Updated Overpayment Refund Rule: What Coders and Providers Need to Know

The Centers for Medicare & Medicaid Services (CMS) has issued a final interpretation of the 60-day Refund Rule for Medicare Parts A/B (Traditional Medicare) and C/D (Medicare Advantage and Prescription Drug Plans) under the Patient Protection and Affordable Care Act (ACA).

Effective January 1, 2025, this update is included in the comprehensive 2025 Medicare Physician Fee Schedule Final Rule and clarifies provider responsibilities for identifying, reporting, and refunding overpayments.

Understanding the 60-Day Overpayment Refund Rule

According to Section 1128J(d) of the Social Security Act (42 U.S.C. § 1320a-7k(d)), any provider who receives Medicare or Medicaid funds in excess of what they are legally entitled to must report and return those funds within 60 days of identifying the overpayment.

Failing to meet this deadline could lead to violations of the False Claims Act (FCA), which penalizes providers for knowingly concealing or failing to return overpayments.

What’s New in the Final Rule?

1. Clearer Definition of “Identified”

CMS now defines an overpayment as “identified” the moment a provider knowingly receives or retains funds they’re not entitled to. This aligns the definition with the FCA’s standard for knowledge or awareness.

2. Immediate Reporting Obligation

Providers must now report and return overpayments within 60 days of identification, even if the precise amount is not yet calculated.

3. Extended Investigation Period

A new 180-day investigation window allows providers to check for related overpayments that may have occurred for the same reason as the initially identified issue. Providers must report and return funds by:

• The conclusion of the investigation (once the full overpayment amount is determined), or
• 180 days from when the first overpayment was identified—whichever comes first.

Common Overpayment Scenarios

Understanding how overpayments happen can help providers identify and address issues faster. Here are some of the common scenarios we have encountered:

1. Coding Errors

• Upcoding: Assigning a higher-level service code than was actually performed, resulting in higher reimbursement.
• Duplicate Billing: Accidentally submitting the same claim multiple times for the same service.
• Unbundling: Billing separately for procedures that should be bundled under a single code, leading to overpayment.

2. Eligibility Mistakes

• Coverage Lapses: Providing services to a patient whose Medicare coverage has expired or changed without prior verification.
• Incorrect Coordination of Benefits: Failing to recognize that Medicare is the secondary payer, not the primary one.

3. Payment Miscalculations

• Contractual Adjustment Errors: Not applying the correct fee schedule rates from payer contracts.
• Deductible and Copayment Miscalculations: Incorrect application of patient responsibility amounts, leading to excess reimbursements from Medicare.

4. Documentation Issues

• Insufficient Medical Necessity: Services that lack proper documentation to justify the treatment as medically necessary.
• Missing Signatures: Claims submitted without required provider signatures, leading to payments for services that may not meet Medicare’s requirements.

5. Post-Payment Audits and Revisions

• Audit Findings: Discoveries of overpayments during internal audits or external payer reviews.
• Revised Patient Information: New data provided by the patient or payer that changes eligibility status or covered services retroactively.

Best Practices for Staying Compliant

To avoid penalties under the updated rule, providers should:

• Update Overpayment Policies: Align internal protocols with the latest CMS guidelines.
• Keep Meticulous Records: Document every step of the investigation and refund process with time-stamped entries.
• Allocate Sufficient Resources: Assign knowledgeable staff and use analytical tools to support thorough investigations.
• Cross-Department Collaboration: Ensure effective communication between billing, compliance, and legal departments.
• Create a Specialized Investigation Team: Appoint a dedicated team, led by legal counsel, to manage the process effectively.
• Take Immediate Corrective Actions: Address any systemic issues that led to overpayments and document all changes made.
• Consider Partial Refunds: Refund known overpayments while continuing to investigate for any additional funds owed.
• Promote a Speak-Up Culture: Encourage staff to report any suspected overpayments without fear of reprisal.

Why Quick Action Is Crucial

Delays in investigating or reporting overpayments can trigger legal consequences under the False Claims Act, especially if CMS determines that the overpayment should have been identified during a good-faith investigation. Providers who anticipate delays should proactively notify CMS or their government contractor and continue submitting overpayments as they are identified.

By staying proactive, healthcare providers and coders can ensure compliance, minimize financial risk, and maintain the integrity of their billing practices.

Outsourcing Overpayment Monitoring: A Smart Solution

Navigating the complexities of Medicare’s updated overpayment refund rule requires vigilance, expertise, and significant resources. For many healthcare providers, managing overpayment investigations internally can drain time and effort from patient care and practice growth.

This is where partnering with a professional billing and revenue cycle management company like Bristol Healthcare Services can make a significant difference. Our certified experts use advanced technology and analytics to detect overpayments early, streamline the refund process, and ensure full compliance with the latest CMS regulations.

By outsourcing your billing, coding, and overpayment monitoring to Bristol, your practice can:

• Reduce legal and financial risks associated with non-compliance.
• Increase efficiency through automated audits and reporting.
• Maximize revenue by identifying and correcting systemic billing errors.
• Stay updated with ever-changing Medicare and payer regulations.

Let us handle the complexities so you can focus on delivering the best patient care while securing your financial health.