Final Rule Outlining Recoupment Limitations and the Impact on Ongoing Medicare Overpayment Appeals Cases

(February 1, 2010):  Last September, the Centers for Medicare and Medicaid Services (CMS) published its Final Rule addressing limitations on the recoupment of alleged overpayments by its Medicare contractors (e.g. Medicare Administrative Contractors and Qualified Independent Contractors).  This Final Rule finalizes how Medicare contractors are to proceed when pursuing recoupment actions of alleged overpayments owed by a health care provider.   “Recoupment” is defined as the recovery of a Medicare overpayment by reducing present or future Medicare payments and applying the amount withheld against the debt.

Under existing regulations, health care providers may postpone recoupment by engaging in the administrative appeals process.  Prior to passage of the Medicare Modernization Act (MMA), CMS could recoup overpayments, regardless of whether the provider or supplier had filed an appeal challenging an alleged overpayment.  With CMS’ Final Rule in place, limitations have been set on the ability of its Medicare contractors to pursue a recoupment action.  As the Federal Register states:

“This final rule defines the overpayments to which the limitation on recoupment applies, how the limitation works in concert with the appeals process, and sets time limits for recouping overpayments, specifically providing 41 days for a provider or supplier to file the first level of appeal before the contractor can begin recoupment and providing the provider or supplier 60 days to appeal at the second level before the contractor can begin recoupment” (74 Fed. Reg. 47458, 47458 (Sept. 16, 2009)).

Notably, a Medicare contractor may freely initiate recoupment on an overpayment once a reconsideration decision has been rendered, regardless if an Administrative Law Judge (ALJ) appeal has been filed or is going to be filed.

Should a provider elect to delay recoupment, the amount owed will be subject to the Medicare interest rate. This amount varies but is generally quite high. For example, as of January 25, 2010, the interest rate has been set at 11.25 percent.  As such, it is especially important that providers consider the following:

(1) If an overpayment determination is overturned past the reconsideration level of appeals, CMS is liable for interest on recouped overpayments that has accrued.

(2) If a health care provider or supplier takes advantage of the limitation on recoupment and ultimately loses an administrative appeal, the provider is liable for all interest accrued since the original determination, along with the overpayment which remains after going through the administrative appeals process.

While the Medicare interest rate is quite high, it is essential that health providers understand the nuances of the administrative appeals process before rushing to postpone recoupment.  For example, to avoid recoupment after a redetermination appeal decision has been issued, a provider (or its representative) must file for  reconsideration appeal within 60 days.  Should they choose to do so, they will be forfeiting the statutory right to avail themselves of the full 180 period that is permitted to file for reconsideration appeal – merely to avoid the initiation of recoupment.  In some cases, a provider would be better off taking the necessary time (up to 180 days) to ensure that its files are complete and its arguments in support of payment are fully developed prior to filing their appeal.  Filing an incomplete appeal within the 60 day deadline may ultimately harm, rather than help a provider’s chances of prevailing on appeal.

Ultimately, CMS’ Final Rule makes it more important than ever that health care providers undergoing overpayment review get qualified, experienced legal advice to help guide them through the administrative appeals process.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.