Medicare Financial Management Manual 
Chapter 3 - Overpayments 
 
Table of Contents 
 (Rev. 11787, 01-19-23) 
 
 
Transmittals for Chapter 3 
 
10  Overpayments Determined by the FI or Carrier 
10.1  Aggregate Overpayments 
10.2  Individual Overpayments 
20  Recovery of Cost Report Overpayments- Cost Report Filed 
20.1  Part A Provider is Participating in Medicare and Medicaid 
20.2  Provider is No Longer Participating in Medicare and Not Participating in Medicaid 
20.3  Provider is No Longer Participating in Medicare But is Participating in Medicaid 
30  Recovery of Cost Report Overpayments- Overdue Cost Report 
30.1 - Part A Provider is Participating in Medicare and Medicaid 
30.2 - Provider is No Longer Participating in Medicare and Not Participating in Medicaid 
30.3 - Provider is No Longer Participating in Medicare But is Participating in Medicaid: One or 
More Cost Reports Not Filed 
40  Recovery of Claims Accounts Receivables from the Provider- FI Only 
40.1  Demand Letter Contents 
40.2- Sample Demand Letter for Claims Accounts Receivables 
50  Recovery of Overpayments When a Provider Changes its FI- FI Only  
50.1  Action by Outgoing FI  
50.2  Action by Incoming FI  
60  Interim Rate Adjustments and Periodic Interim Payment Adjustments  FI Only 
70  Determining Liability and Waiver of Recovery for Overpayments 
70.1  1879 Determination  Limitation of Liability 
70.2  1842(l) Determination 
70.3  1870 Determination  Waiver of Recovery of an Overpayment  
80  Individual Overpayments Discovered Subsequent to the Fifth Year 
80.1  How to Determine the Fifth Calendar Year After the Year the Payment was Approved  
80.2- Recovery of Overpayment Due to Overdue Cost Report  
90  Provider, Physician, or Other Supplier Liability 
90.1  Examples of Situations in Which Provider, Physician, or Other Supplier Is Liable 
90.2  Provider, Physician, or Other Supplier Protests Its Liability 
100  Beneficiary Liability 
110  Recovery Where the Beneficiary is Liable for the Overpayment 
110.1  Recovery Where the Beneficiary is Covered Under Medicaid or Another Health 
Insurance Plan, Private or Governmental   110.2  Recovery From the Beneficiary 
110.3 - When to Suspend Efforts to Recover from the Beneficiary Following the Initial Demand 
Letter  
110.4  Content of Demand Letter to Beneficiary  
110.5  Sample Demand Letter to Beneficiary 
110.6  Optional Paragraphs for Inclusion in Demand Letters 
110.7  Recovery Where Beneficiary is Deceased  
110.8  Beneficiary Wishes to Refund in Installments  
110.9  Beneficiary Protests 
110.10  When the FI or Carrier Does Not Take Recovery Action in Beneficiary Cases but 
Considers Whether Waiver of Recovery is Applicable 
110.11  Recording Overpayment Cases in Which the Provider is Not Liable- FI Only 
120  Referral to the Department of Justice (DOJ)  
120.1  Communication on Cases Sent to RO for DOJ Referral 
120.2  Cases Referred to DOJ for Possible Litigation 
130  Change of Ownership (CHOW) 
140 - Bankruptcy 
140.1 - Bankruptcy Forms  
140.2 - Basic Bankruptcy Terms and Definitions  
140.2.1 - Bankruptcy is Litigation  
140.2.2 - Types of Bankruptcies  
140.2.3 - Filing Bankruptcy Draws a Line in the Sand  
140.2.4 - Bankruptcy Affects Nearly All Medicare Operations  
140.2.5 - Recoupment and Set-off  
140.2.6 - Time is of the Essence  
140.2.7 - Definitions  
140.3 - Contractor's Establishment of Relationships to Ensure Effective Actions Regarding 
Providers In Bankruptcy  
140.3.1 - Contractor Staff Must Establish Relationships to Ensure That the RO and 
Regional Counsel Receive Prompt Notice of Provider Bankruptcies, so That Medicare 
Can Take Quick Action  
140.3.2 - Contractors Must Recognize and Advise RO Staff About Potential Provider 
Bankruptcies  
140.3.3 - Contractor Staff Will Establish a Relationship With the RO That has 
Jurisdiction Over the Bankruptcy  
140.3.4 - RO Jurisdiction Generally Parallels the Bankruptcy Court Where Case Is Filed  
140.3.5 - Contractor and Regional Office Bankruptcy Point of Contact Staff Member  
140.4 - Actions to Take When a Provider Files for Bankruptcy  
140.4.1 - Establish Effective Lines of Communications with Partners  
140.4.2 - Respond to RO Requests for Information  
140.4.3 - Immediate Contractor Directives From the RO  
140.4.4 - Tracking Debts/CO Communications  
140.5 - Chain Bankruptcies   140.5.1 - Chain Providers  
140.5.2 - Single Providers Serviced By a National Contractor  
140.6 - Affirmative Recovery Actions  
140.6.1 - Working with the RO and Regional Counsel's Office  
140.6.2 - Assumption of the Medicare Provider Agreement  
140.6.3 - Settlement Agreements or Stipulations  
140.6.4 - Recoupment  
140.6.5 - Administrative Freeze/Setoff  
140.7 - Preparing and Filing Proof of Claim  
140.8 - Closure Bankruptcy Cases And Treatment Of Overpayment Reporting Systems At End 
Of Bankruptcy  
140.8.1 - Closing the Bankruptcy Case  
140.8.2 - Debt Located at the Debt Collection Center or Department of the Treasury  
140.8.3 - Managing Bankruptcy Debt at the Contractor Location  
150  Accelerated Payments  FI Only 
150.1  Eligibility for Accelerated Payment 
150.2  Computation of the Accelerated Payment 
150.3  Recoupment of the Accelerated Payment 
150.4  Recoupment of the Accelerated Payment 
Exhibit 1  Sample Format for Provider Request for Accelerated Payment  
160  Debt Close-Out 
160.1   Reserved for Future Use 
160.2   Reserved for Future Use 
170  General Overpayment Provisions 
170.1  Offset of Overpayments Against Other Benefits Due- FI Only 
170.2  When the FI or Carrier Does Not Attempt Recovery Action 
170.3 - Information and Help Obtainable from the Social Security Office   (SSO) 
170.4  Recovery Where Physician or Other Individual Practitioner is   Deceased- Carrier 
Only 
170.5  Provider Offers to Settle on Compromise Basis 
170.6  Unsolicited Overpayment Refunds 
170.7  Timely Deposit of Overpayment Refund Checks 
170.8  Informal Referral to RO  
180  Reserved 
190  Collection of Fee-for-Service Payments Made During Periods of Medicare Advantage (MA) 
Enrollment 
200 - Section 935 of the Medicare Modernization Act (MMA) - Limitation on Recoupment 
Overpayments 
200.1 - Limitation on Recoupment Section 935(f)(2) Eligibility  
200.1.1 - Overpayments Subject to Limitation on Recoupment: 
200.1.2 - Overpayments Not Subject to Limitation on Recoupment 
200.1.3 - Adjustment of the Fee-For-Service Claims  200.1.4  The Rebuttal Process and the Limitation on Recoupment 
200.1.5-  Extrapolated 935 Overpayments 
200.1.6  Medicare Secondary Payer (MSP) Provider Duplicate Primary Payment (DPP) 
200.1.7  Immediate Recoupment Requirements for 935 Overpayments 
200.2 - Requirements for All Initial Demand Letters (Manual or Ecectronic) 
200.2.1  935 Initial Demand Letter  
200.2.2 - Recoupment After The Initial Demand:  When Does it Begin? 
200.2.3 - Payments Made Upon Notice of Demand or Through An Immediate    
                Recoupment  Request  
200.2.4  Payment Suspension Relating to Limitation on Recoupment 
200.2.5 -  Timeframe for Receiving, Validating and Flagging in the System to   
                 Stop Recoupment for all Redetermination Requests  
200.3 - What to Do After the Validated Redetermination is Received 
200.3.1 - Outcome From the Redetermination Decision   
200.3.2 - Administrative Law Judge (ALJ) Third Level of Appeal 
200.4 - Extended Repayment Schedules (ERS) with an Appeal That is Subject to Limitation on 
Recoupment 
200.5 - Reserved for Future Use 
200.5.1 - Reserved for Future Use 
200.5.2 -Assessment of 935 Interest 
200.6 - Interest Rate and Calculation Periods for Appeal Decisions on Recouped Funds for 
Purposes of Paying 935 Interest 
200.6.1 - Calculations for Each 30-Day Period at the ALJ Decision or a Final 
Determination Date 
200.6.2 - Computing 935 Interest at the ALJ and Higher Levels  
200.6.3 - How to Calculate 935 Interest: 
200.6.4 - Obligation to Pay the Providers, Physicians, or Suppliers Late Payment Interest 
200.7 - Tracking and Report on Limitation of Recoupment Overpayments  NOTE: Revision 3 includes a cross reference to the source sections in current manuals. The manual is 
identified by A1, A2, A3, or A4 for Intermediary Manual Parts 1 through 4; or by B1, B2, B3 or B4 for 
Carriers Manual Parts 1 through 4. This indicator is followed by a dash and the related section number. 
10 - Overpayments Determined by the FI or Carrier   
(Rev. 29, 01-02-04) 
Overpayments are Medicare payments a provider or beneficiary has received in excess of amounts due 
and payable under the statute and regulations.  Once a determination of an overpayment has been made, 
the amount is a debt owed by the debtor to the United States Government. 
Under the Federal Claims Collection Act of 1966, as amended, each agency of the Federal Government 
(pursuant to regulations jointly promulgated by the Attorney General and the Comptroller General of the 
U.S.) must attempt collection of claims of the Federal Government for money arising out of the 
activities of the agency.  The FI or carrier will not be liable for overpayments it makes to debtors in the 
absence of fraud or gross negligence on its part, however once an intermediary or carrier determines an 
overpayment has been made it must attempt recovery of overpayments in accordance with CMS 
regulations. 
The Federal Claims Collection Act requires timely and aggressive efforts to recover overpayments, 
including efforts to locate the debtor where necessary, demands for repayment, and establishment of 
repayment schedules, suspension of interim payments by intermediaries to institutional providers, and 
recoupment or setoff, where appropriate. 
In addition, The Debt Collection Improvement Act of 1996 requires Federal agencies to refer eligible 
delinquent debt to a Treasury designated Debt Collection Center (DCC) for cross servicing and offset.  
CMS is mandated to refer all eligible debt over 180 days delinquent for cross servicing and offset. 
This chapter deals with two general types of overpayments.   
Aggregate overpayments involve a group or all of a Part A providers claims, e.g., overpayments 
discovered at cost-report settlement time or change of FI, overpayments resulting from a pattern of 
improper application of Medicare coverage provisions, overpayments resulting from a periodic interim 
payment adjustment, situations involving provider failure to file a cost report, or occasions of fraud or 
program abuse.  Aggregate overpayments are described in 10.1, 20 and 30 of this chapter and 
Chapter 4, Debt Collection.   
Individual overpayments refer to incorrect claims payment for services under Part A or Part B.  
Individual overpayments are described in 10.2, 80ff and Chapter 4, Debt Collection.  Medicare 
Secondary Payer (MSP) instructions can be found in the Medicare Secondary Payer Manual, CMS 
Publication 100-5. 
 
10.1 - Aggregate Overpayments  
(Rev. 29, 01-02-04) 
 
A.  Stitutional Providers Serviced By Fis 
 
Aggregate overpayments to providers (overpayments arising in other than individual cases) may occur 
by: 
 
  A pattern of furnishing and billing for excessive or noncovered services (see  Program Integrity 
Manual); 
  Inclusion of non-allowable or excessive costs in the provider's cost report;    Excessive interim payments made to the provider; 
  Failure to repay accelerated payments; 
  Failure to file cost reports (Chapter 3, 30);or 
  Determination of amounts due upon filing the cost report, during desk review, final settlement 
and reopening of the cost report. 
 
10.2 - Individual Overpayments  
(Rev. 29, 01-02-04) 
An individual overpayment is an incorrect payment for provider or physician services made under title 
XVIII. 
Examples of individual overpayment cases are: 
  Payment for provider, supplier or physician services after benefits have been exhausted, or where 
the individual was not entitled to benefits. 
  Incorrect application of the deductible or coinsurance. 
  Payment for noncovered items and services, including medically unnecessary services or custodial 
care furnished an individual. 
  Payment based on a charge that exceeds the reasonable charge. 
  Duplicate processing of charges/claims. 
  Payment to a physician on a non-assigned claim or to a beneficiary on an assigned claim.  
(Payment made to wrong payee.) 
  Primary payment for items or services for which another entity is the primary payer 
  Payment for items or services rendered during a period of non-entitlement. 
 
20 - Recovery of Cost Report Overpayments- Cost Report Filed   
(Rev. 29, 01-02-04) 
 
Providers of services under Part A of the Medicare program are normally required to submit a cost 
report.  A cost report must be submitted for each cost reporting year or upon termination of the 
Medicare agreement. 
 
20.1 - Part A Provider is Participating in Medicare and Medicaid 
(Rev. 29, 01-02-04) 
When the provider files a cost report indicating an overpayment, a final determination is deemed to have 
occurred if the cost report is not accompanied by payment in full.  Where the provider does not remit the 
overpayment in full, the FI sends the first demand letter notifying the provider that it will reduce or 
suspend interim payments in 15 days if the provider does not make repayment arrangements.   
If an overpayment is determined as a result of a tentative settlement, final settlement, interim rate 
adjustment, or reopening the FI sends the first demand letter within 7 calendar days. (See Chapter 4, 
20)   
When the Notice of Program Reimbursement (NPR), which is sent at the conclusion of an audit, results 
in an overpayment a first demand letter must also be sent.  The NPR and the first demand letter may be 
sent simultaneously, the first demand letter may be sent as a separate document or the first demand letter  may be incorporated into the NPR. If the issuance of the NPR changes the facts as stated in prior 
demand letters, the FI shall include in the NPR an explanation of the revised overpayment amount. 
See Chapter 4, 40 to determine if the overpayment requires a withhold of payments. 
If the provider does not respond within 30 days after the date of the first demand letter, the FI sends a 
second demand letter notifying the provider of the FIs intent to recoup the overpayment from interim 
payments. (If the current percentage of withhold is less than 100%, the demand letter shall state that 
interim payments will be withhold at 100% in 30 days if repayment arrangements are not made.)  If 
appropriate, the FI shall advise the provider that action to withhold its Federal share of Medicaid 
payments has been requested.  The FI shall attempt to make personal (or telephone contact) with the 
provider, 15 days after sending the second demand letter to encourage either a lump-sum refund or a 
request for an extended repayment plan. It shall document each contact. (See Chapter 4, 10-20)   
If there is no response or if the overpayment is still outstanding 30 days after the date of the second 
demand letter the FI shall send a third demand letter.  If eligible, the third demand letter shall include 
notification of the intent to refer the entire debt to the Department of Treasury for additional collection 
action. (See Chapter 4, 20) 
 
20.2 - Provider is No Longer Participating in Medicare and Not Participating in 
Medicaid 
(Rev. 29, 01-02-04) 
 
If the FI becomes aware that there is an imminent likelihood that a provider will be terminating from the 
Medicare program it shall contact the RO with regard to future collection efforts.   
If the FI discovers an overpayment upon the filing of a cost report, or on determination of program 
reimbursement, with respect to a provider no longer participating in Medicare, it shall immediately 
contact the terminated provider to obtain a refund in a lump-sum, if it has not been made. 
The first demand letter shall be sent and all subsequent collection activities performed as specified in 
20.1 and Chapter 4, 10-20. 
If the terminated provider has sold the entity to a participating provider refer to Chapter 3, 130 for change 
of ownership instructions. 
 
