CMS Issues Final Rule Limiting Recoupment of Overpayments

Payment Matters Newsletter

October 1, 2009

By: Mark A. Stanley *

On September 16, 2009, CMS issued a final rule that limits recoupment of overpayments. The rule suspends recoupment of overpayments that are appealed through the Medicare claims appeals process and increases the interest available to providers or suppliers that establish an underpayment on appeal. The final rule can be viewed here [PDF]. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) mandated the final rule, and it essentially duplicates changes to the Medicare Financial Management Manual that were implemented by CMS last year. See "CMS Releases New Rules Limiting Recoupment Pending Claims Appeals" (Payment Matters, October 2, 2008), and CMS Transmittal 141, Pub. 100-06 [PDF].

Consistent with last year's transmittal, the final rule establishes that a provider or supplier may avoid any recoupment of a deemed overpayment by filing an appeal within 41 days for a first level appeal, or within 60 days for a second level appeal. CMS may commence recoupment of a deemed overpayment after the expiration of these deadlines, but will halt recoupment if the provider or supplier files a timely appeal to the next level. The deadlines for appealing a payment determination (i.e., 120 days for a first level appeal, and 180 days for a second level appeal) are not changed by the final rule.

The rule also modifies, consistent with last year's manual change, the way in which interest accrues when a provider or supplier successfully appeals a payment determination. As with the prior rules, funds that CMS recoups from a provider or supplier are subject to interest if CMS's overpayment determination is reversed on appeal. Under the new rules, interest accrues in a provider's or supplier's favor beginning 30 days after the funds are recouped. If a favorable decision is issued at the administrative law judge (ALJ) or higher level, the interest will be paid to the provider or supplier, together with any assessed underpayment. Prior to last year's manual change, interest did not begin accruing until a contractor, pursuant to a favorable decision on appeal, issued a written determination of underpayment. Providers and suppliers who lose on appeal must pay interest, which begins accruing on the date of the original notice of overpayment, on the balance of any overpayment that is not recouped or repaid pending appeal.

Ober|Kaler's Comments

Although the new rule does not substantively differ from the previously-implemented manual provisions, the rule serves as a reminder that Medicare providers and suppliers should examine their processes and timelines for filing claims appeals. Providers and suppliers who file appeals within the deadlines may avoid or delay recoupments that would otherwise exact a severe financial hardship. Alternatively, those who do not wish to risk paying interest on an unsuccessful appeal may elect to allow CMS to recoup a deemed overpayment. In the latter case, providers and suppliers would need to file appeals after the recoupment limitation deadlines or make payment to CMS pending the outcome of the claims appeals process.

* Mark A. Stanley is a former member of Ober|Kaler's Health Law Group.

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