In a busy medical practice, the risk of error runs high. This is a dangerous assertion when you consider that mistakes in a medical record can negatively impact a patient’s health. Mistakes made repeatedly in medical claims may flag your practice for an audit and, if overpayments are found, can result in huge fines and penalties from the government.

The Centers for Medicare & Medicaid Services (CMS) operates under the guidelines of the Affordable Care Act (ACA) to support compliance with applicable statutes, promote quality care, and help to protect Medicare Trust Funds against false payments. When a Medicare overpayment occurs, it must be reported and paid back. Failing to report or refund a Medicare overpayment is fraud which can result in added fines, penalties, and ineligibility to participate in the Medicare program.

All medical offices should have a process in place to audit claims before they go out the door. Learning how to identify an overpayment and knowing the necessary Medicare requirements will help you resolve the issue quickly and save the practice time and resources.

Medicare Overpayment—A Definition

The Medicare Integrity Program defines an overpayment as funds a provider has received in excess of amounts due and payable. There are many ways that overpayments can occur, coding errors, duplicate claims, and services not rendered are some of the most common. Other problems include failure to follow an established fee schedule for services provided to Medicare recipients, billing for non-covered services, and billing outside the guidelines of provider incentive payment adjustments.

Medicare Administrative Contractors (MAC) are authorized under the False Claims Act to seek out Medicare overpayments. Any amount in excess of $25 will result in a demand letter from your MAC outlining the reasons, accruing interest amount after 30 days, and appeal rights.

Managing Part A and Part B Overpayments

It is the responsibility of the provider to voluntarily refund an overpayment in a timely manner. Health care providers have 60 days after the overpayment is identified to settle the score. Those who do comply are subject to accruing annual interest rates and penalties. However, Medicare’s Part A and Part B overpayments are not treated equally. They are managed in different ways:

• Part A overpayments are resolved through credit balance reports. These include provider services not performed or incorrectly paid for any reason.
• Part B overpayments must be returned to the local Medicare carriers. Most often they require the refund of copayments made by or on behalf of beneficiaries.

Final Legislation

To fine tune its legislation, CMS published a final rule in 2016 roughly six years after the statutory provision. It details a provider’s responsibility to repay overpayments within the 60 days of identifying it. Additionally, it outlines the consequences. Under the False Claims Act failure to submit a refund will result in a stiffer liability—up to three times the original amount and a mandatory penalty up to $11,000 per claim. The final rule provides both clarity and consistency in reporting and returning self-identified Medicare Part A and B overpayments. It addresses the following key issues:

• Six-year lookback period – The provider repayment obligation is limited to overpayments received in the last six years.
• Clarification of “identity” – The 60-day payback period is initiated when the provider determines the date of the overpayment.
• Clarification of “overpayment” – Broadly defined it includes the receipt or retention of any Medicare payment in which a provider is not entitled including erroneous payments issued by its Medicare contractor.
• Reasonable diligence – Proactive compliance activities and routine internal audits to monitor, identify, and quantify overpayments is the responsibility of the provider.
• Calculating repayment amounts – CMS defines this as the difference between the overpayment received and what should have been received.

Get In-Depth Knowledge on Medicare Compliance With CMOM

Overpayments are a serious risk and an ongoing concern for all health care organizations. Implementing good auditing processes and procedures will aid in tackling and resolving overpayments before they go out the door. The Certified Medical Office Manager (CMOM) program prepares medical office professionals with the knowledge to keep the office compliant with Medicare guidelines. In-depth coverage of this topic and more are discussed in Module 4: Compliance Requirements. Learn more and enroll today.