CMS proposes changes to the 60-day rule

As is said, “the devil is in the details.” In December 2022, the Centers for Medicare and Medicaid Services (CMS) issued a surprise proposed rule, which would change the 60-Day Overpayment Refund Rule (60-Day Rule) with a few words. On March 23, 2010, the 60-Day Rule was enacted as Section 6402 of the Affordable Care Act (ACA). Subsequently, CMS issued separate final regulations for Medicare Parts A, B, C, and D. Unsurprisingly, §3729(a)(1)(G) of the False Claims Act often coincides with the 60-Day Rule because it “is known as the reverse false claims section; it provides liability where one acts improperly – not to get money from the government, but to avoid having to pay money to the government.”

An example of the intersection of the 60-Day Rule and the False Claims Act’s reverse false claim is the October 2017 settlement with Jacksonville First Coast Cardiovascular Institute, P.A. (FCCI) for $488,821.58 after “knowingly delaying repayment of more than $175,000 in overpayments owed to Medicare, Medicaid, TRICARE, and the Department of Veterans Affairs.”

“When FCCI learned that it had received over $175,000 in potential overpayments to federal health care programs in 2016, it had a legal obligation to return those funds within 60 days,” stated Acting U.S. Attorney Stephen Muldrow. “Instead, they delayed repayment, ultimately retaining thousands of dollars to which they were not entitled. This settlement should send a message that we will aggressively pursue those who seek to unjustly profit from our nation’s federal health care programs.”

The proposed rule would remove the following language at 42 C.F.R. § 401.305(a)(2):

A person has identified an overpayment when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.

The new proposed 42 C.F.R. § 401.305(a)(2), which would replace the previous language follows:

A person has identified an overpayment when the person knowingly receives or retains an overpayment. The term “knowingly” has the meaning set forth in 31 U.S.C. 3729(b)(1)(A).

As set forth in 31 U.S.C. 3729(b)(1)(A) of the False Claims Act “knowingly” means “that a person, with respect to information—(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information.”

The take-away – public comments on the proposed rule are due by February 13. The potential liability for these seemingly small changes is significant. Compliance officers and in-house counsel alike should take note of the final rule and update training, as well as policies and procedures, because whistleblowers and the government certainly will.

Rachel V. Rose, JD, MBA, advises clients on compliance, transactions, government administrative actions, and litigation involving healthcare, cybersecurity, corporate and securities law, as well as False Claims Act and Dodd-Frank whistleblower cases.