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HomeHealth LawCMS Proposes to Amend Overpayment Rule, Take away Potential Overpayment and False...

CMS Proposes to Amend Overpayment Rule, Take away Potential Overpayment and False Claims Act Legal responsibility for Mere Negligence

The Facilities for Medicare and Medicaid Companies (“CMS”) has issued a proposed rule which might amend the present laws for reporting and returning recognized overpayments (the “Proposed Rule”). Particularly, with respect to the that means of “identification” of overpayment, CMS proposes to get rid of the “cheap diligence” (or conventional negligence) commonplace and substitute it with the False Claims Act’s (“FCA’s”) commonplace of “realizing” and “knowingly” (i.e., reckless disregard or deliberate ignorance of a possible overpayment).

Below the present Overpayment Rule, an individual who has acquired an overpayment should report and return it inside 60 days of discovery to the Secretary, the State, an middleman, a provider, or a contractor, as acceptable, and should additionally notify that entity in writing of the explanation for the overpayment. As presently written, the Overpayment Rule holds that an individual has recognized an overpayment once they have decided, or ought to have decided via the train of cheap diligence, that they’ve acquired an overpayment.

UnitedHealthcare Litigation

UnitedHealthcare challenged the present Overpayment Rule in litigation.[1] One in every of its important arguments was that incorporating a negligence commonplace via the definition of “identification”, i.e., requiring Medicare Benefit Organizations (“MAOs”) to make use of “cheap diligence” in figuring out overpayments, conflicted with the data commonplace within the FCA and improperly created legal responsibility for mere negligence. The district court docket agreed with UnitedHealthcare and vacated the Overpayment Rule for MAOs. CMS appealed however didn’t problem the court docket’s findings concerning the negligence commonplace. The D.C. Courtroom of Appeals reversed and allowed the Overpayment Rule to face, however didn’t change the district court docket’s holding that the adoption of a brand new negligence commonplace within the Overpayment Rule violated the APA. Thus, MAOs and all different individuals and entities topic to the Overpayment Rule (comparable to healthcare suppliers) have been left doubtful as as to if the Overpayment Rule continued to require them to have interaction in proactive, “cheap diligence” to self-audit or in any other case determine potential overpayments, lest they danger legal responsibility beneath the Overpayment Rule and doubtlessly the FCA.

The Proposed Rule

If finalized, the Overpayment Rule shall be amended at 42 C.F.R. §§ 401.305(a)(2), 422.326(c) and 423.360(c) to take away references to “cheap diligence” and substitute them with language that provides the phrases “realizing” and “knowingly” the identical that means given these phrases within the FCA. Subsequently, if the Proposed Rule is finalized, a supplier, provider, MAO, or Half D sponsor can have recognized an overpayment provided that it has precise data of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.

This proposed change to the Overpayment Rule would provide welcome aid to suppliers, suppliers, MAOs, and Half D sponsors as they’d not be held to the subjective “cheap diligence” commonplace when figuring out whether or not an overpayment has been recognized. Relatively, legal responsibility stemming from the identification of overpayments would solely be triggered beneath the FCA’s heightened commonplace of precise data, reckless disregard, or deliberate ignorance. Suppliers, suppliers, MAOs, and Half D sponsors are capable of submit feedback on CMS’ proposal, ought to monitor the ultimate rule carefully, and will start to think about potential modifications to organizational insurance policies and procedures relating to the identification and determination of overpayments accordingly.


[1] See UnitedHealthcare Ins. Co. v. Azar, 330 F. Supp. 3d 173 (D.D.C. 2018), rev’d partly on different grounds sub nom. UnitedHealthcare Ins. Co. v. Becerra, 16 F.4th 867 (D.C. Cir. 2021), cert. denied, 142 S. Ct. 2851 (U.S. June 21, 2022) (No. 21-1140).



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