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Volume 7, Issue 2 April 2012

CMS Wants to Hear From You
On February 16, 2012, the Centers for Medicare and Medicaid Services (CMS) released a long-anticipated proposed rule on reporting and returning of overpayments. The Proposed Rule is one of a series of steps Medicare is taking to reduce fraud, waste and abuse and to prevent overpayments from happening. The Proposed Rule implements the Patient Protection and Affordable Care Act's (ACA) provision on returning and reporting overpayments. The Proposed Rule is open for comments through April 16, 2012.



In 2009, Congress amended the federal civil False Claims Act to include that the knowing concealment or the knowing and improper avoidance of an obligation to pay or transmit money to the government was a basis for liability under the False Claims Act. This is referred to as the “reverse false claims” provision, as it is the knowing retention and failure to refund federal funds that were paid in error that triggers the violation of the False Claims Act. In 2010, Section 6402(a) of the Affordable Care Act (ACA) further strengthened the “reverse false claims” provision of the False Claims Act.

The ACA established a new section 1128(d) of the Act entitled, “Reporting and Returning of Overpayments,” which requires providers to report and return any Medicare overpayment by the later of, 60 days after the identification of the overpayment, or the date the applicable cost report is due. Failure to refund promptly could result in a violation of the False Claims Act, which includes civil penalties between $5,500 and $11,000 per violation, plus three times the government’s losses.

In addition to liability under the False Claims Act , a determination that an individual or entity knowingly concealed overpayments from federal healthcare programs may constitute grounds for additional civil money penalties, criminal penalties (including fines, imprisonment, or both), as well exclusion from the Medicare and Medicaid programs.

The obligation to return Medicare overpayments is not new, however, prior to the ACA, providers did not have a specific deadline by which overpayments were to be reported and returned. In a February 14, press release, CMS reports having directly received approximately $5 million in overpayments since passage of the ACA. Nevertheless, the changes in the False Claims Act and the ACA left many questions, including the definition of an overpayment, the process of identification of overpayments, and the details of how these overpayments were to be reported and returned.

In the February 16, 2012, Federal Register, CMS published the Proposed Rule, Medicare Program: Reporting and Returning of Overpayments. In the Proposed Rule, CMS provides definitions and clarifications on the reporting and returning of overpayments.

This article will summarize the key elements of the Proposed Rule.

The Proposed Rule, Medicare Program: Reporting and Returning of Overpayments, only applies to Medicare Part A and Part B providers and suppliers. CMS states that other stakeholders remain subject to the ACA’s statutory requirement pending further regulatory guidance.

The Proposed Rule defines an overpayment as, “any funds that a person receives or retains under title XVIII to which the person, after applicable reconciliation, is not entitled under such title.” Examples of overpayments include:

  • Medicare payments for noncovered services.
  • Medicare payments in excess of the allowable amount for an identified covered service.
  • Errors and non-reimbursable expenditures in cost reports.
  • Duplicate payments.
  • Receipt of Medicare payment when another payor had the primary responsibility for payment.

Identification of Overpayments
CMS proposes that an overpayment is “identified” (and therefore subject to the 60-day deadline) when a provider or supplier has actual knowledge or acts in “reckless disregard” or “deliberate ignorance” of the existence of the overpayment. CMS states that this gives providers and suppliers an incentive to undertake reasonable diligence to determine whether overpayments exist, “such as self-audits, compliance checks, and other additional research.”

The following example of “reckless disregard” is provided:

A provider receiving an anonymous compliance hotline telephone complaint of a potential overpayment has incurred an obligation to timely investigate the matter. A provider failing to make a reasonable 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 any overpayment.

The following examples are provided by CMS to promote understanding of when an overpayment has been identified as well as examples of the provider’s obligation to make a reasonable inquiry into whether an overpayment exists. CMS stresses that the list provides examples but is not an exhaustive list of situations where an overpayment has been identified:

  • 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.)

Reporting and Returning of Overpayment
CMS proposes to use the existing voluntary refund process and to rename it the “self-reported overpayment refund process.” The current voluntary refund process as described in Publication 100-06, Chapter 4 of the Medicare Financial Management Manual requires providers to report overpayments using a form made available from the Medicare contractor. This process also requires providers to summarize the reason for the refund 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 (SDP);
  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.