20.3 - Provider is No Longer Participating in Medicare But Is Participating in 
Medicaid 
(Rev. 29, 01-02-04) 
If the FI discovers an overpayment upon the filing of a cost report, or on determination of the amount of 
program reimbursement for a former Medicare provider that is still participating in Medicaid, it shall 
immediately contact the provider to obtain a refund in a lump sum, if it has not been made. 
The first demand letter shall be sent and all subsequent collection activities performed as specified in 
20.1 and Chapter 4, 10-20. 
The first demand letter must provide notice (See Chapter 4, 10-20 and 60) that action to withhold its 
Federal share of Medicaid payments will be requested if repayment arrangements are not made within 
15 days of the date of this notice.  The second demand letter must provide notice that action to withhold 
its Federal share of Medicaid payments has been requested and will be initiated if repayment 
arrangements are not made.  The FI shall send the third demand letter 30 days following the second 
where the provider has not responded, even though procedures for withholding the Federal share of 
payments in title XIX have been initiated, so that if recoupment efforts and withholding of Medicaid 
funds are not effective, the case will be ready for referral to the Department of Treasury.    If the terminated provider has sold the entity to a participating provider refer to Chapter 3, 130 for change 
of ownership instructions. 
 
30 - Recovery of Cost Report Overpayments - Overdue Cost Report 
(Rev. 29, 01-02-04) 
 
When a provider fails to submit a cost report by the due date the FI shall take recovery action to notify 
the provider that submission of the cost report is required and that additional collection action will 
continue until an acceptable cost report is submitted. 
 
30.1 - Provider is Participating in Medicare and Medicaid 
(Rev. 29, 01-02-04) 
 
A.   General 
For a participating provider, the cost report required for each cost report period is due on or before the 
last day of the fifth month following the end of that particular cost report period.  For cost reports 
ending on a day other than the last day of the month, cost reports are due 150 days after the last day of 
the cost reporting period. 
If no cost report has been received by the seventh day after the due date (including extensions), the FI 
must send the first demand letter in Chapter 4, 20.  (The seven-day timeframe allows for processing 
and mail time.)  In addition the FI must initiate 100% suspension of all Medicare payments on day seven 
if the cost report has not been received, an extension request has not been received and approved or a 
reduction in the rate of suspension has not been approved.  (See Chapter,    )   
If the provider does not respond within 30 days of the first demand letter, the FI shall send the second 
demand letter. (See Chapter 4, 20) 
The FI shall make a personal (or telephone) contact with the provider 15 days after mailing the 
second demand letter.  It shall determine any problems the provider might be having in preparing 
the cost report, and if, and when, the provider expects to complete and submit it.  It shall 
document the provider's response. 
If the provider does not respond within 30 days of the second demand letter, the FI shall send the third 
demand letter. (See Chapter 4, 20) 
30.2.-.Provider is No Longer Participating in Medicare and Not Participating in 
Medicaid 
 
30.3 - Provider is No Longer Participating in Medicare But is Participating in 
Medicaid: One or More Cost Reports Not Filed 
(Rev. 29, 01-02-04) 
Where a provider's agreement under title XVIII has terminated and one or more cost reports 
have not been submitted the FI shall send the first demand letter.  Requirements for this letter are 
in Chapter 4, 20.  Since this situation involves not only a terminated provider but a provider that 
has failed to meet the basic obligation (submission of a cost report) for the period when it did 
participate, the first demand letter provides notice that initiation of the procedure for withholding 
the Federal share of Medicaid payments will begin in 15 days if the FI does not receive the cost 
report.  The FI shall continue sending demand letters to the provider.  (Chapter 4, 20 for the requirements for 
the second and third demand letters)  The demand letters must be sent at 30-day intervals where the 
provider has not responded even though the procedures for withholding the Federal share of Medicaid 
payments have been initiated.) This must be done so that if recoupment efforts and the withholding of 
Medicaid payments are not effective, the case will be ready for referral to the Department of Treasury. 
40  Recovery of Claims Accounts Receivables from the Provider - FI 
(Rev. 29, 01-02-04) 
 
Intermediary claims A/R arises from adjustments in the intermediarys claim processing systems (this 
type of adjustment may also be referred to as a carryover adjustment).  Some of the reasons these 
adjustments occur include the duplicative processing of a claim, payment of a claim at the wrong 
Diagnostic Related Group (DRG) rate, a request from a provider, a determination by the intermediary that 
an adjustment was required, or an adjustment created from a credit balance report, CMS-838.  These 
adjustments are normally recovered through the recoupment of future claims and the recovered amounts 
are included in the remittance advices to the providers.  For additional information see Chapter 4, 
70.15.2. 
    
40.1  Demand Letter Contents  
(Rev. 315, Issued: 05-17-19, Effective: 06-18- 19, Implementation: 06-18-19) 
 
The term Medicare beneficiary identifier (Mbi) is a general term describing a beneficiarys Medicare 
identification number. For purposes of this manual, Medicare beneficiary identifier references both the 
Health Insurance Claim Number (HICN) and the Medicare Beneficiary Identifier (MBI) during the new 
Medicare card transition period and after for certain business areas that will continue to use the HICN as 
part of their processes. 
The FI will demand an overpayment resulting from a claims adjustment if the claims adjustment has had 
no recoupment in the past 60 days.   
The demand letter must include the following information:   
  That an overpayment was made; 
  That interest will begin to accrue if the overpayment is not paid in full within 30 days; 
  The name and Medicare beneficiary identifier of the beneficiary involved; 
  The dates and types of services for which the overpayment was made to include sufficient 
information for the provider to identify the overpayment; 
  How the overpayment was calculated; 
  Why it is liable for recovery of overpayment (i.e., the reasons for finding the provider at fault); 
  That recoupment of the overpayment from all available payments is occurring; 
  A reference to the Appeals rights in the remittance advice; 
 
40.2- Sample Demand Letter for Claims Accounts Receivables 
(Rev. 41, 04-30-04) 
 
Below is a sample demand letter that FIs may use when demanding Claims Accounts Receivables.  The 
Extended Repayment Plan enclosure can be found at Chapter 4, 20, Exhibit 2.   
 
Date 
      Certified Mail  
 
Name/Address 
 
 
Re:   Provider Number 
  Claims Accounts Receivable 
 
Dear _____: 
 
On ____________, a claim adjustment was entered in our system under provider _____ for 
$___________.  Since then, adjustments were made to the claim and a balance in the amount of 
$______________ has been outstanding for 60 days.  As this amount has not been recouped through 
claims submission, the purpose of our letter is to request that this amount be repaid to our office.  For 
your reference, a copy of the Claims Accounts Receivable Transaction Summary is enclosed. (Insert the 
name of the detailed summary report enclosed.  This report should include sufficient information needed 
by the provider to identify the overpayment). 
 
Submit your check payable to ______________, to the following address: 
 
In order to ensure that your check is credited to this overpayment, please enclose a copy of this letter 
with your payment.   
 
Until payment in full is received or an acceptable extended repayment request is received all payments 
due to you are being withheld. (This includes claims, settlement amounts, or interim payments.)  If you 
have reason to believe that withhold should cease you must notify our office before __________ and 
provide documentation as to why this withholding action should not continue.  We will review your 
documentation, but will not delay recoupment during the review process.  This is not an appeal of the 
overpayment determination.   
 
In addition, in accordance with 42 C.F.R. 405.378, simple interest at the rate of ____% will be charged 
on the unpaid balance of the overpayment, beginning on the 31st day.  Interest is calculated in 30-day 
periods and is assessed for each full 30-day period that payment is not made on time. Thus, if payment 
is received 31 days from the date of this letter, one 30-day period of interest will be charged.  Each 
payment will be applied first to accrued interest and the remaining amount to principal.  
 
Additional interest of $___ will be assessed against the principal balance on ____ and will continue to 
assess at the rate of ___% a year for each 30-day period the principal amount remains unpaid.  In 
addition, please note that Medicare rules require that payment be either received in our office by ___ or 
United States Postal Service postmarked by that date in order for the payment to be considered timely.  
A metered mail postmark received in our office after ___ will cause an additional months interest to be 
assessed on the debt.   
 
We request that you refund this amount in full.  If you are unable to make refund of the entire amount at 
this time, please advise our office immediately so that we may determine if you are eligible for a 
repayment schedule (See enclosure for details).  Any repayment schedule (where one is approved) 
would run from the date of this letter.  If we do not hear from you, your interim payments will continue 
to be withheld and applied towards the outstanding overpayment balance.  Any amount withheld will 
not be refunded.   
  If you feel you have reason to appeal this adjustment, please refer to the original remittance advice dated 
_______ for additional instruction.  
 
If you have filed a bankruptcy petition or are involved in a bankruptcy proceeding, Medicare financial 
obligations will be resolved in accordance with the applicable bankruptcy process.  Accordingly, we 
request that you immediately notify us about this bankruptcy so that we may coordinate with both the 
Centers for Medicare & Medicaid Services and the Department of Justice so as to assure that we handle 
your situation properly.  If possible, when notifying us about the bankruptcy, please include the name 
the bankruptcy was filed under and the district where the bankruptcy is filed.   
 
If you have a question regarding why these adjustments were made, please contact our ___________at 
________.   If we can assist you further in the resolution of this matter, we will be glad to do so.  We 
look forward to hearing from you shortly.   
 
Sincerely,   
 
(name and title) 
 
50 - Recovery of Overpayments When a Provider Changes Its FI- FI Only 
(Rev. 29, 01-02-04) 
 
Where CMS approves a change of FI, the change is effective on the first day following the close of the 
fiscal year in which the provider gave timely notice.  (See Medicare Claims Processing, Chapter 1, 
General Billing Requirements.) 
50.1 Action By Outgoing FI 
(Rev. 29, 01-02-04) 
The outgoing FI is responsible for effectuating final settlement for the cost report periods during which 
it serviced the provider.  It issues the reminder letter to ensure the timely receipt of the cost report as 
well as any NPRs and demand letters.  The outgoing FI is also responsible for assuring that the 
incoming FI is aware of the outstanding overpayment and that recoupment is initiated by the 
withholding of interim payments, if necessary.  If the overpayment remains uncollected, the outgoing FI 
is responsible for initiating the withholding of Title XIX payments (Medicaid) and for referring the 
overpayment to the Department of Treasury.  The outgoing FI must copy the incoming FI on all 
correspondence with the provider to ensure a timely collection process. 
 
A.   Notification to Incoming FI 
When the outgoing FI is notified by the RO that the provider's request for a change of FI has been 
approved, it shall notify the incoming FI in writing of all outstanding program overpayments.  It 
shall include: 
  The cost reporting period; 
  The date the overpayment was determined;  
  Explanation of the type of overpayment, e.g., cost report overpayment - desk review, cost report 
overpayment - audit;  
  The current status of collection action, including any withhold that is currently in place to recoup 
the overpayment; and    The original balance of the overpayment and the current principal and interest balance of the 
overpayment. 
 
The outgoing FI should also notify the incoming FI of future settlements that will be occurring and of 
any unfiled cost reports. 
 
B.   Notice of Intent to Suspend Interim Payments 
 
If at the time of the change of FI the outgoing FI is recouping an overpayment by the withholding of 
interim payments the incoming FI will continue the withhold.  The outgoing FI must notify the provider 
that the withhold will be continued by the incoming FI until the overpayment is liquidated or an 
acceptable ERS is approved.  In addition, the outgoing FI must notify the incoming FI of the details of 
the withhold. 
 
If after the change of FI occurs the outgoing FI determines that an overpayment exists the outgoing FI 
must notify the provider in accordance with normal procedures.  The current FI should receive a copy of 
all NPRs and demand letters. The outgoing FI must contact the current FI to make sure that recoupment 
begins when necessary.  
 
50.2  Action by Incoming FI  
(Rev. 29, 01-02-04) 
 
The incoming FI is responsible for effectuating final settlements for the cost report periods after the 
change of FI becomes effective.  If the FI receives a cost report from a prior period it should forward it 
to the outgoing FI to make the final settlement.  If the outgoing FI is no longer participating in the 
Medicare program, the incoming FI shall contact the RO for further instructions. 
 
After the outgoing FI has completed its review of the cost report, it notifies the incoming FI whether the 
cost report is acceptable, and the final settlement.  The incoming FI, in accordance with Ch. 4, 40, 
disposes of funds withheld during the suspension of interim payments (for an unfiled cost report) and 
initiates recoupment by the withhold of interim payments if necessary. 
 
While overpayments are outstanding at the outgoing FI, the incoming FI must keep the outgoing FI up 
to date regarding the providers location and participation in the Medicare program.  If the incoming FI 
learns of a providers termination from the Medicare program it must notify the outgoing FI so that it 
may act accordingly. 
 
A.  Reduction of Outstanding Overpayment 
 
Any actions taken by the incoming FI which reduce or eliminate the overpayment made by the outgoing 
FI shall be communicated, in writing, to the outgoing FI within 5 working days after the month in which 
the actions occurred.  In addition, unless the provider indicates to the contrary, any collections or 
payment are applied first to the earliest overpayment.  See Chapter 5, Financial Reporting for 
instructions on transferring any payment(s) between FIs. 
 
