What steps must a radiology practice undertake if it has uncovered a possible billing error or a compliance problem impacting Medicare coverage, such that it appears that the practice has received a possible overpayment from Medicare? Although the practice believes that a possible overpayment has occurred, confirmation of that fact and calculation of the amounts of any overpayments has yet to be determined. The practice leaders are aware that the Affordable Care Act contained a requirement for repayment of Medicare overpayments within 60 days of identifying it and that retaining any overpayments may result in significant penalties under the Federal False Claims Act (FCA).  But they may be uncertain on how to proceed, and in what time frame must they act.

CMS has just put forward a possible rule change and has requested comments in the 2025 Medicare Physician Fee Schedule proposed rule that, if adopted, could remove much of the uncertainty in how much time the radiology practice described above has to go about investigating the matter and to “identify” any overpayments that must be refunded. CMS has proposed to create an up to 180-day period for the practice to conduct a good faith investigation before the 60 day period for making the refund begins to run.  This blog post from my Reed Smith colleagues does a great job in describing the proposed rule.

First, a little history on how we got here. Initially, after the 60 day overpayment requirement was enacted with the Affordable Care Act, there was no guidance on how much time was appropriate for the radiology practice to investigate their billing and compliance concerns. Not long after the overpayment law was enacted, one Federal judge, for example, ruled that “identification” occurs simply when a health care provider is put on notice of a possible overpayment.  Not at all helpful. Should not the health care provider be able to take some time to investigate before making a refund to Medicare? To remove that cloud,  in 2016 CMS adopted a rule stating that an overpayment was identified after a health care provider engaged in "reasonable diligence” to determine the amount of any overpayment.  That worked well in helping those investigating possible overpayments to know that the the 60 period was triggered only after reasonable diligence. But that understanding was in place only for a time.

Subsequent litigation cast a shadow over the "reasonable diligence" standard in the overpayment rule since some courts opined that the rule created FCA liability for "mere negligence," which conflicted with the FCA's knowledge standard.  In an attempt to fix these FCA issues, CMS proposed in 2022 that overpayments would be identified only if the person had “actual knowledge of the existence of the overpayment” or acted “in reckless disregard or deliberate ignorance of the overpayment.” The 2022 proposal was widely criticized - and actually never adopted - since it did nothing to give confidence as to how much time health care providers and suppliers could investigate a billing or compliance issue in order make an accurate overpayment refund. 

So now, it appears that if the proposed rule is adopted, health care providers will have the comfort of time - up to six months - to conduct timely, good-faith investigations to determine whether overpayments exist and how much should be refunded to the Medicare program. Kudos to CMS for proposing to bring more certainty in how to proceed when overpayments are suspected.