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All coding, billing and compliance personnel for all providers and suppliers should read this entry. While the proposed rule does provide some clarity about certain situations, to some extent CMS is proposing to raise the bar of oversight relative to a number of issues.


Here are some of the key issues covered by the entry:


  • Identification of overpayments – 60-day period
  • Reporting and repayment process
  • Definition of overpayment
  • The 10-year lookback period
  • Extended repayment
  • Anti-kickback complications




  1. Everything in this proposed rule pertains to overpayments. A reasonable suggestion would be to ensure that all the same rules (among whichever rules are implemented) apply to any identified underpayments as well.
  2. This proposed rule addresses only providers and suppliers covered under Part A and Part B.  Other payment processes will be discussed later, but CMS certainly hints at the fact that all healthcare providers under Medicaid should address the concepts of this proposed rule.
  3. See also the self-reported overpayment process as found in CMS Publication 100-06, Chapter 4.


Once an overpayment is identified, the 60-day reporting and repayment period starts. What does it mean to identify an overpayment? Per CMS, “… we propose that a person has identified an overpayment if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” (77 FR 9182)


Well, what if a case arises requiring significant investigation as to whether an overpayment situation exists? In this case CMS provides some latitude for investigation, but such investigations must proceed with all deliberate speed. As usual, be certain to document everything done to address a possible issue generating overpayments. Obviously, this particular phrase will end up in court in litigation.


Also, what is an overpayment? Overpayments involve Medicare payments received or retained by a person or entity not entitled to them. CMS gives some examples:


  • Payments for non-covered[1] services
  • Payments in excess of an allowable amount
  • Erroneous and non-reimbursable expenditures in cost reports
  • Duplicate payments
  • Improper payments when Medicare is secondary


CMS also gives some further examples in the form of scenarios (see 77 FR 9182):


  • 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.
  • 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.


Clearly, CMS is interpreting the definition of “overpayments” broadly.


Note that certain providers and suppliers are reimbursed based on cost, specifically Critical Access Hospitals (CAHs), Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs). For some such providers, the interim payment rate may be too high, meaning that overpayment occurs during a given cost-reporting year. In these cases, the 60-day period has little meaning, and such overpayments (as well as underpayments) are reconciled at the cost report settlement.


[1] Presumably, “non-covered” would include provided services that were not medically necessary.



What do you need to report? Besides identification information such as provider name, TIN (Tax Identification Number) and HICN (Health Insurance Claim Number), there are nine pieces of 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 a corporate integrity agreement (CIA) with the OIG is in place or whether the matter falls under OIG Self-Disclosure Protocol;

5) The timeframe and the total amount of refund for the period during which the problem causing the refund existed;

6) The Medicare claim control number, as appropriate;

7) The 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, a description of the statistically valid methodology used to determine the overpayment.


Now, there is not anything startling or new in this listing. Virtually all of this information is currently required under CMS self-disclosure protocols. However, there are still some situations that might arise. Let us consider a simple case study out at the fictitious Apex Medical Center.


Case 1: Inpatient DRG Review. The Apex Medical Center just received a consultant’s report concerning an inpatient DRG review. The review involved 150 Medicare cases from two years ago.  The results were really quite good: seven cases were adjusted, two cases involved an underpayment and five cases involved overpayment. However, of the five cases involving overpayment, four occurred in one of the problem sequences of DRGs, and each involved the choice of principal diagnosis.


Certainly Apex should repay the overpayment in all of the five cases. The actual total overpayment amount was only in the neighborhood of $1,000, however. There are at least two questions for consideration:


1.   How much detail should be included in the report to CMS?

2.   Because there were four similar errors, should this invoke the need for further auditing?


Because there was a high degree of coding accuracy, the five cases could just be reported as being uncovered by a routine audit of claims for which there was a minimal overpayment, with notation that the cause of the overpayments involved coding errors. Or should there be more detail indicating the possibility of a systemic error in coding certain types of cases? Should the report simply indicate routine coding errors, representing matters that will be addressed through additional education and training?


In particular, note items Nos. 2 and 7 in the above listing. The information requested seems to suggest that more information, rather than less, should be provided.


Notice also item No. 9, in which statistical extrapolation may have been used to analyze a billing problem that generated overpayments. If you are going to rely on extrapolation, make certain that your auditors and consultants are following rigorous guidelines. A statistician or mathematician should assess the extrapolation approach and certify the propriety of the process.


Amazingly, CMS is proposing a 10-year lookback period in these cases! From page 9184:


“…we are proposing that overpayments must be reported and returned only if a person identifies the overpayment within 10 years of the date the overpayment was received. We selected 10 years because this is the outer limit of the False Claims Act statute of limitations. We believe that the proposed 10-year lookback period is appropriate for several reasons. First, we believe that providers and suppliers should have certainty after a reasonable period that they can close their books and not have ongoing liability associated with an overpayment. We also believe that the length of the lookback period is long enough to sufficiently further our interest in ensuring that overpayments are timely returned to the Medicare Trust Funds.”


Granted, 10 years basically has been the de facto limit traditionally used by the OIG and DOJ. For healthcare, however, this is a long lookback period. If you have thoughts of a different lookback period, then you should be commenting about it here. The three-year lookback for the RACs (Recovery Audit Contractors), for example, may seem more reasonable in comparison.


In some circumstances, particularly if you are dealing with a systemic issue requiring statistical extrapolation, the possible repayment amounts could become significant. Care should be taken to avoid the possibility of a large repayment delaying the recognition of a problem. If there are stringent financial constraints, then the existing Extended Repayment Schedule process should be used. This process previously was called the Extended Repayment Plan.



The last issue we will address is that of prohibited kickback arrangements. CMS indicates that there may be innocent providers or suppliers who have no knowledge of overpayments arising from inappropriate arrangements. This particular issue probably will be raised and addressed in the future.


Note: Again, readers are highly encouraged to comment on the Feb. 16 Federal Register entry.  Consider having underpayments included in addition to overpayments. Also, if you think the 10-year lookback period is too long, now is your chance to make your thoughts known to CMS.


About the Author


Duane C. Abbey, Ph.D., CFP, is an educator, author and management consultant working in the healthcare area.  He is president of Abbey & Abbey, Consultants, Inc. that specializes in healthcare consulting and related areas.  His firm is based in Ames, Iowa.  Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University.


Contact the Author




To comment on this article please go to editor@racmonitor.com


OIG Audits for Drug Billing Errors Continue with No End in Sight



Duane C. Abbey, PhD, CFP

Duane C. Abbey, PhD, CFP, is an educator, author, and management consultant working in the healthcare field. He is president of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University. Dr. Abbey is a member of the RACmonitor editorial board and is a frequent guest on Monitor Mondays.

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