60 - Interim Rate Adjustments and Periodic Interim Payment Adjustments  FI only 
(Rev. 29, 01-02-04) 
 
The interest provisions of Chapter 4, 30 do not apply to FI overpayments or underpayments determined 
as a result of interim rate and periodic interim payment (PIP) adjustments or utilization reviews.  If 
necessary, an interim rate or periodic interim payment adjustment shall occur prior to the end of the cost  reporting year.  When this occurs, the interim rate or periodic interim rate is adjusted for the remainder 
of the cost reporting year in order to have aggregate payments approximate total allowable costs.  This 
adjustment is based on any overpayment or underpayment determined as a result of the interim review.  
Since payments are adjusted, this overpayment or underpayment should not exist at the end of the cost 
reporting year. 
 
If the adjustment of the payments would provide a hardship to the provider and an extended repayment 
plan is requested instead, interest shall accrue on the overpayment.  The interest rate charged shall be the 
rate in effect on the date the notice of payment adjustment was sent to the provider unless a specific 
instruction is issued as in the case of Interim Payment System (IPS) recoveries for FY 1998 & 1999 
(Transmittal A-99-47).  This is true for any entity that is reimbursed in such a way that interim rate 
adjustments and/or periodic interim payment adjustments are required. 
 
If the review is completed after the end of the cost reporting year or after the cost report is filed, 
adjustments to the interim or periodic rate are not possible.  In this case any determined overpayment or 
underpayment shall be considered in conjunction with the final settlement.  By taking the overpayment 
or underpayment into consideration with the tentative or final settlement the FI will issue a tentative 
settlement payment, tentative settlement demand letter, or Notice of Program Reimbursement.  When a 
demand letter or Notice of Program Reimbursement is issued, interest will be assessed if necessary, and 
the provider will be notified of its appeal rights.  Any determined overpayment shall then be recouped. 
70  Determining Liability and Waiver of Recovery for Overpayments 
(Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) 
 
The Medicare law contains three provisions (1870, 1879 and 1842(l)) dealing with liability for, and 
recovery of, individual overpayments. These provisions do not cover cost report overpayments. These 
provisions are reflected below and, for a more extensive treatment, in Medicare Claims Processing 
Manual, Publication 100-04, Chapter 31, Financial Liability Protections. 
 
The contractor shall determine whether the provider, physician, or beneficiary is liable for the 
overpayment. Most contractor payments for provider services are made to providers on behalf of the 
beneficiaries who received the services. If payment is made directly to the beneficiary, liability always 
lies with the beneficiary unless recovery is waived under the limitation of liability provision. Where the 
provider or physician has been overpaid, it is liable for the overpayment unless the contractor 
determines that it was without fault with respect to the overpayment. 
 
If the contractor determines that an overpaid provider or physician was without fault and therefore not 
liable for the overpayment, it relieves the provider of liability for the overpayment. The beneficiary 
automatically becomes liable, whether or not the beneficiary was at fault. 
 
However, recovery from the beneficiary may be waived if you determine the beneficiary is without fault 
and recovery would defeat the purposes of Title II or Title XVIII or would be against equity and good 
conscience. 
70.1- 1879 Determination  Limitation of Liability 
(Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) 
 
Section 1879 of the Social Security Act (the Act) provides financial relief to beneficiaries, providers, 
practitioners, and other suppliers who acted in good faith in accepting or providing services found to be 
not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the  functioning of a malformed body member, or to constitute custodial care. The provision applies to all 
Part A/Part B claims decisions where claims are denied or reduced (prepay or postpay) under 1862(a) 
(9) and 1879 (e) and (g) of the Act. 
Contractors must make an individualized determination for each claim that is denied as not reasonable 
and necessary. (See Medicare Program Integrity Manual (PIM), Publication 100-08, Exhibits, 14.1) 
 
A.  Limitation on Liability  Indemnification Procedures for Claims Filed under Part B 
 
Section 1879(b) of the Act provides that, when a physician/supplier is held liable for the payment of 
expenses incurred by a beneficiary for items or services determined to be excluded and such 
physician/supplier requests and received payment from the beneficiary or any person(s) who assumed 
financial responsibility for payment of expenses, the Medicare program will indemnify the beneficiary 
or other person(s) for any payments made to the liable physician/supplier (including deductible and 
coinsurance payments). Further, any such indemnification payments are considered overpayments to the 
physician/supplier. (See PIM Exhibits, 14.1.) 
 
 
B.  Limitation on Liability Where Physician and Beneficiary Did Not Have Prior Knowledge With 
Respect to Services Found To Be Not Reasonable And Necessary Services (1879 of Act) 
 
When both the physician and the beneficiary did not have prior knowledge with respect to services 
found to be not reasonable and necessary, permit Medicare payment to be made under the limitation on 
liability provision.  (See Medicare Program Integrity Manual (PIM), Publication 100-08, Exhibits, 
14.1) An overpayment does not exist if a determination is made that the limitation of liability provision 
applies. The claim decision must incorporate a limitation of liability determination. 
 
70.2 - 1842(l) Determination  
(Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) 
 
For denials of nonassigned claims based on 1862(a)(1) involving physician services, the contractor 
must make a determination under 1842(l) of the Act regarding whether the physician or supplier must 
refund any payment collected from the beneficiary. This should be done for initial determinations 
(prepay) and for postpayment denials. (See Medicare Program Integrity Manual (PIM), Publication 100-
08, Exhibits, 14.3) 
 
 
70.3 - 1870 Determination  Waiver of Recovery of an Overpayment  
(Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) 
 
Once the contractor has concluded that an overpayment exists (that is, a finding that payment cannot be 
made under the waiver of liability provisions) it makes a 1870(b) determination regarding whether the 
provider/beneficiary was without fault with respect to the overpayment. Once this determination has 
been made, then waiver of recovery of the overpayment from the provider/beneficiary should be 
considered per 1870(c). 
 
The contractors make a 1870 determination for all assigned and non-assigned claims, however, 1870 
(b) or (c) of the Act, does not apply to the provider on non-assigned post-payment 1862(a)(1) denied 
claims. However, it can apply to the beneficiary meaning that the beneficiary was not at fault in causing  the overpayment. The provider may have a refund obligation to the beneficiary, but the provider did not 
receive an overpayment from the Medicare program. 
 
Section 1870 is not limited to claims denied under 1862(a)(1) of the Act for not being reasonable and 
necessary. Section 1870 is the framework for determining who is liable for the overpayment and 
whether the overpayment recovery can be waived. For providers taking assignment, waiving recovery of 
an overpayment is appropriate where the provider was without fault with respect to causing the 
overpayment. Where recovery from the provider is waived per 1870(c), the overpayment becomes an 
overpayment to the beneficiary. However, if the provider was at fault in causing the overpayment, 
recovery of the overpayment from the provider must proceed. Section 1870 waiver of recovery 
determinations also must be made where the provider mistakenly receives direct payment on an 
unassigned claim and this is the basis for the overpayment. 
 
Examples of 1870 determinations: 
 
A.  Overpaid Provider or Physician Not Liable Because It Was Without Fault (1870(b) of the 
Act.) 
 
If a provider was without fault with respect to an overpayment it received (or is deemed without fault, in 
the absence of evidence to the contrary, because the overpayment was discovered subsequent to the fifth 
calendar year after the year of payment) it is not liable for the overpayment; therefore, it is not 
responsible for refunding the amount involved. The contractor makes these determinations. 
 
B.  Beneficiary Liable for Overpayments to Provider That Was Without Fault With Respect to the 
Overpayment (1870(a) and (b) of the Act) 
 
If an overpaid provider was without fault, or is deemed without fault and therefore not liable for refund, 
liability shifts to the beneficiary. If the overpayment involves services that are not reasonable and 
necessary, you should have made a 1879 determination regarding the beneficiarys liability for the 
overpayment. If the overpayment does not involve medically unnecessary services, then limitation on 
liability does not apply. 
 
C.  Contractor Waiver of Recovery from Beneficiary (1870(c) of the Act) 
 
If a beneficiary is liable for an incorrect payment, recovery may be waived if the beneficiary was 
without fault with respect to the overpayment and recovery would defeat the purposes of title II or title 
XVIII of the Social Security Act (i.e., cause financial hardship) or would be against equity and good 
conscience. (Where an overpayment is discovered subsequent to the fifth calendar year after the year the 
payment was made, recovery is deemed against equity and good conscience if the beneficiary was 
without fault.) 
 
If 1879 of the Act is applicable, then 1879 determination is made first since an overpayment does not 
exist if payment can be made under 1879 because there was lack of knowledge by both the beneficiary 
and the provider. 
 
80  Individual Overpayments Discovered Subsequent to the Fifth Year 
(Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) 
 
There are special rules that apply when an overpayment is discovered subsequent to the fifth year 
following the year in which notice was sent that the amount was paid. Ordinarily, the provider or  beneficiary will be considered without fault unless there is evidence to the contrary. In the absence of 
evidence to the contrary, the contractor will not demand and recover the determined overpayment. (One 
example of evidence to the contrary would be a pattern of billing errors. See Medicare Program Integrity 
Manual, Publication (PIM) 100-08, Chapter 3.) 
 
EXAMPLE 1: On May 9, 2016 Dr. A is notified that he has been paid $1005.00 for services provided 
to Mr. Smith, beneficiary. On January 6, 2022 the contractor determines that Dr. A was overpaid for the 
services to Mr. Smith, beneficiary. The contractor will not recover this overpayment as long as there is 
no evidence to the contrary because it was determined subsequent to the fifth year after notification of 
payment. (Any determination date on or after Jan. 1, 2022 will not be recovered.)(If evidence to the 
contrary existed, recoupment may be initiated. The PIM should be referenced and if necessary the 
appropriate Benefits Integrity unit at the contractor for guidance.) 
EXAMPLE 2: On May 9, 2016 Dr. A is notified that he has been paid $1005.00 for services provided 
to Mr. Smith, beneficiary. On September 20, 2019 the contractor determines that Dr. A was overpaid for 
the services to Mr. Smith, beneficiary. The contractor will attempt recovery of the overpayment. (Any 
determination dates up to and including Dec. 31, 2021 will be recovered.) 
 
80.1  How to Determine the Fifth Calendar Year after the Year the Payment Was 
Approved 
(Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) 
 
Only the year of the payment and the year it was found to be an overpayment enter into the 
determination of the 5-calendar year period. The day and the month are irrelevant. With respect to 
payments made in 2016, the fifth calendar year thereafter is 2021. For payments made in 2017, the fifth 
calendar year thereafter is 2022, etc. Thus, the rules apply to payments made in 2016 and discovered to 
be overpayments after 2021, to payments made in 2017 and discovered to be overpayments after 2022, 
etc.   
 
Where an overpayment to a provider, or a physician assignee for medically unnecessary services or 
custodial care is discovered (i.e., demanded) subsequent to the fifth calendar year after the year in which 
the payment was approved, the provider or physician assignee is prohibited from charging the 
beneficiary or any other person for the services notwithstanding the fact that the provider or physician 
assignee has refunded the overpayment if: 
 
 The provider or physician assignee was at fault with respect to the overpayment; and 
 
 The beneficiary was without fault with respect to the overpayment. (Where the overpayment is 
discovered in, or before, the fifth calendar year, an "at fault" provider or physician assignee is not 
prohibited from charging the beneficiary for the overpayment if it has refunded it. However, a without 
fault beneficiary who pays an at fault provider's or physician assignees bill for medically unnecessary 
services or custodial care, can be indemnified in accordance with Medicare Claims Processing Manual, 
Publication 100-04, Chapter 30, Financial Liability Protections. 
 
Reopenings (See Medicare Claims Processing Manual, Publication 100-04, Chapter 29 Appeals of 
Claims Decisions for additional information) 
 
Your initial, or review determination or a decision by a Hearing Officer may be reopened under the 
following conditions: 
  Within 12 months after the date of the determination or decision it may be reopened for any reason; 
 
After such 12-month period, but within 4 years after the date of the initial determination, it may be 
reopened for good cause; or 
 
At any time, if: 
 
- Such initial or review determination was procured by fraud or similar fault of the beneficiary or some 
other person. 
 
If an overpayment is determined based on a reopening outside of the above parameters, the contractor 
will not recover the overpayment. 
 
80.2 - Recovery of Overpayment Due to Overdue Cost Report 
(Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) 
 
Where CMS approves a change of contractor, the change is effective on the first day following the close 
of the fiscal year in which the provider gave timely notice. (See Pub 100-04, Medicare Claims 
Processing Manual, Publication 100-04, Chapter 1, General Billing Requirements.) 
 
A.  Reminder Letter 
 
The outgoing contractor is responsible for effecting final settlement for the cost report periods during 
which it serviced the provider. It issues the reminder letter required under 30.1 to ensure the timely 
receipt of the cost report. 
 
B. First Demand Letter 
 
If no cost report has been filed by the first day after the due date of the cost report (including 
extensions), the outgoing contractor sends the first demand letter in Medicare Financial Management 
Manual, Publication 100-06, Chapter 4, Debt Collection, 20.2, Exhibit l, Column B. It sends copies of 
the reminder letter and the first demand letter to the RO and incoming contractor. Upon receipt of its 
copy of the letter, the incoming contractor suspends the interim payment. 
 
C. Second Demand Letter 
 
The outgoing contractor is responsible for personal contact with the provider, issuing the second 
demand letter, and notifying the RO if appropriate. The contractor shall issue a modified Intent to 
Refer (ITR) Letter for Unfiled Cost Reports, if the provider has not filed the cost report and the 
overpayment balance has not been paid. (See Medicare Financial Management Manual, Publication 
100-06, Chapter 4, 20.2 Exhibit 7 for a sample intent letter) 
 
D. Receipt of Delinquent Cost Report 
 
If the delinquent cost report is sent to the incoming contractor, it sends the cost report to the outgoing 
contractor to make the final settlement. 
 
After the outgoing contractor has completed its review of the delinquent cost report, it notifies the 
incoming contractor whether the cost report is acceptable, and the final settlement. The incoming  contractor, in accordance with Medicare Financial Management Manual, Publication 100-06, Chapter 4, 
40.1, disposes of funds withheld during the suspension of interim payments. 
 
90 - Provider, Physician, or Other Supplier Liability 
(Rev. 275, Issued: 11-18-16, Effective: 02-21-17, Implementation: 02-21-17) 
 
A provider, physician, or other supplier is liable for overpayments it received unless it is found to be 
without fault. The contractor, as applicable, makes this determination. 
 