CMS also attempts to provide clarification on defining potential reasons for an overpayment by providing a short list of examples of what a provider or supplier may report as the reason for an overpayment, including:

  • Incorrect service date
  • Duplicate payment
  • Incorrect CPT code
  • Insufficient documentation
  • Lack of medical necessity

Currently, providers use the voluntary refund reporting form provided by their Medicare contractor and available on the contractor’s website. However, CMS plans to develop a uniform reporting form enabling all overpayments to be reported and returned in a consistent manner across all Medicare contractors.

Stark Law, OIG SDP and Anti-Kickback Statute
The Proposed Rule recognizes that there are intersections between Section 1128J (d) and existing procedures for providers and suppliers to self-disclose potential violations of the physician self-referral and anti-kickback statutes through the Self-Referral Disclosure Protocol (SRDP) and the Self-Disclosure Protocol (SDP) respectively.

The Proposed Rule suspends the obligation to return overpayments when a disclosure is made through the SRDP process. The SRDP only suspends the 60-day deadline to return the overpayment, the requirement to report overpayments within 60 days or through an applicable cost report still applies. With regard to the SRDP, CMS is seeking comments on alternative approaches that would allow providers and suppliers to avoid making multiple reports of identified overpayments.

CMS discusses the intersections between the obligation to report and return overpayments under the ACA and the existing procedures for reporting self-discovered evidence of potential fraud to the OIG through the OIG SDP. The Proposed Rule suspends the obligation to return overpayments under the ACA when the OIG acknowledges receipt of a submission to the OIG SDP. The obligation to return overpayments would be suspended until a settlement agreement is entered, or the provider or supplier withdraws or is removed from the OIG SDP. CMS is also proposing that the reporting requirement be met once the provider or supplier notifies the OIG of the identified overpayment through the OIG SDP.

CMS also notes that the federal Anti-Kickback Statute (AKS) is violated only where the requisite intent exists. CMS says they recognize that a provider or supplier who is not a party to an arrangement may ultimately submit claims that are the subject of a kickback, such as when a hospital submits a claim for a device for which the device manufacturer has paid a kickback to a physician. CMS says that for this reason, they believe that providers who are not a party to a kickback arrangement are unlikely to have “identified” the overpayment that has resulted from the kickback arrangement and would therefore have no duty to report it or to repay it. In contrast, providers and suppliers who identify AKS violations, must report the overpayment to CMS in accordance with section 1128J(d) of the Act and corresponding regulations.

Lookback Period
The proposed period of exposure or “lookback” period for reporting and returning overpayments is 10-years. CMS reports the proposed 10-year lookback period was selected because it is the outer limit of the Federal False Claims Act statute of limitations. CMS also states their belief that providers and suppliers should have certainty after a reasonable period that they do not have ongoing liability associated with an overpayment. CMS is also proposing to amend the reopening rules to provide for a 10-year reopening period consistent with the lookback period they are proposing. CMS is requesting comments on the proposed 10-year lookback period and their proposal to amend the reopening rules.

Medicare’s Reporting and Returning of Overpayments Proposed Rule will have a profound impact on Medicare providers and suppliers and would greatly increase the liabilities of billing and coding errors.

In their definition of “identification” CMS also defines “reasonable diligence” to determine whether overpayments exist to include self-audits and compliance checks. Thus, providers and suppliers not undertaking self-audits and compliance checks may be subjected to false claims penalties when overpayments are found by payors or exposed by whistleblowers.

Another significant provision is the proposal to amend the reopening rules to a 10-year lookback period. The current Medicare reopening regulation provides a one-year reopening period for any reason and a four-year reopening period for good cause. Currently, reopening beyond four years is permitted, “if there exists reliable evidence that the initial determination was procured by fraud or similar fault.”

If finalized as written, the new 10-year lookback period would apply to overpayments resulting from even routine error. Furthermore, providers may be required to apply the 10-year lookback period when errors are found through internal audits.

The Proposed Rule also leaves unanswered questions with regard to the 60-day timeline. According to CMS, the 60-day period for reporting and returning an overpayment begins when a provider or supplier knows, or should know, that an overpayment exists. At first glance, this may seem to be a reasonable amount of time. However, if the proposal to set the lookback period to 10-years is finalized, 60 days may be an insufficient amount of time to identify the particular claims and determine the amount of the overpayment. If a coding error is discovered does the 60-day time period begin when the coding error is first discovered or after the “reasonable inquiry” (presumably an audit) is performed to determine the scope of the error and the full amount of any overpayments?

