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Pressure from Medicare's 60-Day Overpayment Rule


The provisions of the 60-Day Overpayment Rule place significant pressure on Medicare providers to identify overpayments, and reporting zero won't be acceptable, so providers should make sure they completely understand the regulations.

The provisions of the 60-Day Overpayment Rule place significant pressure on Medicare providers to identify overpayments, and reporting zero won’t be acceptable, so providers should make sure they completely understand the regulations.

As a result of the 2010 Patient Protection and Affordable Care Act (PPACA), the Centers for Medicare and Medicaid Services (CMS) published proposed regulations on Feb. 16, 2012 in an effort to provide guidance in the implementation of the 60-day overpayment rule. The proposed rule currently implements the requirements for Medicare Part A and Part B, while other stakeholders, such as Medicaid, will be addressed at a later date. The comment period ended on April 16, 2012.

What is the 60-day rule?

Under PPACA, a Medicare provider or supplier has the obligation to return reimbursement to the Medicare program within 60 days of an overpayment being identified. If the provider fails to return reimbursement within the 60 day deadline, it may become liable for penalties under the False Claims Act, and could be at risk of exclusion from the Medicare program.

What are considered overpayments?

Anything that results in the provider or supplier receiving more than they are entitled to under the Medicare program is considered an overpayment. The list could be endless.

A few examples are:

• Payment for non-covered services

• Duplicate payments

• Receipt of payment when Medicare is considered secondary

• Payment in excess of the allowable amount

• Incorrect coding resulting in higher reimbursement

• Payments for services provided by an unlicensed or excluded individual

• Non-reimbursable expenses in cost reports

When are overpayments considered “identified”?

The proposed rule defines the start of the 60-day clock as when overpayment is considered to be “identified.” When a person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment, the overpayment is considered “identified.”

CMS has included the “reckless disregard or deliberate ignorance” standards of the False Claims Act in an effort to encourage provider self-compliance.

What is “reasonable inquiry” with “all deliberate speed”?

The “reasonable inquiry” and “deliberate speed” standards in the proposed rule are higher than the standards set forth in the False Claims Act. Furthermore, the proposed rule does not specify the type of evidence that will trigger an obligation to make a “reasonable inquiry.” When in doubt investigate, document and act. Otherwise you may trigger the penalties of the False Claims Act.

Reporting and refunding of overpayments

The refund requirement has been in effect since March 23, 2010. This was the date that PPACA became law and the law provided no mechanism for deferral until the regulations were finalized.

The deadline for reporting and returning overpayments is the later of:

• 60 days after the date on which the overpayment was identified; or

• The date any corresponding cost report is due.

For medical practices and suppliers not required to file cost reports, a uniform reporting mechanism has not yet been made available. CMS directs that the existing self-reporting form that is available from the applicable Medicare contractor is used to report and return overpayments until the uniform reporting is developed.

For other providers, such as hospitals, an annual cost report is required. This is a uniform report already developed, and any identified overpayments are due with the filing of the report. This is further discussed below.

CMS has recognized that in certain scenarios, the magnitude of the overpayment is such that the provider or supplier may need additional time to make repayment. The provider or supplier should use the Extended Repayment Schedule process in these situations, understanding that the process requires substantial documentation to allow CMS to verify that timely repayment would create a true financial hardship to the provider or supplier.

Applicable reconciliation

For those providers required to file cost reports, Medicare will often make interim payments throughout the year. It is not expected that the provider will immediately know that an overpayment from an interim payment has occurred, and the repayment will become due upon “applicable reconciliation.” The “applicable reconciliation” definition applies to the date the filing of the cost report is due.

There are two exceptions in the proposed regulations. The first relates to the Supplemental Security Income (SSI%) used in the calculations for disproportionate share hospitals. Often, this ratio is not available at the time the cost report is filed. In this case, the potential overpayment related to the SSI% is due upon final reconciliation of the cost report.

The second relates to outlier payments. Again, the actual amount of any overpayment is not known until a final reconciliation of the cost report is made. Therefore CMS proposes that the provider will not be required to estimate the change in reimbursement for unknown outliers at the time the cost report is filed and will delay return of the overpayment until the final settlement of the cost report.

Look-back period

The proposed rule requires providers to report and refund overpayments during the past 10 years. This length of time reflects the outer limit of the False Claims Act. This period of time is extraordinarily long when considering that cost reports can only be reopened for the past three final-settled years unless fraud exists. It is unclear at this time whether the provisions will apply to overpayments identified prior to March 23, 2010.

Best practices

Medical providers and suppliers should include guidelines in their policies and procedures, and as part of their compliance programs, to deal with the identification, documentation, reporting and refunding provisions of the 60 Day Rule.

In addition, retention policies should be reviewed and revised due to the 10 year look-back period, as this exceeds the record retention periods required under most federal and state laws. A method to log overpayments and track the activity related to them should be initiated noting date of identification, date of activity related to investigation and date of reporting and refund.


The provisions of the 60-Day Overpayment Rule place significant pressure on Medicare providers to identify overpayments, report the event and make refunds to the Medicare program. Even small payment errors are subject to the False Claims Act standards.

It is the expectation of CMS that all Medicare providers will report at least three to five overpayments per year, so keep in mind that zero is not acceptable. Although the final rules have not been issued, the requirements are in effect as a result of PPACA.

Beverly A. Miller, CPA, CAPPM is Manager of Physician Services at Hayflich, Grigoraci, PLLC in Huntington, WV and President of the National Association of CPA Healthcare Advisors (HCAA). She has been heavily involved in practice startups, as well as aiding existing practices with billing issues, accounting issues, staff modeling and selection, project analysis, financial management, compliance issues, and tax planning. Beverly can be reached at (304) 697-5700.

Hayflich, Grigoraci, PLLC is also a proud member of the National CPA Health Care Advisors Association (HCAA). HCAA is a nationwide network of CPA firms devoted to serving the health care industry. Members provide proactive solutions to the accounting needs of physicians and physician groups. For more information contact the HCAA at

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