At the end of last year, the Centers for Medicare & Medicaid Services (CMS) proposed changes to the so-called 60-day repayment rule. The proposed changes include eliminating the current “reasonable diligence” standard that applies to providers in connection with potential liability for overpayments and replacing it with “actual knowledge” or “acting with reckless disregard.” The proposed changes can be located here.
The deadline for submission of comments was February 13, 2023. We are likely going to see substantial comments from the industry. The healthcare industry participants should carefully scrutinize the comments and proactively implement any relevant changes based on such comments in their compliance practices. In addition, regardless of whether or not the new changes will be implemented, most providers should not rely on existing knowledge standards as a replacement for proactive diligence and compliance. There is a risk that a decision not to engage in any proactive diligence may be seen as evidence of acting in reckless disregard.
The so-called “60-day Repayment Rule” requires the providers who submit claims to Medicare or Medicaid to report and repay any overpayments by the later of: (1) 60 days after the overpayment was identified; or (2) the date any corresponding cost report is due, if applicable. The rule states that the “identification” of an overpayment occurs 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”. Currently, providers are generally required to proactively diligence any billing issues. In the context of M&A transactions, buyers may become responsible for any billing issues that arise post-closing, even if they relate to pre-closing activities.
The proposed changes would eliminate the “reasonable diligence” standard. Instead, the existing regulations for Medicare Parts A, B, C, and D would be amended to be aligned with the statutory language in section 1128J(d)(4)(A) of the Act, which provides that the terms ‘‘knowing’’ and ‘‘knowingly’’ have the meaning given those terms in the False Claims Act at 31 U.S.C. 3729(b)(1)(A). As such, “an MA organization, Part D sponsor, provider or supplier has identified an overpayment if it has actual knowledge of the existence of the overpayment, or acts in reckless disregard or deliberate ignorance of the overpayment.” Actual knowledge under the False Claims Act is generally considered to mean that a person knows that the particular activity has occurred. There is no requirement for “reasonable diligence” to obtain such knowledge. Therefore, the proposed changes would effectively raise the current standard by requiring actual knowledge or acting in reckless disregard of known information to find liability.
With respect to reasons for proposed changes, the CMS noted recent litigation, United Healthcare Ins. Co. v. Azar, involving the current overpayment rule. In United Healthcare, a group of Medicare Advantage Organizations (MAOs) challenged the final Parts C & D Overpayment Rule, and the District Court held, in relevant part, that by requiring MAOs to use ‘‘reasonable diligence’’ in searching for and identifying overpayments, the final rule impermissibly created False Claims Act liability for mere negligence. It appears that the CMS proposed these amendments for consistency reasons, quoting United Healthcare.
Contact Cozen O’Connor if you have any questions about the current rule, the proposed changes, or other compliance questions.
 Fed. Reg. Vol. 81, No. 29, Page 7683.
 Fed. Reg. Vol. 87, No. 247, Page 79456.
 330 F. Supp. 3d 173, 191 (D.D.C. 2018).
 “See UnitedHealthcare, 330 F. Supp. 3d at 191 (finding that this language would be consistent with a 2000 agency rule, the FCA, and the Affordable Care Act’s reference to the FCA).”