Regardless of the outcome of this Proposed Rule, providers need to have a policy and process in place for identifying and returning overpayments in a timely manner. Under the ACA, simple billing or payment errors resulting in an overpayment may become a false claim if not returned before the 60-day deadline, and under the False Claims Act, providers may be subject to having to pay three times the amount of the overpayment, plus penalties.

An effective Compliance Plan can assist in the identification of overpayments and the avoidance of future errors that might otherwise lead to overpayments. Furthermore, effective Compliance Plans and the development of compliance policies and procedures will help protect the practice from whistleblower claims.

If your practice has not already implemented an effective Compliance Plan, it should do so immediately.


Comment on the Proposed Rule

Comments on the rule must be received no later than 5:00p.m. on April 16, 2012

To Submit Comments Electronically
  • Go to www.regulations.gov.
  • Enter “Reporting and Returning of Overpayments” and click on “Search”
  • Find the document titled, “Reporting and Returning of Overpayments” and click on the link on the left hand side of the page titled, “Submit a Comment.”

To Submit Comments by Regular Mail

Mail Comments to:
Centers for Medicare & Medicaid Services,
Department of Health and Human Services
Attention: CMS-6037-P, P.O. Box 8013
Baltimore, MD 21244-8013

Online Exclusion Databases

Congress mandates that physicians and other practitioners convicted of program-related crimes be excluded from participation in federally funded healthcare programs. Congress gave the Office of Inspector General (OIG) the authority to establish an Exclusion Program and to impose a Civil Monetary Penalty (CMP) for institutions that knowingly hire excluded individuals and entities.

Excluded healthcare providers, individuals, and businesses may not receive payment for any items or services that would otherwise be payable under Medicare, Medicaid, and any federal healthcare program. Additionally, no payment is made to any individual, business or facility that submits claims for payment of items or services provided, ordered, prescribed or referred by an excluded entity (there is a narrow exception for certain emergency services or items).

The exclusion program and prohibition against federal program payment also extends to individuals and entities that provide administration and management services not directly related to patient care.

There are more than seventy Classifications of excluded entities listed on the OIG Exclusion database including: Billing Services, CPA, Consultant, Doctor Owned Entity, DME Company, Drug Company/Supplier, Hospital, Law Practice, Management Services, and Nursing Profession.

Providers and entities that hire or contract with excluded individuals or entities to provide items or services to federal program beneficiaries may be subject to a CMP of up to $10,000 for each service or item furnished by the excluded entity and an additional penalty of up to three times the amount claimed as well as possible exclusion themselves.

In order for such penalties to be imposed, the provider submitting the claims for the items or services provided by the excluded entity must have known or should have known that the person was excluded from the federal healthcare programs. Furthermore, to be in compliance with the Health Insurance Portability and Accountability Act (HIPAA), providers must check the OIG List of Excluded Individuals and Entities on the OIG website prior to hiring or contracting with individuals or entities.

The OIG maintains a List of Excluded Individuals and Entities on their website so that providers and entities can identify those entities excluded from the federal healthcare programs. The list is available in both an online searchable database and a downloadable database. The OIG also provides updates to the Exclusion database, OIG Evaluation and Audit Reports, Federal Register Reports and other OIG postings to the website through an Email List.

For more information and guidance on the OIG Exclusion Program, visit The OIG Website.

Services That Would Violate an OIG Exclusion
The OIG lists the following examples of items and services that when furnished by an excluded party would subject their employer or contractor to possible CMP liability:

  • Services performed by excluded nurses, technicians or other excluded individuals who work for a hospital, nursing home, home health agency or physician practice, where such services are related to administrative duties, preparation of surgical trays or review of treatment plans if such services are reimbursed directly or indirectly (such as through a PPS or a bundled payment) by a Federal healthcare program, even if the individuals do not furnish direct care to Federal program beneficiaries;
  • Services performed by excluded pharmacists or other excluded individuals who input prescription information for pharmacy billing or who are involved in any way in filling prescriptions for drugs reimbursed, directly or indirectly, by any Federal healthcare program;
  • Services performed by excluded ambulance drivers, dispatchers and other employees involved in providing transportation reimbursed by a Federal healthcare program, to hospital patients or nursing home residents;
  • Services performed for program beneficiaries by excluded individuals who sell, deliver or refill orders for medical devices or equipment being reimbursed by a Federal healthcare program;
  • Services performed by excluded social workers who are employed by healthcare entities to provide services to Federal program beneficiaries, and whose services are reimbursed, directly or indirectly, by a Federal healthcare program;
  • Administrative services, including the processing of claims for payment, performed for a Medicare intermediary or carrier, or a Medicaid fiscal agent, by an excluded individual;
  • Services performed by an excluded administrator, billing agent, accountant, claims processor or utilization reviewer that are related to and reimbursed, directly or indirectly, by a Federal healthcare program;
  • Items or services provided to a program beneficiary by an excluded individual who works for an entity that has a contractual agreement with, and is paid by, a Federal healthcare program; and
  • Items or equipment sold by an excluded manufacturer or supplier, used in the care or treatment of beneficiaries and reimbursed, directly or indirectly, by a Federal healthcare program.

