The standard for an “identified overpayment” under Medicare Parts A–D now aligns with section 1128J(d)(4)(A) of the Social Security Act, which incorporates by reference the Federal False Claim Act’s (the “FCA”) “knowledge” standard.  The previous “reasonable diligence” standard, which, as it related to Part C, had been struck down by a Federal court, no longer applies.  Under the new standard, a provider, supplier, or Medicare Advantage Organization (“MAO”) has knowledge of an overpayment when it has been identified.

Additionally, the deadline for reporting and returning identified overpayments has also been finalized.  An overpayment must be reported and returned by the later of:

  1. The date which is 60 days after the date on which the overpayment was identified, or
  2. The date any corresponding cost report is due, if applicable.

Any identified overpayment retained after the deadline to report and return may create FCA liability.

The foregoing was finalized, as proposed in 2022, pursuant to the Calendar Year 2025 Physician Fee Schedule (the “2025 PFS”).  With respect to the timeframe to report and return overpayments, the 2025 PFS suspends a person’s 60-day obligation to report and return overpayments for up to 180 days if the person, after having identified an overpayment, conducts a timely, good-faith investigation to determine whether related overpayments exist.  While the 2025 PFS did not expressly define the term “good-faith investigation”, persons “can rely upon [its] plain meaning.”  See 2025 PFS at 98338.

Takeaways

This legal change creates new risks for providers who fail to investigate credible information about a potential overpayment.  However, this should come as no surprise, as it aligns with what the U.S. Department of Justice may already pursue against a person under the FCA—a reverse false claim.  As noted in the commentary of the 2025 PFS, the FCA, from which the “knowledge” qualifier originates, contains an existing body of case law and examples to guide stakeholders and their counsel regarding if a person has the requisite knowledge to have identified an overpayment based on the facts and circumstances presented.  See 2025 PFS at 98335–8.

Additionally, once a person has identified an overpayment, the 60-day obligation to report and return such overpayment begins to run.  And, that deadline exists regardless of whether the overpayment has been quantified.  But, because quantification takes time, the 60-day deadline may be suspended if the person needs to dive deeper into its investigation to determine if related overpayments exist.  The timeline to do so, however, is only 180 days.  Thus, providers should make every effort to act with “all deliberate speed”, which, in turn, may require providers with fewer resources and expertise to expend a disproportionately high amount of effort.  These rules apply across all of Medicare and, thus, are applicable to all providers, suppliers, and MAOs.

Proskauer’s Health Care Group can provide guidance to persons subject to the 2025 PFS as they evaluate whether and to what extent they have received a potential overpayment, and if they need to investigate, report, and return any overpayment.

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Photo of Matthew J. Westbrook Matthew J. Westbrook

Matt Westbrook is an associate in the Corporate Department and a member of the Health Care Group. His practice focuses on providing regulatory compliance advice for the Firm’s health care clients, including service providers, health plans, operators, investors, and lenders, among others. Matt…

Matt Westbrook is an associate in the Corporate Department and a member of the Health Care Group. His practice focuses on providing regulatory compliance advice for the Firm’s health care clients, including service providers, health plans, operators, investors, and lenders, among others. Matt specifically provides advice on fraud and abuse matters arising under the Federal False Claims Act (FCA), Civil Monetary Penalties Law, Federal Anti-Kickback Statute (AKS), and Physician Self-Referral Law (Stark Law), as well as on the regulations promulgated by the Drug Enforcement Administration (DEA) and the Department of Health and Human Services, including the Office of Inspector General (OIG), Centers for Medicare & Medicaid Services (CMS), and Food and Drug Administration (FDA).