The contractor considers a provider, physician, or other supplier without fault, if it exercised reasonable 
care in billing for, and accepting, the payment; i.e., 
 
  It made full disclosure of all material facts; and  
  On the basis of the information available to it, including, but not limited to, the Medicare 
instructions and regulations, it had a reasonable basis for assuming that the payment was correct, 
or, if it had reason to question the payment; it promptly brought the question to the contractors 
attention. 
 
Normally, it will be clear from the circumstances whether the provider, physician, or other supplier was 
without fault in causing the overpayment. Where it is not clear, the contractor shall develop the issue. 
 
90.1 - Examples of Situations in Which Provider, Physician, or Other Supplier 
Is Liable 
(Rev. 275, Issued: 11-18-16, Effective: 02-21-17, Implementation: 02-21-17) 
 
In accordance with 90 the following are examples of situations in which the provider, physician, or 
other supplier is liable for an overpayment it received. 
 
A. The Provider, Physician, or Other Supplier Furnished Erroneous Information or Failed to 
Disclose Facts That It Knew or Should Have Known, Were Relevant to Payment of the Benefit. 
 
This includes, among others, situations in which a provider, physician, or other supplier failed to report 
any additional payments he may have received from the beneficiary and situations in which a provider, 
physician, or other supplier failed to request applicable information from the beneficiary including, but 
not limited to, information needed by the contractor to identify cases in which Medicare may be 
secondary payer, or if it did request such information, it failed to annotate the billing form. 
 
(Providers, Physician, or Other Supplier are instructed to ask beneficiaries for, and to annotate the 
claims form with, information needed to help the contractor identify cases in which Medicare may be 
secondary payer, e.g., information about the circumstances of the illness or injury and the availability of 
benefits under an insurance policy or plan.) (See Medicare Claims Processing, chapter 29, Coordination 
With Medigap Insurers.) 
 
EXAMPLE: A provider, physician, or other supplier submitted an assigned claim showing total fees of 
$600. The provider, physician, or other supplier did not indicate on the CMS-1500 that any portion of 
the bill had been paid. After the deductible and coinsurance you determined the amount owed to the 
provider, physician, or other supplier was $480 on the assumption that the provider, physician, or other 
supplier had received no other payment. You later learned that the beneficiary had paid the provider, 
physician, or other supplier $200 before the provider, physician, or other supplier submitted his claim. 
Thus, the payment should have been split; i.e., $400 should have been paid to the provider, physician, or  other supplier and $80 to the beneficiary. The provider, physician, or other supplier was at fault in 
causing the $80 overpayment since he failed to inform you of the amount he had received from the 
beneficiary. 
 
B. Provider, Physician, or Other Supplier Receives Duplicate Payments.  
 
This includes the following situations:  
 
  Provider, physician, or other supplier is overpaid because the contractor processed the 
providers, physicians, or other suppliers claim more than once. If an overpayment to a 
provider, physician, or other supplier is caused by multiple processing of the same charge (e.g., 
through overlapping or duplicate bills), the provider, physician, or other supplier does not have a 
reasonable basis for assuming that the total payment the provider, physician, or other supplier 
received was correct and thus should have questioned it. The provider, physician, or other 
supplier is, therefore, at fault and liable for the overpayment. 
 
  Provider, physician, or other supplier received payment from Medicare on the basis of an 
assignment and a beneficiary received payment on an itemized bill and turned the beneficiary 
payment over to the provider, physician, or other supplier. The provider, physician, or other 
supplier is liable for only the portion of the total amount paid in excess of the providers, 
physicians, or other suppliers portion of the allowable amount. The beneficiary is liable for the 
balance of the overpayment. However, if the beneficiary paid any portion of the coinsurance to 
the provider, physician, or other supplier, the provider, physician, or other supplier is liable for 
that amount also. If the provider, physician, or other supplier protests recovery of the 
overpayment on the grounds that the provider, physician, or other supplier applied all or part of 
the check received from the beneficiary to amounts the beneficiary owed the provider, physician, 
or other supplier for other services, the beneficiary, rather than the provider, physician, or other 
supplier, is liable for refunding such amounts.  
 
EXAMPLE: Dr. A and Mr. B each received duplicate payments of $300 based on reasonable charges 
of $375. Mr. B turned his $300 over to Dr. A. Thus, Dr. A received a total of $600. Mr. B did not owe 
money to Dr. A for other services. Dr. A is liable for $225, which is the amount he received in excess of 
the reasonable charge. Mr. B is liable for the remaining $75 of the duplicate payment. If Mr. B had 
previously paid Dr. A the $75 coinsurance, Dr. A is liable for the entire $300 overpayment.  
 
  Provider, physician, or other supplier receives duplicate payments from Medicare and another 
insurer or plan (directly or through the beneficiary) which is the primary payer, i.e., an 
automobile medical or no-fault insurer, a liability insurer, a WC insurer, or, under certain 
circumstances, an EGHP. (See Medicare Claims Processing, Chapter 29, Coordination With 
Medigap Insurers.) The provider, physician, or other supplier is liable for the portion of the 
Medicare payment in excess of the amount Medicare is obligated to pay as secondary payer. 
(See Medicare Claims Processing, Chapter 29, Coordination With Medigap Insurers and/or 
Medicare Secondary Payer Manual.) However, if the provider, physician, or other supplier turns 
the other insurance payment over to the beneficiary, the beneficiary is liable. 
 
C. The Overpayment Resulted Through Misapplication of the Deductible or Coinsurance 
Requirement or Payment After Exhaustion of Benefits and the Provider, Physician, or Other 
Supplier Could Have Known From Its Own Records the Beneficiary's Utilization Status 
  Part A provider, physician, or other supplier is considered liable if it received a remittance record within 
the 60 days preceding billing indicating deductible and benefit status. This condition is considered met 
where, within the 60-day period preceding the admission that gave rise to the overpayment, the 
beneficiary had been a patient in the same institution or the provider, physician, or other supplier could 
have known the beneficiary's utilization status from its own records. 
 
The provider, physician, or other supplier is expected to ask the beneficiary, or the person acting on the 
beneficiarys behalf, at the time of admission if the beneficiary received inpatient services in a hospital 
or SNF within the past 60 days, and note the response on its records. 
 
EXAMPLE: John Doe entered University Hospital on January 10, 2000. After using all of his benefit 
days, including lifetime reserve days, he returned home, but reentered the same hospital in fewer than 60 
days and stayed an additional 30 days. University Hospital neglected to check its records and billed the 
contractor for 30 days of inpatient hospital care. The contractor made payment. Subsequently, the 
overpayment was discovered. Since the hospital should have known from its own records that Mr. Doe 
had exhausted his benefit days, the contractor shall seek recovery from the hospital. 
 
If the previous stay had been in a different hospital, or if more than 60 days had elapsed between the end 
of the first stay and the start of the second stay but the benefit period had remained unbroken because 
John had been in an SNF or a different hospital, the contractor would consider University Hospital 
"without fault." In this latter situation, the hospital would not have been able to ascertain from its own 
records that benefit days had been exhausted. The contractor would seek recovery from the beneficiary. 
 
D. The Overpayment Was Due to a Mathematical or Clerical Error.  
 
Examples:  
 
  Error in calculation by the contractor in calculating reimbursement;  
  Error by the provider, physician, or other supplier in calculating charges, or 
  Overlapping or duplicate bills. 
 
Mathematical error does not include a failure to properly assess the coinsurance and/or deductible. The 
contractor would determine the liability for coinsurance and deductible overpayments in accordance 
with D. above. Where payment to a provider, physician, or other supplier was based on a deductible 
amount, the provider, physician, or other supplier is without fault. Seek recovery from the beneficiary.  
 
E. The Provider, Physician, or Other Supplier Does Not Submit Documentation to Substantiate 
That Services Billed to the Program Were Covered.  
 
F. The Provider, Physician, or Other Supplier Does Not Submit Documentation to Substantiate 
That It Performed the Services Billed to the Program Where There Is a Question as to Whether 
the Services Were Performed.  
 
(See the Program Integrity Manual, which can be found at the following Internet address: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMs.html, 
if fraud is suspected.)  
 
G. The Beneficiary Was Not Entitled to Part A Benefits and the Provider, Physician, or Other 
Supplier Had Reason to Believe That the Beneficiary Was Not Entitled to Such Benefits.  
  For example, the Social Security Office notified the hospital that the individual was not entitled to 
hospital insurance benefits.  
 
H. The Provider, Physician, or Other Supplier Billed, or Medicare Paid the Provider, Physician, 
or Other Supplier for Services that the Provider, Physician, or Other Supplier Should Have 
Known Were Noncovered.  
 
1. Services Other Than Medically Unnecessary or Custodial Services, e.g., skilled physical therapy 
services furnished by a nonqualified physical therapist, or services rendered pursuant to an authorization 
from the VA. (See Medicare Benefit Policy, Chapter 17, Exclusions.)  
 
In general, the provider, physician, or other supplier should have known about a policy or rule, if: 
 
  The policy or rule is in the provider, physician, or other supplier manual or in Federal 
regulations;  
 
  CMS or a CMS contractor provided general notice to the medical community concerning the 
policy or rule; 
 
  CMS, a CMS contractor, or the OIG gave written notice of the policy or rule to the particular 
provider, physician, or other supplier; 
 
  The provider, physician, or other supplier was previously investigated or audited as a result of 
not following the policy or rule; 
 
  The provider, physician, or other supplier previously agreed to a Corporate Integrity Agreement 
as a result of not following the policy or rule; 
 
  The provider, physician, or other supplier was previously informed that its claims had been 
reviewed/denied as a result of the claims not meeting certain Medicare requirements, which are 
related to the policy or rule; or  
 
  The provider, physician, or other supplier previously received documented training/outreach 
from CMS or one its contractors related to the same policy or rule. 
 
Generally, a provider's, physicians, or other suppliers allegation that it was not at fault with respect to 
payment for noncovered services because it was not aware of the Medicare coverage provisions is not a 
basis for finding it without fault if any of the above conditions is met. However, there may be other 
circumstances that justify a finding that the provider, physician, or other supplier was not at fault. The 
contractor shall consider all of the circumstances, including such factors as whether and to what extent a 
coverage rule is spelled out in regulations, instructions, or in a CMS notice, and whether a contractor 
misinformed the provider, physician, or other supplier about the rule; in deciding whether a provider, 
physician, or other supplier acted reasonably in billing for and accepting payment for noncovered 
services.  
 
2. Medically Unnecessary or Custodial Services.  
 
The contractor shall apply the criteria in Medicare Claims Processing, Chapter 30, Financial Liability 
Protection in determining whether the provider, physician, or other supplier should have known that the 
services were not covered.    
I.  The Overpayment Resulted From Services Rendered in a Nonparticipating  
Portion of the Facility or in a Bed Certified for a Type of Care Other Than That Furnished.  
 
J.  The Physician Was Paid but Did Not Accept Assignment.  
 
The physician is liable whether or not the beneficiary had also been paid.  
 
K.  Overpayment Was for Rental of Durable Medical Equipment and Supplier Billed Under the 
One-Time Authorization Procedure.  
 
Pursuant to Medicare Claims Processing, Chapter 20, suppliers of durable medical equipment who have 
accepted assignment may be reimbursed for rental items on the basis of a one-time authorization by the 
beneficiary; i.e., without the need to obtain the beneficiarys signature each month. A supplier using the 
procedure must have filed with the carrier a statement that it assumes unconditional responsibility for 
rental overpayments for periods after the beneficiary's death or while he was institutionalized or while 
he no longer needed or used the equipment.  
 
L.  Items or Services Were Furnished by Practitioner or Supplier not Qualified for Medicare 
Reimbursement  
 
Two examples of such services are:  
 
  A laboratory test performed by a nonqualified independent laboratory, or  
  Services rendered by a naturopath. 
 
90.2 - Provider, Physician, or Other Supplier Protests Its Liability  
(Rev. 275, Issued: 11-18-16, Effective: 02-21-17, Implementation: 02-21-17) 
 
A providers, physicians, or other suppliers reply to a notification that the provider, physician, or other 
supplier is liable for an overpayment may indicate dissatisfaction with some aspect of the overpayment 
decision. Such a protest shall be considered a request for an appeal. In most instances, this will be a 
redetermination which is the first level of appeal for an overpayment determination. However, if the 
overpayment is identified during the course of the redetermination, the contractor shall consider the 
providers, physicians, or other suppliers protest as a request for reconsideration by the qualified 
independent contractor (QIC). In conducting the appeal, the contractor shall consider whether  
 
a. There was an overpayment;  
b. The amount of the overpayment was correctly calculated; and whether,  
 
The provider, physician, or other supplier is liable for repayment. 
 
100 - Beneficiary Liability 
(Rev. 29, 01-02-04) 
A beneficiary is liable for: 
  Overpayments made to a provider that was without fault with the exception of 
overpayments for medically unnecessary services or custodial care where the beneficiary, as well 
as the provider, was without fault.  (See Medicare Claims Processing, Chapter 30, Limitation on 
Liability.)    Situations in which Medicare pays a provider, and a WC carrier, automobile medical, or 
no-fault insurer or any liability insurer; or EGHP pays primary benefits to the beneficiary for the 
same services.  (See Medicare Secondary Payer Manual) 
  Overpayments made to the beneficiary. 
 
110 - Recovery Where the Beneficiary Is Liable for the Overpayment 
(Rev. 29, 01-02-04) 
 
When the FI or carrier has determined the beneficiary to be liable for the overpayment, it shall initiate 
recovery efforts in accordance with the following sections, as appropriate.  The chart below is meant to 
be a guide.  The actual sections shall be reviewed for additional guidance. 
 
MEDICARE BENEFICIARY NON-MSP 
    OVERPAYMENTS   
            
O/P Amount    Overpayment Notice    Level of Pursuit    Waiver Requests 
            
$0-$49.99    No- refer to Ch. 3 110.2    None    N/A 
            
$50-$999.99    Yes, See Ch. 3 110   Attempt collection    Review all waiver 
following Ch. 3  requests and make a 
110.2.  If case is in  decision to approve 
offset status for one  or deny the waiver 
year with no collection  based on Ch. 3 70. 
activity, refer case to 
RO with a 
recommendation to 
terminate collection 
action. 
            
$1000-$19999.99   Yes, See Ch. 3 110   Attempt collection    Review all waiver 
following Ch. 3  requests and make a 
110.2.  Attempt to  decision to approve 
refer the case to SSA if  or deny the waiver 
applicable.  based on Ch. 3 70. 
 
