At the end of 2022, the Centers for Medicare and Medicaid (“CMS”) issued a proposed rule that would amend the standard imposed on Medicare providers to report and return overpayments. If finalized, the proposed rule would replace the 60-day overpayment rule’s current “reasonable diligence” standard with the False Claims Act “knowingly” standard.

The Affordable Care Act’s 60-day overpayment rule generally requires healthcare providers to report and return overpayments 60 days after the provider identifies the overpayment. The current law provides that overpayments are identified when a 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.” Failure to report and return such overpayments establishes liability under the False Claims Act, which includes treble damages and civil penalties. This current standard has been under fire in recent years. In a 2018 case involving the Medicare Parts C and D overpayment rule, a federal court ruled that the “reasonable diligence” standard creates impermissible False Claims Act liability for mere negligence. The Medicare Advantage Organizations involved in the case argued that the 60-day overpayment rule standard should align with the False Claims Act “knowingly” standard. The CMS proposed rule aims to do just that.

Under the proposed rule, a provider identifies an overpayment “when the person knowingly receives or retains an overpayment.” By reference to the False Claims Act, the proposed rule incorporates the following definition: “the terms ‘knowing’ and ‘knowingly’ mean that a person, with respect to information -- (i) has actual knowledge of the information, (ii) acts in deliberate ignorance of the truth or falsity of the information, or (iii) acts in reckless disregard of the truth or falsity of the information, and require no proof of specific intent to defraud.”

The proposed rule fails to consider the complexity of identifying and quantifying overpayments, and does not address whether providers will risk liability for overpayments known to exist, but that are unable to be quantified within the rule’s 60 day timeframe.

CMS requests comments on the above change by February 13, 2023.