death occurred prior to the service date on a claim; or a provider learns that a service was provided by an unlicensed or excluded individual

What steps can medical practices take to comply with the 60- Day Rule?

Medical practices can take a number of proactive steps to protect themselves from overpayment issues.  Practices should develop and implement robust corporate compliance plans that are more than just books on a shelf.  Furthermore, they should be proactive in conducting random audits of coding and billing to ensure they have the right checks and balances and systems in place.  If a medical practice receives credible information of an overpayment, the practice should act quickly to address it.  One recommendation is to bring in an independent third party to assess whether their suspicions are correct, as well as the potential economic implications.  Delaying action could open a practice up to a whistleblower within the practice.

Who is liable for overpayments and what are the implications for practices with retiring physicians?

The medical practice, as the entity that received payments, is typically liable for overpayments.  This liability, which is currently uninsurable, flows through to the current owners of the medical practice.  Because of the six-year look-back period, medical practices should consider revising their corporate documents as to whether retiring physicians and other physicians who leave the practice should contribute to overpayment refunds for the period when they were in the practice.  When a physician is bought out of a practice, it is typical for there to be an indemnification provision.  However, given the length of the look-back period and the amount of liability that a practice may be subject to, practices should consider updating the indemnification provisions in their retirement and buy/sell documents to require the separating physician to retain some liability for overpayments. 

One area of particular concern is in hospital/physician transactions.  Typically, the physicians indemnify the hospitals in case of refund obligations.  However, with a six-year look-back period, a medical practice may have a sizable obligation to the hospital.  If a physician has left the group in the interim, the remaining physicians are on the hook for the entire liability.

The final rule puts medical practices on notice that they need to be proactive in developing compliance plans and infrastructure to identify and report overpayments in a timely manner.  In addition, medical practices should review their corporate documents with regard to retiring and separating physicians in light of liabilities that may arise due to the six-year look-back period.

John D. Fanburg chairs the health law practice at Brach Eichler, LLC, in Roseland, NJ.  Contact him at jfanburg@bracheichler.com. Edward Hilzenrath is an attorney in the health law practice at the firm, as well.