As is evident in the preceding list, there is virtually no position in the medical practice that would not subject the provider to CMP liabilities were it to be staffed with an individual that is on the OIG exclusion list. For this reason, as well as the HIPAA mandate to do so, providers must review the OIG exclusion list prior to hiring or contracting an individual or entity. Furthermore, it is recommended that the practice have a policy for reviewing the database on a yearly basis for current employees and contractors.

This issue available for download

Published by Rise Marie Cleland. Sponsored by Lilly Oncology


checkmark Know the Billing and Coding Rules
checkmark Know What You Should be Paid
checkmark Ensure Medical Record Documentation Supports Services Billed
checkmark Document Medical Necessity for Services
checkmark Follow “Incident To” Supervision, Billing & Documentation Rules
checkmark Comply with Medicare Signature Requirements
checkmark Put Processes in Place to Avoid Duplicate Claims
checkmark Check the OIG Exclusion Databases Prior to Hiring

Note: The next Oplinc Best Practices Review Newsletter will have a focus on audits and reviews.


Medicare overpayments and recoupments may be identified and initiated by providers, through voluntary reporting and refunds, or by Medicare contractors through audits and reviews.

Providers who voluntarily report and refund overpayments need to be aware that self-reporting does not protect them from further recoupment efforts or penalties. In fact the following statement is included on the Voluntary Reporting Refund Form, “The acceptance of a voluntary refund in no way affects or limits the rights of the Federal Government or any of its agencies or agents to pursue any appropriate criminal, civil, or administrative remedies arising from or relating to these or any other claims.” Nevertheless, when an overpayment is discovered it must be reported and returned.

If you discover that a large or widespread overpayment has been made you would be wise to seek legal counsel prior to self-reporting the overpayment in order to ensure that the reporting and refunding are properly handled.

Likewise, if such an overpayment is discovered or suspected by a Medicare contractor you will want to retain a healthcare attorney to help guide you through the process. Medicare contractors may use statistical extrapolation estimates when assessing claims overpayments. Through the extrapolation process, the contractor will often review a relatively small subset of claims and then apply the error rate to all similar claims within the sample period under review to estimate a total overpayment. In medical oncology, this could result in alleged damages of millions of dollars.

The Medicare statistical sampling, or “extrapolation” process and regulation is complex and even the most diligent auditors may make mistakes. Therefore, for complex contractor audits it is recommended that you retain a healthcare attorney who has had experience with Medicare statistical extrapolation cases and who has worked successfully with the particular entity auditing your claims.

Oral Methotrexate


The CMS Physicians Regulatory Issues Team (PRIT) recently addressed the issue of a Part D plan that was requiring a prior authorization on prescriptions for oral methotrexate when used for rheumatoid arthritis.

The PRIT, a group of CMS subject matter experts led by Dr. William Rogers, work to reduce the regulatory burden on physicians who participate with the Medicare Program.

Below is the issue and PRIT response as reported on the CMS PRIT website:

Issue Name & Date:
Prior Authorization for Methotrexate Prescriptions- 02/24/2012
The American College of Rheumatology asked the PRIT to find out why a Part D plan had begun to require prior authorizations on all prescriptions for methotrexate. When methotrexate is used as a chemotherapeutic drug, it is covered by Part B but when it is used as an oral agent for rheumatoid arthritis, it is covered by Part D. Early in the evolution of Part D, we suggested that doctors writing a prescription for oral Methotrexate write the words "part D drug" on the prescription as documentation for the Part D plan. In this case, the plan was requiring the prior authorization to document that the prescription was in fact for a part D use.

