The Centers for Medicare & Medicaid Services (CMS) is a federal agency within the U.S. Department of Health and Human Services (HHS). It oversees the nation’s major healthcare programs, including Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). Its primary role is to ensure that these programs provide quality healthcare to eligible individuals, but it also sets standards for healthcare providers, manages funding, and ensures compliance with healthcare laws and regulations.
How overpayments happen
Medicare overpayments occur when CMS pays a healthcare provider more than the amount due for services provided. These overpayments can happen due to several reasons, including:
- Incorrect coding
- Insufficient documentation
- Errors in medical necessity
When a provider identifies an overpayment, it becomes a debt owed to the federal government.
New rules for Medicare overpayments in 2025
The CMS introduced significant changes to the regulations governing Medicare overpayments. Effective January 1, 2025, these changes are part of the 2025 Medicare Physician Fee Schedule final rule.
One of the key changes is the revision of the standard for identifying overpayments. Previously, the standard required “reasonable diligence” to determine if an overpayment had occurred. The new rule adopts a standard aligned with the Federal False Claims Act, which focuses on whether a person “knowingly receives or retains an overpayment.” This means that providers must now consider actual knowledge, reckless disregard, or deliberate ignorance when identifying overpayments.
Another significant change is the formalization of a six-month period for good faith investigations into potential overpayments. This period temporarily suspends the 60-day deadline for returning overpayments, allowing providers more time to conduct thorough investigations. This provision balances the need for timely reporting with the complexities of investigating potential overpayments.
Additionally, the new regulations emphasize the importance of accurate and timely reporting. Providers must report and return overpayments within 60 days of identification or by the due date of any corresponding cost report. Failure to comply with these requirements can result in significant penalties under the False Claims Act.
Compliance is more important than ever
These changes highlight the need for healthcare providers to stay informed and proactive in their compliance efforts. Regular audits, staff education and robust compliance programs are essential to minimize the risk of overpayments and avoid penalties. Seeking legal guidance can also help providers navigate these complex regulations and ensure they meet all requirements.
Navigating the complexities of Medicare overpayments can be challenging. Healthcare providers should seek legal guidance to ensure they comply with CMS regulations and avoid severe penalties. Legal professionals can help providers understand their obligations, develop effective compliance programs, and respond appropriately to overpayment demands. By working with legal professionals, providers can protect their practice and ensure they meet all regulatory requirements.