          
$20000 and over   Yes, See Ch. 3 110   Attempt collection    Review all waiver 
following Ch. 3  requests and make a 
110.2.  Attempt to  recommendation to 
refer the case to SSA if  approve or deny the 
applicable.  waiver based on Ch. 
3 70.  If the 
recommendation is 
for approval, refer the 
waiver request to the 
Regional Office for 
concurrence.  110.1 - Recovery Where the Beneficiary Is Covered Under Medicaid or 
Another Health Insurance Plan, Private or Governmental 
(Rev. 29, 01-02-04) 
When the FI or carrier determines the beneficiary is liable, and the beneficiary carries supplemental 
health insurance or is covered by another Government health benefits program such as Medicaid, 
TRICARE, CHAMPVA, or the Federal Employees Health Benefits Program, it may be possible to 
recover the overpayment from the other plan or program.  Payments of deductible or coinsurance 
amounts and payment for services rendered persons who are not entitled to Medicare are the payments 
most likely to be recoverable. 
If, based on the circumstances of the overpayment and FI or carrier knowledge of the other plan or 
program, the FI or carrier believes there is a possibility that the other plan will refund the overpayment, 
it shall attempt to recover from the other plan or program.  In this connection, it may be necessary to ask 
the beneficiary for their policy number or other information concerning their non-Medicare coverage.  
(See Medicare Claims Processing , Chapter 28, Coordination With Medigap, Medicaid, and Other 
Complementary  Insurers, for procedures to follow where the overpayment is for services that should 
have been paid for by a WC carrier.) 
To facilitate recovery of the Medicare overpayments to the extent possible, where another plan or 
program is involved, the FI or carrier shall attempt to work out mutually satisfactory arrangements with 
the other carrier(s).  In negotiations with Medicaid agencies or carriers, it may be helpful for the FI or 
carrier to point out that Medicare will refund directly to Medicaid agencies overpayments for services 
reimbursed on a charge basis.   
The methods listed below have been used successfully.  The FI or carrier shall use any one or a 
combination, as it finds appropriate.  The most desirable method in a given situation depends upon the 
particular circumstances, and the provisions of the other plan or program. 
  The FI or carrier shall arrange with the other plan or program for direct refund of overpayments to 
it.  If the FI or carrier is also the carrier under the other plan or program, a transfer of funds is the most 
convenient method of recovering.  If another insurance carrier is involved, the FI or carrier shall send 
the other insurance carrier a letter requesting refund of the overpayment.  The letter should explain how 
the overpayment occurred and how it was calculated.  The FI or carrier shall follow up in 30 days with 
another letter or a phone call if payment or a letter of explanation has not been received.  If this does not 
bring a meaningful response, it shall write to the President or Chief Administrative Officer of the other 
carrier. 
  If the FI or carrier does not use the above method for provider overpayments, it shall arrange with 
the other plan or program to make payment to overpaid provider upon the FIs or carriers request, (even 
though the provider has not billed the other plan or program) and to notify the FI or carrier of the 
payment.  Upon receiving such a notice, the FI or carrier shall recover the Medicare overpayment from 
the provider. 
  Where neither of the above methods is possible, the FI or carrier shall ask the provider if it would 
be willing to refund the overpayment and to bill the other plan or program, with the understanding that if 
it is unable to obtain payment, the FI or carrier will refund the amount recovered to the provider. If the 
provider does not agree to refund the overpayment before collecting from the other plan or program, the 
FI or carrier shall ask it to bill the other plan or program and to use the payment to refund the 
overpayment.  If the FI or carrier receives notice that a provider (or a beneficiary) plans to file a claim 
with another plan or program, it shall suspend recovery efforts for a reasonable period. 
If the FI or carrier has questions concerning the proper approach in recovering from a welfare agency, or 
another insurance plan, it should contact its RO.  If efforts to recover the overpayment are not successful, or if the FI or carrier is certain that the other 
plan or program will not refund a particular overpayment, it shall seek recovery from the beneficiary in 
accordance with 110.2.  It shall explain in the notice to the beneficiary that the other plan or program 
will not make payment directly to it.  However, if the beneficiary is a Medicaid recipient, the FI or 
carrier shall not attempt recovery from the beneficiary.   
110.2 - Recovery From the Beneficiary 
(Rev. 315, Issued: 05-17-19, Effective: 06-18- 19, Implementation: 06-18-19) 
 
The term Medicare beneficiary identifier (Mbi) is a general term describing a beneficiarys Medicare 
identification number. For purposes of this manual, Medicare beneficiary identifier references both the 
Health Insurance Claim Number (HICN) and the Medicare Beneficiary Identifier (MBI) during the new 
Medicare card transition period and after for certain business areas that will continue to use the HICN as 
part of their processes. 
To recover a Non-MSP overpayment from a beneficiary, follow the recovery procedure below.  If the 
beneficiary protests following the receipt of a notification of overpayment, handle the protest in 
accordance with 110.9. 
A.     Non-MSP Overpayment Is Less Than $50 
Take no further recovery action.  Do not send a recovery letter, or attempt recoupment.  Also do not refer 
case to CMS for further collection efforts.  See 160.2 for termination of collection procedures. 
B.  Non-MSP Overpayment Amount Is $50 or More 
Upon discovering an overpayment of $50 or more, send the beneficiary a recovery letter containing the 
information in 110.4.  
If there is no response within 30 days after sending the initial recovery letter and none of the conditions 
in 110.3 are present: 
1.  Send a follow-up letter to the beneficiary, and 
2.  Arrange to begin recoupment of the overpayment against any Medicare payments that become due 
the beneficiary on day 60. 
C.  Referral to SSA 
To be considered for SSA referral the overpayment amount must be $1000 or more and the beneficiary 
must be in current pay status.  If, within 90 days of sending the initial demand letter, the overpayment 
has not been recovered and the individual has not requested a reconsideration, hearing or waiver (see 
110.9) Prepare the case for referral to SSA for possible recovery from the individual's social security 
benefits.    
However, if the beneficiary has a Beneficiary Identification Code (BIC) that is either T or M, do not 
refer the case to SSA since those beneficiaries are not entitled to monthly social security benefits. Offset 
should be continued in the case of beneficiaries whose BIC is either T or M.  If appropriate, the 
instructions for termination of collection action (See 110.3D for additional instructions.) should be 
followed.     
The FI or carrier should not refer an overpayment to SSA if it has knowledge that the beneficiary is 
deceased. 
When preparing the case for referral to SSA the following must be included in the case file: 
  Referral Form- contains the address of the referring agency (The Centers 
for Medicare and Medicaid Services (CMS) Central Office, CMS Regional Office, or the 
Medicare Contractor and information pertaining to the case; and    Return Notice- for SSA use in recording information for crediting the CMS 
Trust Fund; and 
 Waiver Determination- if the Medicare Contractor or CMS RO determines 
the beneficiary was at fault for the overpayment. 
NOTE:  The  contractors  file  must  contain  all  overpayment  notification  letters  and 
correspondence from the beneficiary and/or representative.  Contractors may retrieve copies of 
the relevant forms from the servicing regional office or by accessing SSAs Program Operations 
Manual System at http://policy.ssa.gov/poms.nsf/poms.  Access the HI section for Health 
Insurance and then the section number HI 022 titled Medicare Overpayments.  Then access HI 
02201 - Methods of Recovery for Title XVIII Overpayments and finally HI 02201.015 titled 
Appeal Requests and Refunds.  The Beneficiary Overpayment Referral Notice is Exhibit A. 
When an individual or his/her authorized representative receives notice from SSA that a Medicare 
overpayment will be withheld from title II benefits and protests the withholding, the protest applies only 
to the deduction from his/her title II benefits.  It does not apply to the Medicare overpayment because 
the Medicare contractor has determined that the overpayment must be recovered. 
If SSA receives an appeal and/or waiver request, they must stop the process of recovery.   If the 
Medicare Contractor, CMS RO, or the Administrative Law Judge has previously denied a waiver 
request, SSA will then process the overpayment in accordance with current operating procedures.   If the 
individual has not requested waiver with the contractor but files a waiver request with SSA, then SSA 
must return the overpayment package to the appropriate contractor for processing. 
When an individual or his/her representative goes to SSA to request a waiver and/or an appeal of the 
Medicare Overpayment withholding, SSA must complete the following forms, depending on the 
request: 
  Waiver- 
Form 632-BK (Request for Waiver of Overpayment and Recovery of Change in 
Repayment Rate) 
  Appeal 
of Withholding  SSA-795 (Statement or Claimant or Other Person) since the rate of 
the withholding is not an initial determination, does not use the SSA-561 (Request for 
Reconsideration) or HA-501 (Request for Hearing). 
NOTE:  The referral of a Non-MSP beneficiary debt to SSA occurs regardless of the classification of 
the debt for financial reporting. Thus, a referral to SSA should occur even if the debt has been 
reclassified to Currently Not Collectible(CNC). 
 
D. Beneficiary Write-Off between $50- $999.99  
 
If there has been No Activity(i.e. no recoupment) within a 12 month period of a beneficiary Non-MSP 
overpayment that is between $50-$999.99, verify that no collections are being made on any other older 
debts for the same beneficiary before you make a recommendation for write-off to the Regional Office.  
At the end of each Quarter compile a list of all beneficiary Non-MSP overpayments between  $50-$999.99 
to the Regional Office for Write-Off.  Submit this information, including the status of probate, if applicable, with an explanation for the 
 
 
 
Example: 
   
   
Region #                        Carrier #      Medicare beneficiary identifier    Claim #    
xx                                   xxxxx           xxxxxxxxxx                xxxxxxxxxxxxxxxx 
 
 
Claim paid date          Demand letter date       Det. date.               $ amt.           
xxxxxxxx                    xxxxxxxx                     xxxxxxxx                  xxxx       
   
beneficiary Non-MSP overpayment Write-off.  
 
The regional office will be responsible for approval or denial of all recommendations for write-off, 
based on the information submitted by Carrier. 
NOTE: The write off of a Non-MSP beneficiary debt between $50-$999.99 occurs regardless of the 
classification of the debt for financial reporting.  Thus, a request to write off Non-MSP beneficiary debt 
between $50-$999.99 should occur even if the debt has been reclassified to Currently Not Collectible 
(CNC). 
NOTE: Beneficiary overpayments that are greater than $1000 may be recommended for write-off 
following the above instructions if the Medicare contractor has verified from SSA that the beneficiary is 
not in a current pay status.  
                                                               
110.3 - When to Suspend Efforts to Recover From the Beneficiary Following 
the Initial Demand Letter 
(Rev. 29, 01-02-04) 
 
Efforts to recover from the beneficiary should be suspended if any of the following conditions exist: 
 
A.   The Beneficiary Requests Administrative Appeal, or Questions the Overpayment Decision 
 
The FI or carrier shall make no further recovery efforts until it disposes of the appeal request.  (See 
110.9.) 
 
B.  The Beneficiary Requests That Recovery be Waived or States Conditions that Might Qualify the 
Beneficiary for Waiver of Recovery 
 
C.   The Beneficiary Is Receiving Welfare Benefits 
 
If the beneficiary is receiving welfare benefits, i.e., cash benefits or Medicaid, the FI or carrier shall 
ascertain whether the welfare agency will reimburse Medicare for all, or part of, the overpayment.  (See 
110.1.)  If the welfare agency does not refund the overpayment in full, the FI or carrier shall not 
attempt recovery from the beneficiary, unless it is apparent that the beneficiary knew or should have 
known that the payment was incorrect.   
NOTE:  If a beneficiary requests an appeal or a waiver after the overpayment has been referred to the 
SSA for collection from Title II benefits, the SSA processing center will return the overpayment to the 
Medicare contractor to review the waiver and/or appeal. 
110.4 - Content of Demand Letter to Beneficiary 
(Rev. 29, 01-02-04) 
Any correspondence with a beneficiary concerning an overpayment must contain a clear and complete 
explanation of the overpayment.  An overpayment which is not clearly explained is less likely to be 
refunded.  Furthermore, lack of clarity may deprive the individual of sufficient information to decide  whether there is a basis for questioning the carrier's determination.  Clarity is also important because the 
letter may eventually be used by CMS for further recovery attempts.  
The following is the minimum information which shall be included in all overpayment refund letters 
sent to a beneficiary: 
A.  Name and address of physician, date and type of service, charges, date of check, amount of check, 
and name of payee. 
B.  A clear explanation of why the payment was not correct. 
C.  The amount of the overpayment and how it was calculated. 
D.  The beneficiary is required to refund the overpayment. 
E.  The refund should be by check or money order, and how it should be made out (enclose a pre-
addressed envelope). 
F.  The refund can be made by installments.  (See 110.8.) 
G.  Unless a refund is made, the overpayment may be withheld from other Medicare benefits payable to 
the beneficiary, and may be referred to the Social Security Administration for further recovery action. 
H.  Possible recovery from other insurance (if applicable). 
I.  An explanation of the beneficiary's right to a review or hearing as appropriate. 
J.  An explanation of the CMS/SSA waiver of recovery provisions.  (See 170.3.) 
110.5 - Sample Demand Letter to Beneficiary 
(Rev. 29, 01-02-04) 
The FI or carrier may use or adapt the following model letter for requesting refunds of 
overpayments from beneficiaries: 
"Dear Mr. ________: 
A.   Opening Paragraph: 
"In (month and year) we paid (provider's, physicians, suppliers name and location) (you) 
$___________ more than was due for services furnished by ____________ on _________ (from 
__________ through __________) (on __________). We have reviewed the payment and determined 
that it was incorrect.  The correct payment should have been $________________."   
The FI or carrier shall include a clear and complete explanation of how the overpayment arose and how 
it was calculated.) 
It shall add if applicable:  "We have recovered $________________ from (specify source).  Thus, the 
total remaining overpayment is $_______________. 
B.   Liability of Beneficiary When Payment Made to Physician or Supplier 
If payment was made to the physician, add the following: 
"Under the Medicare law, you are responsible for overpayments made on your behalf if the provider of 
services was not at fault in causing the overpayment.  In this case, (provider's, physicians, suppliers 
name) was not at fault.  Therefore, you are liable for the $_____________ incorrectly paid for the 
services you received." 
C.   Request for Refund 
"Please send us a check or money order for $ _________________, within 30 days. Make the check or 
money order payable to (FI or carrier name), and mail it in the enclosed self-addressed envelope.  D.   Possible Offset 
If other Medicare benefits become payable to you and you have not refunded the incorrect payment we 
will withhold the amount you owe from those benefits.  (In the initial letter the FI or carrier shall add: 
beginning 60 days from the date of this letter.) 
E.   Possible Referral to Social Security Administration 
 
