On January 1, 2025, the Centers for Medicare and Medicaid Services’ (“CMS”) new 60-Day Rule became effective. The 60-Day Rule states several changes, with some changes significantly impacting False Claims Act (“FCA”) liability.
Background
CMS’s 60-Day Rule is a regulation under the Affordable Care Act (“ACA”) that requires health care providers and suppliers to report and return identified Medicare and Medicaid overpayments within 60 days of identifying them. Failure to comply can result in liability under the FCA. The rule is codified at 42 U.S.C. § 1320a-7k(d).
Key Updates
Specific to the FCA, the updated rule makes three significant changes: (1) the rule updates the standard for determining when an overpayment is “identified;” (2) the rule imposes the obligation to report and return overpayments, regardless of whether the precise amount is calculated; and (3) the rule suspends the obligation to report and return overpayments for up to 180 days if, after identifying an overpayment, the provider conducts a timely, good-faith investigation to determine whether related overpayments exist.
Removal of Quantification Toll and Redefinition of “Identified”
Previously, an overpayment was considered “identified” when a provider determined, or should have determined through reasonable diligence, that an overpayment was received, and the amount was quantified. However, under the updated rule, the obligation to report and return an overpayment begins upon identification, even if the exact amount is undetermined. In other words, the 60-day clock to report and return overpayments begins immediately, despite incomplete quantification.
Additionally, the updated rule aligns with the FCA’s definition of “knowingly” meaning an overpayment is identified when a provider has actual knowledge, or acts in reckless disregard or deliberate ignorance of the overpayment. In its updated rule, CMS highlighted that FCA case law can offer providers guidance and insight into what actions may constitute “reckless disregard” or “deliberate ignorance.”
In 2023, the United States Supreme Court (the “Court”) clarified the meaning of “knowingly” under the FCA in United States ex rel. Schutte v. SuperValu Inc. For the first time, the Court held that the determination of whether a defendant acted “knowingly” depends on their subjective understanding of the claim’s truth or falsity at the time it was made. The decision established that defendants cannot escape liability by arguing that their conduct was objectively reasonable under an ambiguous law if they actually knew or believed their claims were false. Justice Thomas, in a unanimous opinion, strongly emphasized that the “scienter element” refers to the “subjective knowledge” of an FCA defendant and explained that actual knowledge, deliberate ignorance of the truth or falsity, or reckless disregard of the truth or falsity will suffice.
180-Day Suspension Period
The ACA’s initial enactment of the 60-Day Rule required reporting and returning of overpayments within 60 days of discovery. The updated 60-Day Rule allows a 180-day suspension of this reporting obligation if a Medicare participant identifies an overpayment and conducts a timely, good-faith investigation to uncover any related overpayments.
Practical Takeaways
- Compliance Programs: Providers should update compliance protocols to reflect the new definition of “identified” and ensure prompt action upon discovering potential overpayments.
- Timely Investigations: It’s crucial to initiate and complete investigations within the 180-day suspension period to avoid FCA liability.
- Documentation: Maintaining thorough records of investigations and decisions regarding overpayments is essential to demonstrate compliance with the updated rule.
If you have questions or would like more information about this topic, please contact:
- David Honig at (317) 977-1447 or dhonig@hallrender.com;
- Kennedy Bunch at (317) 977-1420 or kbunch@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.