Before joining the Firm, Matt served as senior counsel in OIG’s Administrative and Civil Remedies Branch. At OIG, Matt was responsible for determining whether to impose administrative sanctions, including civil money penalties and Federal health care program exclusions, against health care providers and suppliers, and whether to impose civil money penalties on hospitals and physicians in connection with matters referred to CMS under the Emergency Medical Treatment and Labor Act (EMTALA). During his tenure, Matt also litigated exclusion appeals before administrative law judges and appellate panels of the Departmental Appeals Board; advised United States Attorney’s Offices on exclusions appealed to Federal district courts; resolved voluntary self-disclosures submitted by providers and grant and contract recipients; and participated in the negotiations and settlements of FCA matters by the Department of Justice involving the AKS, Stark Law, CMS reimbursement issues, and DEA and FDA compliance issues. In connection with certain FCA resolutions, Matt also negotiated and monitored corporate integrity agreements.

On the Florida junior circuit and in college, Matt was a competitive tennis player. Matt played on the varsity team and was captain his senior year at Rhodes College, earning ITA Division III and SCAC All-Academic Honor Roll awards his sophomore, junior, and senior years. Matt is an active member of the American Health Law Association (AHLA) and currently serves as a Vice Chair of AHLA’s Fraud and Abuse Practice Group.

Photo of Vinay Kohli Vinay Kohli

Vinay Kohli is a healthcare industry lawyer.  Recognized for his focus and commitment to the healthcare industry, a wide range of healthcare businesses use Vinay as an outside general counsel to guide them on strategic planning, compliance matters, operational questions, and reimbursement concerns. …

Vinay Kohli is a healthcare industry lawyer.  Recognized for his focus and commitment to the healthcare industry, a wide range of healthcare businesses use Vinay as an outside general counsel to guide them on strategic planning, compliance matters, operational questions, and reimbursement concerns.  He provides regulatory, compliance, and reimbursement advice on topics that range from venture formation, technology implementation, and risk management to day-to-day contract negotiations.

Vinay’s background is unique in that he is also a seasoned trial lawyer.  He is able to combine his regulatory expertise with a trial lawyer skillset for jury trials, bench trials, and arbitrations arising in the healthcare arena—he represents hospital systems, physician practices, providers of post-acute care services, as well as healthcare technology and revenue cycle management companies. He defends health care fraud and abuse litigation, prosecutes managed care disputes against large national payors, and handles government investigations.  And clients frequently call upon Vinay to serve as lead trial counsel in commercial litigation disputes that span the gamut from breach of contract and trade secret misappropriation to unfair business practices and breach of fiduciary claims.

Vinay received his B.B.A., magna cum laude, M.A., and J.D. from the University of Texas at Austin in 2005, 2006, and 2009 respectively.

Prior to joining Proskauer, Vinay was a partner in the Healthcare group at King & Spalding.

Photo of David Manko David Manko

David is a partner in the Corporate Department and Chair of the Health Care Group. With more than 30 years of experience, David has represented virtually every type of stakeholder in the health care services sector. David leverages his industry expertise to provide…

David is a partner in the Corporate Department and Chair of the Health Care Group. With more than 30 years of experience, David has represented virtually every type of stakeholder in the health care services sector. David leverages his industry expertise to provide practical, creative and actionable advice to healthcare clients in connection with complex business transactions and regulatory matters. Across his career, clients have included investors, lenders, management companies, payers, hospital organizations and health systems, medical practices, provider networks, medical technology companies, digital health companies, nonprofit entities and public benefit corporations. David has particular expertise representing clients involving large, national provider networks and risk bearing entities, including in connection with regulatory structuring issues, fraud and abuse and value-based contracting.

Chambers USA recognizes David as a Band 1 lawyer in Healthcare, remarking that he is a “regulatory and transactional healthcare lawyer who earns impressive reviews from peers and clients alike.” “He is a master negotiator and is second to none in his responsiveness,” says one client commentator, who adds that “he turns around whatever needs to be done promptly and efficiently.”

In the community, David is dedicated to expanding access to primary care services for underserved populations. For almost 10 years, he has been an active member of the Board of Directors of Primary Care Development Corporation (“PCDC”). PCDC is a nonprofit Community Development Financial Institution dedicated to providing low-cost debt financing to not-for-profit organizations to expand and improve primary care in underserved communities.