If the overpayment is over $1000, add the following: 
If you do not repay this amount, this overpayment may be referred to the Social Security 
Administration (or Railroad Retirement Board) for further recovery action that, among other actions, 
may result in the overpayment being deducted from any monthly social security (or railroad retirement) 
benefits to which you may be entitled. 
F.   Installment Payments 
"If you are unable to refund this amount in one payment, you may make regular installments.  To refund 
in installments, you are required to pay a minimum of $_____________each month for ___ months. 
However, we urge you to pay more each month so that this matter can be settled as soon as possible.  If 
you prefer to repay this overpayment through installments, please notify us promptly how much you are 
able to pay and how often." 
G.   Possible Recovery from Other Insurance 
(The FI or carrier shall not use this paragraph where it has determined that the private insurer will not 
pay.)  
"If you carry private health insurance to supplement your Medicare benefits, you may be able to recover 
the amount of this overpayment by claiming benefits from the other plan, or (name of provider or 
physician) may be able to submit such a claim on your behalf.  If you plan to file a claim with a 
supplemental plan and use the proceeds to refund this overpayment, please let us know.  If you need 
help in filing such a claim, please contact any Social Security office." 
H.   Notification of Appeal Rights 
The notification of appeal rights must be in accordance with the reopening rules in Medicare Claims 
Processing, Chapter 29  Appeals of Claims Decisions. 
NOTE: If the overpayment was for medically unnecessary services or for custodial care, The FI or 
carrier shall begin the first sentence of the appeals paragraph:   
"If you believe that this determination is not correct, or if you did not know that Medicare does not pay 
for these services." 
I,   Notification of Waiver of Recovery Provision 
"The law requires that you must repay an overpayment of Medicare benefits unless you meet both of the 
following conditions: 
  You were without fault in causing the overpayment in that the information you furnished 
in connection with the claim was correct and complete to the best of your knowledge, and you had a 
reasonable basis for believing that the payment was correct, and 
  Paying back the overpayment would keep you from meeting your ordinary and necessary 
living expenses or would be unfair.   
If you claim that repayment will cause you serious financial hardship, it will be necessary to submit a 
statement to the Social Security Administration regarding your income, assets, and expenses. 
If you believe that both conditions for waiver of this overpayment apply in your case, please let us 
know, giving a brief statement of your reasons.  You may contact your Social Security office.  You will  be notified if recovery of this overpayment is waived.  If waiver cannot be granted, you will have the 
opportunity to present your case at a personal conference.  The conference will be conducted by an 
employee of the Social Security Administration who did not participate in the initial waiver 
determination." 
110.6 - Optional Paragraphs for Inclusion in Demand Letters 
(Rev. 29, 01-02-04) 
The FI or carrier should use or adapt the following paragraphs in explaining how the overpayment 
occurred. 
A.   Inpatient Hospital Deductible or Coinsurance Not Properly Assessed - FI 
1.   General - FI 
Medicare pays all costs of covered services furnished during the first 60 days of hospitalization except 
for the first $_____ (the inpatient deductible).  For the 61st through the 90th days Medicare pays all 
costs except for a coinsurance of $_____ per day.  After 90 days of benefits have been used, an 
additional 60 lifetime reserve days are available.  There is $_____ per day coinsurance for each lifetime 
reserve day used. 
2.   Deductible Overpayment 
Our records show that the claim for the inpatient services you received at (provider's name) was 
improperly processed.  Benefits were mistakenly paid for ____ days in full.  However, since these were 
the first inpatient hospital services furnished in this benefit period you are responsible for the deductible 
and the $_____ inpatient hospital deductible should have been subtracted from the reimbursement paid 
(provider's name) on your behalf.  Thus (provider's name) was overpaid by $______. 
3.   Coinsurance Overpayment 
Our records show that the claim for the inpatient services you received at (provider's name and 
address) was improperly processed. Benefits were mistakenly paid for ____ full days (less the $____ 
deductible).  However, since you had previously been hospitalized for ____ days at (name of provider 
where previously hospitalized) during that benefit period, your claim should have been processed as ___ 
full days and ____ coinsurance days (and/or lifetime reserve days).  Therefore (provider's name) has 
been overpaid on your behalf for _____ coinsurance days at $_____ per day and/or lifetime reserve days 
at $______ per day) (less $_____ for the inpatient hospital deductible which was improperly applied to 
your claim).  The total overpayment is $__________. 
 
B.  Deductible Not Properly Assessed -Carrier 
Under Part B of Medicare, no reimbursement may be made for the first $100 of approved charges 
incurred by a beneficiary in each calendar year.  (If pertinent, add: This is true even if you were 
covered under Medicare for only part of the year.)  In these cases explain the computation of the 
overpayment. 
 
C.   Payment Made Under Workers Compensation Law 
We paid $_____________ in benefits for services furnished you by (provider's, physicians or suppliers 
name and location) on (dates).  However, these payments were in error since these services were 
covered under the (State) workers' compensation law and Medicare may not pay for services that are 
covered under workers' compensation.  Since (provider's, physicians, suppliers name) was not at fault 
in causing this overpayment, you are required to refund the $_______________ Medicare paid on your 
behalf.  You may wish to submit the bill for these services to your employer or his workers' 
compensation carrier for payment under the State workers' compensation provisions.   
D.   Beneficiary Not Entitled to Medicare Benefits 
"The Social Security Administration's records show that you were not entitled to (specify Part A 
hospital insurance and/or Part B medical insurance) benefits when these services (item(s)) were 
furnished.  Your Medicare Handbook explains the difference between Part A (hospital) and Part B 
(medical) insurance.  The decision that you were not entitled to these benefits was made by the Social 
Security Administration, and not by (FI or carrier name).  Therefore, if you disagree with this decision, 
or if you have any questions about your entitlement to Medicare benefits, contact your Social Security 
office.  If you go to the Social Security office, take this letter with you. 
110.7 - Recovery Where Beneficiary Is Deceased 
(Rev. 29, 01-02-04) 
Where a beneficiary who is liable for an overpayment dies, the FI or carrier shall attempt to recover 
from such sources as State welfare agencies, or private insurance plans (see 110.1), or withhold the 
overpayment from any underpayments due the beneficiary's estate or due a surviving relative. (See 42 
CFR 424.60) 
If the entire overpayment cannot be recovered by the above methods, it shall send a letter (see sample 
below) addressed to the estate of the deceased at the address of the legal representative if known, or to 
the last known address of the deceased.  It shall include the basic information in 110.5, but shall not 
mention the possibility of installment payments or the possibility of offset against monthly benefits. 
The FI or carrier shall not direct recovery efforts against a person who answered a recovery letter 
concerning an overpayment unless it is known that the individual represents the beneficiary's estate.  It 
shall not recover by offset against underpayments payable to a provider of services or to a person (other 
than the beneficiary's estate) who paid the bill. 
Model Refund Request to Estate of Deceased Beneficiary (FI or carrier shall adapt to Fit the Situation) 
Estate of (deceased beneficiary) (or, if known, "Representative of the Estate of (deceased beneficiary)). 
Dear Sir (or Dear M. ___________ if estate representative's name is known). 
On (date) we paid (provider's, physicians, or suppliers name and location)(deceased beneficiary, if 
applicable) $ ________ more than was due for services furnished by (________) on _____ (from 
______ through _____)."   
(This paragraph should include a clear and complete explanation of how the overpayment 
arose, the amount of the overpayment, how it was calculated, and why the payment was not correct.) 
The FI or carrier shall add if applicable:  
"We have recovered $ __________ from (specify source).  Thus, the total remaining overpayment is 
$________. 
If other Medicare benefits become payable to the estate and you have not refunded the incorrect 
payment, we will withhold the amount owed from those benefits. 
If payment was made to the physician, add the following: 
Under the Medicare law, the beneficiary is responsible for overpayments made on his behalf if the 
(provider, physician) was not at fault in causing the overpayment.  In this case ((provider, physician) 
name) was not at fault. Therefore, the estate of (deceased beneficiary) is liable for the $________ 
incorrectly paid to ((provider, physician) name) for the services it furnished (deceased beneficiary). 
Please send us a check or money order in the amount of $ ___________ payable to (FI or carrier name) 
in the enclosed, self-addressed envelope within 30 days.  NOTE: The FI or carrier shall undertake notification of appeal rights in accordance with the reopening 
rules in Medicare Claims Processing, Chapter 29, Appeals of Claims Decisions. 
If you believe that (deceased beneficiary) was without fault in causing this overpayment and that 
recovery of the overpayment would be unfair, you may request that recovery of the overpayment be 
waived.  Your request should include a brief statement of your reasons for requesting waiver." 
 
110.8 - Beneficiary Wishes to Refund in Installments 
(Rev. 315, Issued: 05-17-19, Effective: 06-18- 19, Implementation: 06-18-19) 
 
The term Medicare beneficiary identifier (Mbi) is a general term describing a beneficiarys Medicare 
identification number. For purposes of this manual, Medicare beneficiary identifier references both the 
Health Insurance Claim Number (HICN) and the Medicare Beneficiary Identifier (MBI) during the new 
Medicare card transition period and after for certain business areas that will continue to use the HICN as 
part of their processes. 
 
A.   General 
If an overpaid beneficiary states that they are unable to refund the full amount of an overpayment at one 
time, regular monthly installment payments are acceptable.  The amount and frequency of the 
installments should be in reasonable relationship to the amount of the overpayment. 
Normally, the installments should be large enough to effect recovery within 3 years; however, the FI or 
carrier shall allow a longer installment period if the beneficiary is willing to refund at least $50 per 
month.  In notifying a beneficiary that they can refund an overpayment by installments, the FI or carrier 
shall specify the amount (not less than $10) and the number of monthly installments necessary to 
recovery the overpayment.   
NOTE: These provisions for repayment in installments do not apply to overpayments for which 
providers are liable. 
The FI or carrier shall exercise care in distinguishing between a request for repayment in installments, 
and a request for waiver.  Where a beneficiary states that they cannot afford an installment of at least 
$10 per month, or that they can afford installments of $10 to $50 per month but the overpayment is so 
large that recovery would take substantially more than 3 years, the FI or carrier shall treat such 
statement as a request for waiver. (See 110.9)  
 
B.   Notification of Installment Schedule 
When agreement is reached with a beneficiary for refund by installments, the FI or carrier shall notify 
the beneficiary of the installment schedule.  Request the beneficiary to sign an installment agreement 
such as the one in paragraph C below.  It shall give one copy of the agreement to the beneficiary, and 
retain the other. 
 
C.   Suggested Installment Agreement 
_________________________  __________________________ 
Name of Overpaid Beneficiary  Medicare beneficiary identifier 
Beneficiary's Address  I hereby agree to repay my Medicare overpayment totaling $ ____________ to (FI or carrier name), 
which will receive the payments on behalf of the Centers for Medicare and Medicaid Services.  My 
payments will be made as follows: 
Amount of Payment 
DATE PAYMENT DUE (Month, Day, 
Year) 
____________________  ___________________ 
____________________  ___________________ 
____________________  ___________________ 
 
________________________ 
Signature of Beneficiary  
 
_____________ 
Date 
 
D.   Beneficiary Fails to Remit Installments 
If the beneficiary fails to remit two consecutive installments, or after remitting the overdue installments, 
fails to remit any subsequent installments, the FI or carrier shall ask the beneficiary the reason for the 
lapse.  If it does not receive a response within 30 days, or is informed that the beneficiary is unable to 
continue paying any installments the statement should be treated as a waiver request.  If the FI or carrier 
learns that the beneficiary is deceased, see 110.7.   
 
E.   Beneficiary Can No Longer Afford Installment Amount But Can Afford a Lesser Amount 
If the beneficiary notifies the FI or carrier that they can no longer afford to pay the agreed-upon 
installments but can afford a lesser amount, the FI or carrier shall set up a new agreement, provided the 
new installment is at least $10 per month, and large enough to effect recovery of the remainder of the 
overpayment within approximately 3 years after the date of the new installment agreement. 
 
110.9 - Beneficiary Protests 
(Rev. 29, 01-02-04) 
A beneficiary's reply to a notification of overpayment or request for refund may constitute a request for 
waiver, or request for appeal, i.e., reconsideration, review, carrier fair hearing, or ALJ hearing as 
applicable, or a request for both waiver and appeal. 
A.   Protests To Treat As Requests Administrative Appeal 
The FI or carrier shall consider a beneficiary's reply a request for administrative appeal (Part A 
reconsideration, Part B review, Part B fair hearing, or ALJ hearing (both A & B), as applicable) if the 
beneficiary protests the existence of an overpayment, the amount of the overpayment, or if the nature of 
the protest is unclear.  (See B below for which protests the FI or carrier shall consider requests for 
waiver.)  It shall take no further recovery action in such cases until the administrative appeal process is 
completed. (See Pub. 100-4, Medicare Claims Processing, Chapter 29, Appeals of Claims Decisions.)   The FI or carrier shall tell the beneficiary that the request is being considered (or has been forwarded to 
the Office of Hearings and Appeals, if a hearing request) and that no action is necessary until further 
notice.  If the overpayment case has been referred to SSA, the FI or carrier shall inform SSA of the 
appeal so that recovery action by SSA may be suspended pending the results of the appeal. 
If the appeal determination is that the beneficiary is liable for an overpayment, the FI or carrier shall 
send the beneficiary another request for refund of the overpayment (including all information in 
110.5), unless the beneficiary has also requested waiver. In that event, see B below. 
B.   Protests To Treat As Requests for Waiver 
If an overpaid beneficiary protests on the grounds of hardship, or that recovery would be inequitable, the 
FI or carrier shall treat the protest as a request for waiver even if it is filed on a form ordinarily used for 
requesting administrative appeal.  Discontinue collection efforts and make a waiver determination if 
necessary.  If the beneficiary offers evidence of financial condition, the FI or carrier shall include it, but 
shall not solicit such evidence.  It shall tell the beneficiary that the overpayment case will be forwarded 
to the Social Security Administration and that no action is necessary until further notice. 
NOTE: If the beneficiary has also requested appeal, the FI or carrier shall conduct the appeal prior to 
the waiver determination.   
 
