when the initial overpayment is identified, at which point the 180-day suspension may be triggered.Contrary to what the 2016 Preamble might suggest, CMS notes that revised section 401.305(b)(3) does not impose an independent obligation to investigate related overpayments when a person has actual knowledge of an overpayment. “However, other laws, such as the Federal False Claims Act, may impact whether a person must investigate overpayments.” CMS further notes that if there is no reason to believe there are other related overpayments, the person is not acting in deliberate ignorance or reckless disregard, and has no obligation to investigate, calculate, and report and return such overpayments.What Providers and Suppliers Should Do Now Providers and suppliers should revisit their overpayment policies to align with the new standards set forth in the revised regulations, which appear to be significantly less onerous than the “reasonable diligence” standard in CMS’ earlier regulations.[1] 87 Fed. Reg. 79452, 79559 (Dec. 27, 2022).[2] The existing regulation (pre-2025) at 42 C.F.R. § 401.305(a)(2)) provides that: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.[3] As taken from the display copy, 42 C.F.R. § 422.326(c) will provide as follows: “Identified overpayment. The MA organization has identified an overpayment when the MA organization knowingly receives or retains an overpayment. The term “knowingly” has the meaning set forth in 31 U.S.C. § 3729(b)(1)(A).” For Part D, the new provision in 42 C.F.R. § 423.360(c) reads similarly. “Reporting and returning of overpayments. “Identified overpayment. The Part D sponsor has identi

[co-author: Jacquelyn Daniel, Law Clerk]On April 5, the Centers for Medicare & Medicaid Services (“CMS”) released the 2024 Medicare Advantage and Prescription Drug Benefit Programs Final Rule (“Final Rule”), which will be codified at 42 C.F.R. Parts 417, 422, 423, 455, and 460. The Final Rule adopts a host of reforms aimed at improving health care access, quality, and equity for Medicare beneficiaries that receive coverage through Part C (“Medicare Advantage” or “MA”) and prescription drug benefits through Part D. As discussed below, the Final Rule also has some notable omissions compared to what CMS previously proposed in December (“Proposed Rule,” published at 87 Fed. Reg. 79452 (2022)). The Final Rule is effective June 5, 2023.Part C ReformsPursuant to the Final Rule, if an MA plan prior authorized an item or service or made a pre-service determination of coverage or payment, the MA plan may not later deny coverage for lack of medical necessity and may not reopen the decision, except for “good cause” (as defined in 42 C.F.R. § 405.986) or “reliable evidence” of fraud or “similar fault” (as defined in 42 C.F.R. § 405.902). To limit interruptions in care, MA plans will be required to:(1) grant prior authorizations that cover an entire course of treatment, plus a 90-day transition period when a beneficiary, mid-treatment, switches to or between Medicare plans;(2) implement electronic medical record interoperability capabilities related to processing prior authorizations; and(3) provide certain notifications to beneficiaries when the network terminates their providers.See Final Rule at pp. 7-8.The Final Rule defines a “course of treatment” based on the treating provide

ayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.” 42 CFR 401.305(a)(2).CMS is proposing to revise the regulation by eliminating the “reasonable diligence” standard and replacing it with the False Claims Act (FCA) knowledge standard. CMS states that this change is the result of litigation which found that by requiring the “exercise of reasonable diligence” in identifying overpayments, the regulation impermissibly creates FCA liability for mere negligence.In its place, CMS proposes that a provider has “identified” an overpayment (and therefore must report and refund within 60 days) when the person knowingly receives or retains an overpayment. The term “knowingly” has the same meaning as set forth in 31 USC 3729(b)(1)(A)—the FCA standard that includes actual knowledge of the existence of an overpayment or acting in reckless disregard or with deliberate ignorance of the overpayment. See 87 Fed. Reg. 79452, 79559 (Dec. 27, 2022).While the proposed rule appears to address some litigation concern for CMS, the proposal goes further by eliminating the current regulatory language that an overpayment has to be quantified before the 60-day reporting requirement is triggered—that is, before the overpayment has been “identified.”In preamble commentary to its February 12, 2016 final Medicare Part A and B overpayment rule, CMS stated that the identification process includes quantifying the overpayment amount. CMS also explained that the “reasonable diligence” is demonstrated by timely, good faith investigation of credible information of an overpayment, which should take no more than six months, except under “extraordinary circumstances.”PRACTICAL EFFECT OF THE PROPOSED CHANGECMS took almost six years to promulgate the final Medicare Part A and B overpayment regulation, following substantial industry comment. Ironically, the language being proposed now was also proposed by CMS in 2012, but ultimately not adopted when CMS