CMS Issues Final Rule on Overpayment Reporting and Returns, Effective January 01, 2025
Medicare Parts A–D now follow section 1128J(d)(4)(A) of the Social Security Act to define an “identified overpayment.” This definition refers to the Federal False Claim Act’s (the “FCA”) “knowledge” standard. The old “reasonable diligence” standard is not related to part C and no longer applies. A Federal court had already struck down this standard for Part C.
What This Means for Providers
The new standard says a provider, supplier, or Medicare Advantage Organization (“MAO”) knows about an overpayment when they find it.
The deadline for reporting and returning identified overpayments needs to be finalized. You must report and return an overpayment by the later of:
- 60 days after identifying the overpayment, or
- The due date of any applicable cost report.
Keeping an identified overpayment after the deadline to report and give it back might lead to FCA liability.
The Calendar Year 2025 Physician Fee Schedule (the “2025 PFS”) made the above final, as suggested in 2022. The 2025 PFS provides a temporary stay for a 60-day obligation of a person to report and return overpayments that shall remain in abeyance for not more than 180 days. This happens if the person, after finding an overpayment, starts a timely, honest investigation to check if related overpayments exist. “Honest investigation” is not something the 2025 PFS defined, but as the people say, “one can use its basic meaning.” See 2025 PFS at 98338.
Key Takeaways
- Increased Risk of Noncompliance: Providers who ignore credible evidence of potential overpayments may be facing severe legal consequences. This should not come as a surprise because the Department of Justice is already enforcing FCA violations involving “reverse false claims.
- The Countdown Begins Right Away: As soon as someone spots an overpayment, the 60-day deadline begins even when they haven’t nailed down the exact amount yet. If they need to look deeper, they can extend this time—but for no more than 180 days.
- Act with Urgency: The tight schedules mean providers must work fast. Those with fewer resources may struggle more, as they’ll need to put in a lot of work to follow the rules.
- Applies to All of Medicare: These rules affect all providers, suppliers, and MAOs in Medicare Parts A–D.
This update highlights how crucial it is to act when dealing with possible overpayments. Healthcare providers need to make sure they have reliable systems to spot, report, and give back overpayments—before time runs out and leads to False Claims Act trouble.