110.10 - When the FI or Carrier Does Not Take Recovery Action in 
Beneficiary Cases but Considers Whether Waiver of Recovery is Applicable 
(Rev. 29, 01-02-04) 
The FI or carrier shall consider whether waiver of recovery from the beneficiary is applicable.  If the 
beneficiary is liable and the criteria for waiver of recovery from the beneficiary are likely to be met, i.e., 
it appears from the circumstances that the beneficiary was without fault and that recovery is against 
equity and good conscience or defeats the purpose of the Medicare program (i.e., would cause the 
individual financial hardship), the FI or carrier makes a waiver determination. 
The FI or carrier shall first determine if the beneficiary was without fault see 70.3.  If it appears that 
the beneficiary was without fault the FI or carrier shall then determine if recovery would be against 
equity and good conscience or if recovery would defeat the purpose of title II or title XVIII of the Social 
Security Act.   
  For recovery to be against equity and good conscience an individual must 
have changed his or her position for the worse or relinquished a valuable right because of 
reliance upon a notice that a payment would be made or because of the overpayment 
itself. (See 20 CFR 404.509) 
  For recovery to defeat the purpose of title II or title XVIII of the Social 
Security Act the beneficiary must need all of his or her current income to meet ordinary 
and necessary living expenses. (See 20 CFR 405.508) 
The FI or carrier shall make waiver of recovery determinations for individual Non-MSP overpayments 
up to $20,000.  If an individual Non-MSP overpayment is greater than $20,000, and the FI or carrier 
believes that the waiver of recovery is appropriate the FI or carrier shall make a recommendation to the 
regional office for approval to waive the recovery.  If there is a situation that involves several 
beneficiaries where the aggregate total of all waiver determinations exceeds $40,000, the regional office 
shall be notified.  The regional office shall provide guidance as to who shall approve the waiver of 
recovery determinations.     
If the FI or carrier decides that the information available does not justify waiver, it proceeds with normal 
recovery efforts from the beneficiary.    NOTE:  If a beneficiary requests an appeal or a waiver after the overpayment has been referred to the 
SSA for collection from Title II benefits, the SSA processing center will return the overpayment to the 
Medicare contractor to review the waiver and/or appeal. 
 
 
110.11  Recording Overpayment Cases in Which the Provider is Not LiableFI 
Only 
(Rev. 29, 01-02-04) 
 
If a provider is relieved of liability for refunding an overpayment, and an adjustment bill is required in 
accordance with Medicare Bill Processing, Chapter 1, General Billing Requirements, the FI shall treat 
the charges involved in the year-end cost report as though they were covered; i.e., make provision to 
assure that the overpaid amount is not recovered from the provider at the time of final cost settlement. 
 
If the FI has a system capable of preventing year-end recovery from the provider, where it was relieved 
of liability for refunding an overpayment, it need not maintain an additional record of the case.   
 
120 - Referral to the Department of Justice (DOJ) 
(Rev. 29, 01-02-04) 
 
If the FI/Carriers attempts to recover an overpayment are unsuccessful and the FI/Carrier believes that 
the  overpayment  may  be  recovered  through  litigation  the  FI/Carrier  should  informally  refer  the 
overpayment to the RO to explore the possibility of litigation.  If the RO, in conjunction with the Office 
of General Counsel, believes litigation is necessary it will request the FI/Carrier to prepare the case file 
for referral to the DOJ.  The RO will inform the FI/Carrier of all elements to include in the case file.     
 
A.   General 
The DOJ requires the submittal of a Claims Collection Litigation Report (CCLR) for overpayment 
litigation of claims.  The CCLR is a checklist of all administrative collection actions.  If need be the RO 
can assist the FI/Carrier in obtaining a copy of the CCLR.  The FI/Carrier will follow the advice 
received by their ROs OGC in completing the CCLR.    
In addition to completing the sections of the CCLR as much as possible the FI/Carrier must provide any 
relevant information to help DOJ.  If applicable, the FI/Carrier must notify DOJ if there has been a change 
of ownership, if there have been any bankruptcy proceedings, and all necessary information concerning 
the identification of any outstanding overpayments regardless of the determination date.  The following 
guidelines exist for providing information relevant to the identification of overpayments.  However, the 
RO may request additional documents if they are relevant to the overpayment and/or provider.  
Identification of Overpayment(s) 
The FI/Carrier shall clearly identify the overpayment(s).  Cost report overpayments should be identified 
for each cost reporting period, by total overpayment amount and each individual overpayment amount if 
multiple overpayments have occurred (tentative and final settlements, interim rate adjustments...).  It 
shall show any partial payments made by the debtor and clearly distinguish between principal and 
interest.  It shall include documentation to support the overpayment determination. This includes copies 
of the cost reports, audits, and reviews, copies of all correspondence, and any other information relevant 
to the overpayment.  
Refund Requests 
The FI/Carrier shall include a copy of the demand letter(s) to the provider. Where demand letters were 
returned by the postal service, the FI/Carrier shall document other attempts to secure the address of the 
debtor(s). 
Recovery Efforts  The following are required: 
  The FI/Carriers internal communications relative to recovery efforts; 
  Detailed reports of all conferences the FI/Carrier held with the provider relative to the 
overpayment; and  
  A detailed narrative of the current situation with the FI/Carriers evaluation of the cause 
of the incorrect payment, including setoff against any payments that may have been due the provider. 
Provider's Ability to Refund 
The FI/Carrier shall include its evaluation of the provider's ability to pay.  It shall include, if possible, an 
examination of a statement showing assets and liabilities and other relevant financial documents.  It 
shall include: 
  Corporate financial statement; 
  Statement by the debtor showing assets and liabilities; 
  Income and expenses (signed by the debtor under penalty of perjury); 
  Any other financial data necessary including the age and health of the debtor, potential 
future income, and the possibility that the debtor concealed or improperly transferred assets. 
120.1 - Communication on Cases Sent to RO for DOJ Referral 
(Rev. 29, 01-02-04) 
If the FI/Carrier receives any funds, bills for current services, cost report (where one had not been filed), 
compromise offers, etc., after sending the case for referral to DOJ, it shall notify the RO.  It will be 
advised by the RO as to how to respond to the provider's actions. 
When a case is referred to the DOJ, the RO notifies the FI/Carrier, who will take no further collection 
actions except for withheld amounts that may become available.  The FI/Carrier shall forward any 
communications received from the provider to the RO. 
120.2 - Cases Referred to DOJ for Possible Litigation 
(Rev. 29, 01-02-04) 
After a provider overpayment case has been referred to DOJ, the FI/Carrier shall not contact or negotiate 
with the provider, unless authorized to do so by the DOJ or the U.S. Attorney handling the case.  Submit 
all requests for negotiation to the RO.   
To avoid extensive legal proceedings and costs by both parties, compromise offers may be made by the 
provider or the DOJ.  If the DOJ contacts the RO with such a request, the RO forwards the information 
to the FI/Carrier for provider notification.  If the provider offers a compromise, the FI/Carrier shall 
notify the RO and submit the following information: 
  Relevant documentation relating to the offer to compromise including, but not limited to, 
the name, title, and position of the party making the offer, the amount of the compromise offer to settle 
or otherwise dispose of the overpayment, and the financial standing of the debtors; and  
  Recommendations of the U. S. Attorney, if any. 
The FI/Carrier shall forward the offer of compromise to the CMS Claims Collection Officer (CCO) 
through the RO.    
In most cases, the U.S. Attorney assigned the Medicare overpayment case will not be fully familiar with 
Medicare procedures, laws, regulations, or reimbursement.  The FI/Carrier may be requested to provide 
technical information to supplement the U. S. Attorney's knowledge. As cases are readied for litigation,  the RO may contact the FI/Carrier for assistance in documenting the administrative record, e.g., a list of 
FI potential witnesses and technical advisors. 
130  Change of Ownership (CHOW)  
(Rev. 29, 01-02-04) 
When a provider undergoes a CHOW, the provider agreement is automatically assigned to the new 
owner unless the new owner rejects assignment of the provider agreement. The paragraphs below 
describe the impact of assignment on overpayment recovery. 
Assignment of Medicare Provider Agreement: 
Automatic assignment of the existing provider agreement to the new owner means the new owner is 
subject to all the terms and conditions under which the existing agreement was issued.  (See State 
Operations Manual, 3210) With assignment, the new owner assumes all penalties and sanctions under 
the Medicare program, including the repayment of any accrued overpayments, regardless of who had 
ownership of the Medicare agreement at the time the overpayment was discovered unless fraud was 
involved.  In addition, the new owner receives benefits of assuming the Medicare provider agreement, 
such as receiving underpayments discovered after the CHOW. 
When a provider undergoes a CHOW where the new provider accepts assignment of the previous 
owners Medicare agreement, the responsibility for repaying any outstanding and future overpayments 
resides with the new owner.  Exception:  If any of the overpayments determined for a fiscal year when 
the previous owner had assignment were discovered due to fraud the responsibility for the repayment of 
the overpayments does not shift to the new provider.  It stays with the old provider. 
A sales agreement stipulating that the new owner is not liable for the overpayments made to the 
previous owner is not evidence enough for recovery from the new owner to not occur.  Medicare was 
not a part of the sales agreement.  That is a civil matter and it would be up to the new owner to enforce 
the sales agreement.  If the new owner assumes assignment of the Medicare agreement, Medicare will 
attempt to recover from the new/current owner regardless of the sales agreement. 
The intermediary should attempt collection from the new owner.  If this is not successful and the 
FI/Carrier has reasonable evidence that the previous owner can repay the overpayment it should refer 
the case to the regional office.  The regional office will then confer with the regional OGC and decide if 
this case warrants collection from the previous owner.  This should be completed before the debt is 
transferred to the Department of Treasury. 
Nonassignment of a Medicare provider agreement: 
If the new owner refuses to accept assignment of the Medicare agreement, the new owner must enter 
into its own Medicare agreement.  In this case there would be no CHOW of the Medicare agreement and 
the previous owner would still be responsible for any outstanding overpayments. 
 
140 - Bankruptcy 
(Rev. 227, Issued: 09 17-13, Effective: 10-04-13, Implementation: 10-04-13) 
 
This section contains actions that the contractors must take to safeguard the Medicare Trust Funds when 
a provider files for bankruptcy.  This section does not address bankruptcy issues involving debts arising 
under the Medicare Secondary Payer (MSP) provisions.  (Although this chapter will usually use the 
term "provider," its provisions also apply to suppliers, including physicians).  However, use of the term 
"provider" does not mean that the Medicare program considers suppliers and physicians to be providers.  
It also explains how to report accurately the Centers for Medicare & Medicaid Services' (CMS) accounts 
receivable balances and support CMS's efforts to effectively evaluate and manage bankruptcy cases. 
  This chapter will guide contractor staff through the initial stages of a provider bankruptcy.  It is not 
intended to be, and cannot be, a step by step process from beginning to end.  Bankruptcy is litigation.  
Bankruptcy law and the bankruptcy court affect all the actions CMS and its contractors take concerning 
a bankrupt Medicare provider.  Therefore, contractor staff shall consult closely with the Regional Office 
(RO) before taking, omitting, continuing or discontinuing actions regarding a bankrupt provider.  In 
some cases, attorneys from the Department of Justice (DOJ) in Washington, D.C. or United States 
Attorney's offices will work directly with RO staff.  However, in most cases, the RO will be in contact 
with regional counsel. 
 
140.1 - Bankruptcy Forms 
(Rev.11124  Issued:11-18-21 , Effective: 12-21-21, Implementation:12-21-21 ) 
 
Upon receipt of a new bankruptcy notice, contractors shall immediately notify the 
appropriate CMS Regional Office (RO) of the bankruptcy and begin the process of 
collecting the required information on       the Bankruptcy Referral Checklist. The 
Bankruptcy Referral Checklist is divided into three tiers, each designed to gather the 
appropriate bankruptcy information within a reasonable timeframe. Tier I information is 
being updated to clarify the Debts Recalled from Treasury N/A option. Tier II 
information is being updated to include clarification on the Fraud check and including 
HIGLAS Customer Level screen to be submitted to the RO within ten business days of 
receipt of the bankruptcy notification. The submission  time frames for Tier II are 
extended by 5 business days, to account for the Fraud Check Request. 
 
Tier I 
 
Debts Recalled from Treasury (Y/N or N/A)?  
 
If debt(s) have been recalled from Treasury due to the bankruptcy case list Y. If debt(s) 
are currently at Treasury list N. If debt(s) are currently not referred to Treasury list N/A.  
 
Tier II 
 
Fraud Check Report Request Instructions 
 
1.  The contractor shall email its fraud check request spreadsheet along with a completed 
CPI data request form (Attachment #1) to CPIFraudcheck-OFMDebt@cms.hhs.gov with the 
subject line Contractor/Jurisdiction Fraud Check Request (example  ABC/J2 Fraud Check 
Request). 
 
2.  The contractor should expect to receive the fraud check report from CPI within one week of 
sending the fraud check request to CPI. The contractor shall use the fraud check report to 
determine if the provider/supplier has an open fraud case. Please see Attachment #2 for a 
sample UCM fraud check report and note the following: 
  The NPI is listed in column A (PRVDR_NPI_NUM). 
  Column B (UCM_FRAUD_CHECK) will indicate a Y if the NPI was found in 
UCM. An N in column B will indicate that there are no records listed for the NPI. 
Therefore, all other fields will be blank. 
  If there is a Y in column B, proceed to column P (RFRL_OPEN_IND) to determine 
if the case is open or closed. If there is a Y, the case is open. An N indicates that 
the providers fraud case is closed.    If there are more than one open and/or closed fraud cases for a given provider/supplier, 
filter column P with the Ys only to get those with open fraud cases. If all entries for a 
given NPI have an N in columns B or P, then the provider/suppler has no open fraud 
cases. However, if one or more of a given provider/supplier NPIs entries has a Y in 
column P, the provider/supplier has an open fraud case. 
 
The contractor shall include a copy of the fraud check report for the NPIs that are included on the 
Bankruptcy on the checklist spreadsheet Tier II that is sent to the RO. 
 
*Note: The CPI Fraud check applies to bankrupt providers/suppliers with NPIs. Bankrupt 
providers/suppliers with no NPIs should follow the current process of checking for fraud.  
 
 
HIGLAS Customer Status Instructions 
 
1.  Upon receipt of instructions from the RO to place a provider/supplier in bankruptcy 
status, the contractor shall update the provider/suppler to BNK status at the Customer 
level in HIGLAS and the Part A Provider Audit STAR system, Provider Profile, if 
applicable.  
2.  The contractor shall submit a screen print of the HIGLAS Customer Status History 
showing the BNK code in the Customer Status. 
3.  Upon receipt of instructions from the RO to remove a provider/supplier from 
bankruptcy status, the contractor shall update the provider/suppler to INIT status at 
the Customer level in HIGLAS and the Part A Provider Audit STAR system, Provider 
Profile, if applicable.  
4.  The contractor shall submit a screen print of the HIGLAS Customer Status History 
showing the INIT code in the Customer Status. 
 
