An Overview of the 60-day Rule and Prior CMS Regulations
With its enactment in 2010, the ACA created the 60-day Rule, which requires Medicare and Medicaid providers and suppliers, Medicare Advantage Organizations, and Medicare Part D Drug Plans to report and return overpayments within 60 days of identification.3 Non-compliance with the 60-day Rule has two important consequences: significant fines under the Civil Monetary Penalties Law, and liability under the FCA for the improper retention of an identified overpayment, which can on its own result in additional per claims penalties and treble damages.4
Though the ACA did not define when or under what circumstances a person “identified” an overpayment, the original CMS regulations from 2016 interpreting the 60-day Rule explained that the term “identified” referred to when a provider either actually determined or should have determined “through the exercise of reasonable diligence” that it received an overpayment and had “quantified the amount of the overpayment.”5
What this construction of “identified” lacked because of ambiguity in the meaning of “exercise of reasonable diligence,” it more than made up for because an overpayment could not be “identified” until quantification occurred. In situations in which providers faced complex investigations and claims analysis to evaluate potential overpayment and calculate refund amounts, having quantification serve as a tolling mechanism for the 60-day Rule was absolutely critical. Though the time frame in which to report and return was not totally unconstrained, in its preamble commentary to the initial 60-day Rule regulations, CMS specifically noted providers — who were required to move with “all deliberate speed” when evaluating an overpayment — could take up to six months when investigating a challenging overpayment and quantifying liability.6
Better Off Before: Final Rule Introduces New Challenges for Providers
Though the goal of the Final Rule was to provide clarity and seek alignment on the 60-day Rule’s application across all parts of the Medicare program, Part A/B providers are arguably worse off now. Along these lines, the Final Rule introduced three significant changes to the 2016 CMS regulations interpreting the 60-day Rule:
- Rather than continuing to use the amorphous “reasonable diligence” standard to determine when an overpayment is “identified,” the Final Rule incorporates the FCA’s knowledge standard. This means identification occurs when a provider has actual knowledge of an overpayment or acts with “reckless disregard” or “deliberate ignorance” of a potential overpayment. CMS repeatedly emphasized that the extensive body of FCA case law (which varies by Federal Circuit) should give providers guideposts about the type of situations in which a party acts with “reckless disregard” or “deliberate ignorance.”
- The Final Rule removes the quantification element of identifying an overpayment, such that where a provider “knowingly receives or retains an overpayment,” the 60-day clock to report and return begins to run immediately, even if the overpayment amount has not been quantified.
- The 60-day clock to report and return overpayments can be suspended for up to 180 days while providers attempt to identify “related overpayments” stemming from the same reason as the initially identified overpayment. This tolling requires the provider to conduct a “timely, good faith investigation”; it was included to avoid providers making piecemeal refunds rather than waiting to uncover all overpayments originating from a common cause and refunding all at once.
The use of the FCA’s knowledge standard to trigger identification is an improvement over the prior CMS regulations and can be used by providers to temper or elongate the time frame before an overpayment is “identified.” However, removal of the quantification requirement from the definition of “identified” and limiting the 180-day tolling period only to the investigation of “related overpayments” is a net negative for providers and arguably puts them in a worse position than they were before the Final Rule. Additionally, imposing a rigid 180-day suspension period for investigating “related overpayments” puts FCA liability in play, even when providers are working diligently to unpack a complex issue but fail to complete the process within the 180-day period.
Timing Is Everything: CMS Interjects Complexity With the Final Rule
The complexity associated with the Final Rule and its timing for when a provider must report and return an overpayment (if a “related overpayment” is also involved) should also not be overlooked. An illustration is helpful. The Final Rule includes a hypothetical situation in which a provider learns one of its physicians included insufficient documentation in a medical record to support a particular claim. The provider has concerns that the documentation issue may be pervasive and not limited to the single record or claim that was initially reviewed, and that it resulted in an overpayment. Assuming the provider decided to investigate potential “related overpayments,” the timeline for the provider to investigate, report, and return any overpayments would be as follows.
Key Considerations for Providers
Given the novel and potentially challenging revisions the Final Rule made to CMS’s 60-day Rule regulations, here is what providers should keep in mind:
- Know your law. Determining when a provider has knowledge that meets the FCA’s requirements is a heavily fact-based exercise. Given the significant number of FCA decisions interpreting the “reckless disregard” and “deliberate ignorance” standards, providers would be wise to familiarize themselves with cases in their circuit that offer guideposts about situations when those thresholds were or were not satisfied.
- Watch the clock. Though providers have always needed to remain vigilant about their 60-day clock and when an overpayment was initially identified, the Final Rule removes significant flexibility and imposes rigid deadlines on providers, whether they can rely on the 180-day tolling period to investigate “related overpayments” or not.
- Disclosure may be an option when time is running out. For providers who find themselves unable to meet the Final Rule’s report and return deadlines, communication or disclosure to the Medicare Administrative Contractor could be an option. Any affirmative contact with a regulator or contractor poses risk, but undermining or mitigating potential FCA liability through outreach may be worthwhile in certain circumstances.
- Begin quantification immediately. Providers may get extra time to quantify an initial overpayment (through the 180-day suspension period) if they decide to investigate potential “related overpayments.” But providers may learn all at once about a significant and complex overpayment, and if there is no credible basis for there being “related overpayments,” the provider must quantify and refund no later than 60 days following identification of the overpayment. To the extent possible, providers should immediately begin quantifying a potential overpayment, even before its official identification, to ensure it has the maximum amount of time to perform difficult calculations or complicated statistical analysis (such as extrapolation), which is often used when making refunds.
How Goodwin Can Help
Compliance with the Final Rule and other regulatory requirements addressing Medicare providers’ receipt of reimbursement, including when refunds may be necessary, can be challenging. Whether you are a Medicare provider or a private equity investor who owns or may acquire a Medicare provider, Goodwin’s team of attorneys can leverage their deep understanding of CMS’s requirements and knowledge of healthcare regulations to provide the best possible advice. Please contact the author of this article to learn more.
[1] The Final Rule is contained within the 2025 Medicare Physician Fee Schedule. For more, see a display copy of the Final Rule.
[2] While the Final Rule addresses obligations to report and return overpayments under Medicare Parts A, B, C, and D, this alert focuses on the Part A/B requirements for traditional providers and suppliers.
[3] Section 1128J(d) of the Social Security Act, 42 U.S.C. § 1320a-7k(d).
[4] 42 C.F.R. § 1003.210(a)(8); 31 U.S.C. § 3729 (a)(1)(G).
[5] 42 C.F.R. § 401.305(a)(2) (2016).
[6] 81 Fed. Reg. 7654, 7662 (February 12, 2016).
This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.