PRIT Response:
February 24: We have instructed the plan to stop requiring the prior authorization and we would like to hear from any physicians who are having similar problems. It remains very important that you write the words "Part D Drug" on a prescription for one of these drugs that is sometimes covered by Part B. The Part D plans are not permitted to pay for drugs that should be billed to Part B and this statement informs them that the prescription is a valid Part D prescription.

Contact Dr. Rogers, Director, and PRIT by phone at 202-260-7153 or E-mail PRIT@cms.hhs.gov.

For more information on the PRIT and to see the entire list of Active Issues go to the PRIT website at: www.cms.gov/PRIT/


Quick Tips for Searching the OIG Exclusion Databases

The OIG provides the following tips for searching the exclusion databases:

checkmark Because the databases include only the name known to the OIG at the time the individual was excluded, any former names used by the individual (e.g., maiden name, previous married name, etc.,) should be searched in addition to the individual's current name.
checkmark An individual with a hyphenated name should be checked under each of the last names in the hyphenated name (e.g., Jane Smith-Jones should be checked under Jane Smith and Jane Jones, in addition to Jane Smith-Jones).
checkmark When you check the List of Excluded Individuals/Entities (LEIE), using the Online Searchable Database or the Downloadable Data file, you should maintain documentation of the initial name search performed and any additional searches conducted in order to verify results of potential name matches.
checkmark If you are checking only a few names, choose the Online Searchable Database. You can search up to five names at once.
checkmark If you are checking many names, consider downloading the Downloadable Data File into your computer’s spreadsheet or database program. This will enable you to use that program’s search functions to crosscheck your names against the thousands of names on the LEIE.
checkmark Be sure to double-check that you have the correct spelling of any names before starting your search.
checkmark In order to achieve the most accurate search results, enter only the first few letters of the name.
checkmark Do not forget to take the final step of identity verification using the Social Security Number (SSN) for an individual or Employer Identification Number (EIN) for an entity. It is not sufficient to simply find a matching first and last name on the LEIE.
checkmark If you find a potential match using the Downloadable Data file, you must still verify the results by entering the SSN for an individual or EIN for an entity on the Online Searchable Database. (Note: The Privacy Act prohibits the distribution of SSNs so they cannot be included in the Downloadable Data file).
checkmark If a search result does not contain a DOB, UPIN, NPI, EIN, or SSN, it is not available from the OIG. Contact the Exclusions Staff to determine if there is any other information available.



2010 Newsletter Archives

Volume 7, Issue 1
Volume 6, Issues 4 & 5
Volume 6, Issue 3
Volume 6, Issue 2
Volume 6, Issue 1
Volume 5, Issue 6
Volume 5, Issue 5
Volume 5, Issue 4
Volume 5, Issue 3
Volume 5, Issue 2
Volume 5, Issue 1


Risë Marie Cleland

Oplinc, Inc.
113 W. 7th Street
Suite 205
Vancouver, WA 98660
360.695.1608 office
360.326.1733 fax


Comments and suggestions for future issues are welcome, please forward correspondence to Risë Marie Cleland by email at: Rise@Oplinc.com


Access all of our
previous newsletters.


Risë Marie Cleland is the Founder and CEO of Oplinc, Inc., a national organization of oncology professionals. Through Oplinc, Inc., Ms. Cleland publishes the weekly Oplinc Fast Facts focusing on the timely dissemination of information pertaining to billing, reimbursement and practice management in the oncology office and Oplinc’s Best Practices Review, which provides a more in-depth look at the issues and challenges facing oncology practices. Ms. Cleland also works as a consultant and advisor for physician practices, pharmaceutical companies and distributors.


Please note that this newsletter is presented for informational purposes only. It is not intended to provide coding, billing or legal advice. Regulations and policies concerning Medicare reimbursement are a rapidly changing area of the law. While we have made every effort to be current as of the issue date, the information may not be as current or comprehensive when you review it. Please consult with your legal counsel for any specific reimbursement information. For Medicare regulations visit: www.cms.gov.

CPT® is a Trademark of the American Medical Association Current Procedural Terminology (CPT) is copyright 2012 American Medical Association. All Rights Reserved. No fee schedules, basic units, relative values, or related listings are included in CPT. The AMA assumes no liability for the data contained herein.

Copyright ©2012
Oplinc, Inc.
Oplinc, Inc., grants permission to distribute this newsletter without prior permission provided it is forwarded unedited and in its entirety.

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