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That call now has been cancelled while CMS considers “alternative arrangements” for it. Even before CMS has an opportunity to discuss those changes, though, let’s take a look to see how this changes the recoupment process for providers.

What is in Section 935?

Section 935 established a new option for providers appealing Medicare denials, allowing for the postponement of recoupment of denied funds when certain new criteria are met.  On Sept. 16, 2009, CMS published a Final Rule (implementing Section 935 of the MMA), which limits recoupment of alleged overpayments and makes provisions for the payment of interest to a provider or supplier whose overpayment determination is reversed on appeal.

CMS had issued the Proposed Rule to implement this statutory provision on Sept. 22, 2006, so the Final Rule has long-awaited dramatic impact for providers that are preparing for the impending RAC audits. In a nutshell, Section 935 prohibits the recoupment of an overpayment until an appeal decision is rendered as long as a provider requests a reconsideration in a timely fashion. Prior to the change, CMS could recoup overpayments regardless of whether a provider had appealed.

What changes with Section 935?

The Final Rule puts specific time limits in place to halt the initial recoupment of alleged overpayments. For example, at the first level of appeal a provider must request redetermination from a Medicare contractor within 30 days of a revised claims determination to avoid recoupment. If the provider isn’t successful at the first level of appeal, the provider must request reconsideration within 60 days to avoid recoupment during the second level of appeal. So, effective Nov. 16, 2009, CMS is prohibited from recouping Medicare overpayments from a provider that seeks reconsideration from a Qualified Independent Contractor until the date the decision on the reconsideration has been rendered.

Providers can take advantage of the limitation on recoupment by not repaying alleged overpayments and by appealing within these narrow time frames at the redetermination and reconsideration levels of appeal. However, interest will continue to accrue during those periods; if a provider loses at either level of appeal and does not pay the alleged overpayment during the appeal, the provider will owe both the overpayment amount and the accrued interest. The rate of interest is high; in the last year, it has been in the 11-12 percent range.

The Final Rule also stipulates that if an overpayment determination is overturned at the third level of appeal (ALJ) or beyond, then CMS is liable for interest that has accrued on recouped overpayments. Recoupment periods will be calculated in 30-day intervals and interest will not be payable for any periods of fewer than 30 days in which CMS retains the recouped funds. Also, the Final Rule describes the specific overpayments to which the limitation on recoupment applies, which includes overpayment determinations stemming from post-payment review of Medicare Part A and Part B claims.

The Final Rule also adopts the same time limits for recouping overpayments as are found in the program instructions of CMS Transmittal 141 (http://www.cms.hhs.gov/transmittals/downloads/R141FM.pdf), providing 41 days for a provider to file a re-determination request before a Medicare contractor can begin recoupment and 60 days to file a reconsideration request before a contractor can begin recoupment.

How to Stop Recoupment

As mentioned above, the Final Rule provides that when your Medicare contractor receives your valid first-level (redetermination) or second-level (reconsideration) appeal on an overpayment subject to the limitations, Medicare either will cease recoupment or not begin recoupment at the normally scheduled time (which would be no sooner than 41 days after the initial demand letter is issued and 60 days after the first-level decision, and no earlier than 30 days after the second-level decision).

If you disagree with the overpayment decision, you may file an appeal to be performed by an auditing body independent of those who have reviewed your claim so far. Bear in mind that you must file this request for the first level of appeal (redetermination) with your Medicare contractor within 120 days from the date of demand letter, but if you want to stop recoupment of this overpayment, you must file your request for redetermination within 30 days from the date of the letter.

Providers obviously have a number of questions now with this change, so a timely response from CMS to educate providers on it will be invaluable. Stay tuned for more updates on how CMS will handle this outreach.

More information on Section 935 and the Medicare appeals process is available at the Federal Register at: http://fdsys.gpo.gov/fdsys/pkg/FR-2009-09-16/html/E9-22166.htm and the CMS Medicare Financial Management Manual, Chapter 3, section 200 (http://www.cms.hhs.gov/Manuals/IOM/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=1&sortOrder=ascending&itemID=CMS019018&intNumPerPage=10)

About the Author

Carla Engle, MBA, is a product manger for MediRegs, a Wolters Kluwer company. Her background includes more than 20 years in hospital and physician practice operations, particularly in reimbursement and billing functions. Prior to joining Wolters Kluwer recently, she was the vice president of compliance for a national revenue cycle solutions company and prior to that was in the Reimbursement Training Department with HCA.  For several years she headed up the Part A Fraud Investigation Unit for a CMS Program Safeguard Contractor (PSC) where she was successful in the prosecution of several national cases. In her revenue cycle compliance capacity, she worked with a number of clients in California and Florida with Recovery Audit Contractors (RACs) in setting up processes and appeals.

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