Below is a list of the requirements for a basic bankruptcy referral to use when the 
contractor first      receives notice of a new bankruptcy (it is not all-inclusive). 
 
 
EXHIBIT 1 
 
Bankruptcy Referral Checklist Tier II 
(Submit to the RO as an Excel file, via email, within ten business days from receipt of 
the bankruptcy  notification. Please note that Excel file contains a tab with instructions 
on what is expected.) 
 
BANKRUPTCY NOTIFICATIONS 
Tier II: Due 10 Business Days upon receipt of bankruptcy notice. Example: Received July 9, XXXX. 
Due July 19, 
 
  MAC Comments 
MAC Response 
Any Open Claims (Y/N)?     
Amounts of Claims on Payment     
Floor? 
Any open cost reports (Y/N or     
N/A)? (Part A Only)  Year & Status of Open Cost     
Reports? (Part A Only) 
Cost Reporting Years in Appeal     
(Part A Only) 
Pending Cost Report Re-    
openings (Y/N)? (Part A Only) 
Any claims under appeal (Y/N)?     
Any Overpayments in Appeals     
Status (Y/N)? 
Any Fraud Overpayments or     
Investigations (Y/N)? 
Date of fraud cases, if applicable     
Evidence of a Recent or Pending    Recent = Within a year of the 
CHOW (Y/N)?  Petition Date 
HIGLAS Customer Status Screen          
 
 
  
 
 
 
 
Referral Checklist Instructions:  
 
 
Category  Data Element  Instruction  Example 
Prescribed format for this field is Court  TNMBKE-19-
Tier I  Bankruptcy Case #   Abbreviation + BNK Case Number  12345 
Tennessee 
Tier I  Bankruptcy Court  Court State and Region (if applicable)  Middle 
Tier I  Petition Date  Date Petition Filed in US Bankruptcy Court  01/01/2019 
Tier I  Provider Name       
VMS - 
1234560000, 
HIGLAS - 
CONTRACTOR 
WKLOAD-
PROV 
Tier I  Provider Number(s)  DME PTAN(s) or HIGLAS Supplier Number(s)  NUMBER-NPI 
Tier I  Provider Tax ID     12-34567890 
Open Overpayment  Will automatically populate from Receivables 
Tier I  Amount  Summary tab    
List of open debts attached 
Tier I  (Y/N)?       
FISS - Financial 
Master - 
Administrative 
Screen 2, MCS - 
Provider Detail Screen  Attach screen print from FISS, MCS, or VMS  Provider 
Tier I  Attached (Y/N)?  APPL   Eligibility  Screen (PE), 
VMS - APPL 
H1 
Still billing Medicare  Has provider submitted claims in the last 6 
Tier I  (Y/N)?  months    
Tier I  Medicare Termination Date  If multiple, list most current    
Tier I  Last Payment Date  Date of last claim payment made to provider    
Is there an active Surety 
Tier I  Bond policy (Y/N)?  DME Only    
       
If debt(s) have been recalled from Treasury due 
to the bankruptcy case list Y. If debt(s) are 
Debts Recalled from  currently at Treasury list N. If debt(s) are 
Tier I  Treasury (Y/N or N/A)?  currently not referred to Treasury list N/A    
Debts Placed in Bankruptcy  Are the provider's overpayments in a Bankruptcy 
Tier I  Status (Y/N)?  AR Status    
       
If in default, list 
Does provider have an active Extended  as No and add 
Tier I  Active ERS (Y/N)?  Repayment Schedule  comment 
Yes; $1,000.00, 
Money Held (Y/N)? If yes,  Administrative 
Tier I  Amount & Hold Type  See example  Freeze 
PIP & Pass Through 
Payment Amounts Due 
Tier I  Provider (Y/N)?  If yes, provide amount    
Does the provider have any open claims in the 
Tier I  Any Open Claims (Y/N)?   system that are unpaid    
Amounts of Claims on 
Tier I  Payment Floor?  Amounts of approved claims scheduled to be paid    
Any open cost reports (Y/N 
Tier II  or N/A)?   If not Part A workload, list N/A  Yes 
Year & Status of Open Cost 
Tier II  Reports?  If not Part A workload, list N/A  2016, Unfiled 
Cost Reporting Years in 
Tier II  Appeal  If not Part A workload, list N/A    
Pending Cost Report Re-
Tier II  openings (Y/N)?  If not Part A workload, list N/A    
Any claims under appeal 
Tier II  (Y/N)?       
If Yes, provide 
stage of Appeal 
Any Overpayments in  (Ex: 
Tier II  Appeals Status (Y/N)?  Reconsideration)    
Any Fraud Overpayments 
Tier II  or Investigations (Y/N)?   CPI Fraud Check Request     Date of fraud cases, if 
Tier II  applicable  CPI Fraud Check Request    
Evidence of a Recent or 
Tier II  Pending CHOW (Y/N)?  Recent = within 1 year of Petition Date    
HIGLAS Customer Status  Place provider/supplier in BNK or INIT status 
Tier II  Screen  based on RO instructions    
MAC can 
manually 
calculate and 
enter pre and 
post-petition 
interest amounts 
if they 
experience 
problems with 
the formulas.  
Required fields - Provider Name and Number,  The most 
AR or DCN #, Seq # (DME only), AR Status,  current RBD 
Letter Date, Overpayment Amount, Current  report should be 
Principal Balance, Current Interest Balance, Pre  the data source 
and Post-Petition Interest, Reason / Discovery  for all HIGLAS 
Tier I  Receivables Summary  Codes, Dates of Service  workloads 
 
 
 
140.2 - Basic Bankruptcy Terms and Definitions  
(Rev. 12, 10-18-02) 
 
 
140.2.1 - Bankruptcy is Litigation  
(Rev. 12, 10-18-02) 
 
An individual or company declares bankruptcy by filing a petition for bankruptcy in a United States 
Bankruptcy Court. The Bankruptcy Court then opens a bankruptcy case. The Bankruptcy Court closely 
monitors the affairs of the individual or company (the debtor) including the creditors' treatment of the 
debtor. Bankruptcy may appear to be "business as usual" for a debtor, but it is not. You should not take 
any action for or against a debtor until you consult the Regional Office who will consult with the 
Regional attorney handling the bankruptcy. Do not share any information about bankruptcy strategy or 
activities with the bankrupt provider. 
 
140.2.2 - Types of Bankruptcies 
(Rev. 12, 10-18-02) 
 
Title 11 of the United States Code (the Bankruptcy Code) identifies four types of bankruptcies that may 
involve Medicare providers: Chapter 7, 9, 11 and 13. We briefly describe each type here to familiarize 
you with these types of bankruptcy. However, these general descriptions do not replace your attorney's 
specific advice in a particular bankruptcy case.   1. Chapter 7 - Debtors file Chapter 7 bankruptcies to obtain discharge of their debts. Companies that file 
under Chapter 7 generally close. A court-appointed trustee accumulates the assets of the debtor, sells 
them, and distributes the money among those whom the debtor owes (the creditors).  
 
2. Chapter 9 - Chapter 9 bankruptcies involve municipalities such as a hospital district. Chapter 9 
provides for reorganization, much like Chapter 11. 
 
3. Chapter 11 - Debtors file Chapter 11 to reorganize the debtor individual or business. To emerge from 
Chapter 11, the debtor in possession submits a Plan of Reorganization ("Plan"). The Plan indicates the 
amount and schedule for payments to creditors. Creditors vote on the Plan, and the Court must confirm 
it. Recovery amounts vary. The Bankruptcy Code provides for discharge of the remainder of the debt.  
 
4. Chapter 13 - Chapter 13 bankruptcies adjust the debts of individuals (including sole proprietorships) 
with a regular income. Generally, debtors must file a debt adjustment plan within 15 days after filing.  
 
 
140.2.3 - Filing Bankruptcy Draws a Line in the Sand 
(Rev. 222, Issued: 06-14-13, Effective: 07-17-13, Implementation: 07-17-13) 
 
The petition date (i.e., the date the debtor files its petition in bankruptcy with the Bankruptcy Court) 
draws a line in the sand between prepetition and postpetition actions.  Events that occur before the 
petition date are prepetition.  Events that occur on or after the petition date are postpetition.  The 
automatic stay governs many actions that contractors may take concerning a debtor postpetition.  
Contractors shall therefore consult with the RO before taking action concerning the debtor postpetition.  
 
Medicare's right to recover overpayments can depend on whether they are prepetition or postpetition.  
The RO shall direct contractors on how to treat payments for prepetition services (prepetition payments) 
and payments for postpetition services (postpetition payments) to maximize Medicare's recovery. 
 
140.2.4 Bankruptcy Affects Nearly All Medicare Operations  
(Rev. 12, 10-18-02) 
 
Bankruptcy can affect every aspect of the interaction between the Medicare program and a debtor. Each 
contractor staff member who may come in contact with a debtor, is effectively a part of the Medicare 
"bankruptcy team" for that case. You, as contractor point of contact, must ensure that all potential 
bankruptcy team members alert you if they anticipate actions concerning the debtor, and that they then 
coordinate those actions with you and with the RO and Regional Counsel. In bankruptcy, both inaction 
and inappropriate action hurt Medicare's chances of recovery. Some commonly affected areas are: 
 
1.  Overpayment Recovery 
 
Medicare's right to recover prepetition and postpetition overpayments also varies by federal jurisdiction. 
(See discussion on set-off and recoupment in section F below). If you have overpaid a debtor, you must 
consult the RO, then take appropriate action to maximize recovery of Medicare overpayments from 
debtors. Contractor overpayment staff should not send any letters to the debtor until the RO approves 
them for release. 
 
2.  Fraud and Abuse  
  Ensure that you consult with CMS Program Integrity staff and the RO before you suspend an entity for 
fraud and/or abuse, recover fraud overpayments, or continue suspensions. If you have evidence that the 
provider filed for bankruptcy because of fraud it committed, advise the RO handling the bankruptcy. 
 
3.  Reimbursement 
 
Contractor reimbursement staff must notify the RO before suspending payments to a debtor for failure 
to file a cost report or a credit balance report. DO NOT issue tentative settlement payments in 
bankruptcy cases unless explicitly requested by the RO. 
 
Unless otherwise directed, contractor reimbursement staff should continue to review and audit cost 
reports as usual. However, the contractor must submit notices of program reimbursement to the RO for 
review and obtain approval before issuing them. 
 
The CMS will advise the contractor reimbursement staff about stipulations and settlements that affect 
audit and/or reimbursement. In making global settlements decisions CMS will consider the cost and 
benefits of auditing cost reports in cases where recovery is unlikely and direct contractor staff 
accordingly.  
 
4.  Payment  
 
Contractor payment staff must receive approval from the RO before taking any action that changes the 
amounts payable or owed by a debtor. 
 
5.  Appeals 
 
Contractor staff will be asked about recent and current Administrative Law Judge, Provider 
Reimbursement Review Board and Department Appeal Board appeals involving a provider in 
bankruptcy. 
 
6.  Changes of Ownership 
 
A debtor may attempt to transfer provider agreements so that both parties may avoid overpayment 
recovery. DMSO staff will notify other regional office staff when a debtor provider files for a CHOW, 
and immediately notify the Regional Counsel who is handling the bankruptcy. The CHOW will not be 
processed until the regional office obtains the concurrence of the Regional Counsel who is handling the 
bankruptcy. 
 
140.2.5 - Recoupment and Set-off (see also 140.6.4) -  
(Rev. 12, 10-18-02) 
 
Recoupment and set-off are two of Medicare's strongest tools for recovering overpayments to debtor 
providers. Jurisdictions vary in their decisions about how Medicare can use these tools. Some 
jurisdictions consider the Medicare part A provider agreement one contract /transaction and allow it to 
be the basis for broad powers of recoupment. Other jurisdictions consider each cost report year as a 
distinct contract and restrict recoupment to periods within a particular cost report year. Your 
RO/Regional Counsel can advise you whether current law in a given jurisdiction permits recoupment. 
 
1.  Recoupment  
  Recoupment permits a party to reduce current payments to account for prior overpayments made under 
the same contract or transaction. Recoupment permits adjustment across the petition date and does not 
require approval of the bankruptcy court. Therefore, Medicare should recoup in any jurisdiction where it 
is permitted. Do not begin, continue or discontinue recoupment without approval of the RO. 
 
2.   Set-off  
 
If recoupment is not permitted, set-off will be considered. Medicare must take quick action to recover 
overpayments using set-off. Set-off should not take place without specific instructions by the RO. 
 
Set-off permits making similar adjustments in situations involving one or more contracts or transactions. 
For example, suppose B owes A $40.00 under one contract and A owes B $50.00 under another 
contract. If set-off is allowed then A can take her $40 from the $50 she is holding for B (A would only 
pay B $10.00). Generally, parties can request court permission to set-off. If allowed, parties can set-off 
prepetition claims against prepetition payments or postpetition claims against postpetition payments. 
They cannot set-off prepetition claims against postpetition claims. 
 
3.   Administrative Freeze 
 
Once it is discovered that a provider is in bankruptcy, Medicare can enact a temporary administrative 
freeze. An administrative freeze (sometimes called a Strumpf freeze, named after a Supreme Court case) 
will allow time for Medicare to determine if there are any overpayments and to ask the bankruptcy court 
to allow set-off. Speed is essential because courts do not permit set-off across the petition date. A pre-
petition overpayment can only be set-off against a pre-petition claim. 
 
140.2.6 - Time is of the Essence -  
(Rev. 12, 10-18-02) 
 
Do not wait for formal notice of a bankruptcy and do not assume that someone else has notified the 
appropriate party. Medicare does not always receive timely and proper notice. By waiting, we may lose 
the opportunity to recover Medicare overpayments. Notify the RO/regional counsel immediately when 
you get credible information that a bankruptcy is about to occur. Good sources to obtain early 
information about bankruptcies include the Internet; newspapers, trade journals, and business magazines 
are good sources. Each individual item listed below should be relayed to the RO as soon as you receive 
it: 
 
Name and address(s) of the individual or entity,  
 
Type and timing of Medicare reimbursement the provider receives,  
 
Amounts and types of outstanding overpayments,  
 
Date of pending or planned reopening,  
 
Status of any unsettled cost report years (expected settlement date and expected results); remember, DO 
NOT make tentative settlement payments to an individual or entity in bankruptcy, and make final 
settlement payments only after obtaining the RO's concurrence.  
 
Dates and amounts of next Medicare payments if possible,  
  The name of the court and jurisdiction, case number, phone number of the debtor's attorney in the 
matter, and  
 
Any current changes of ownership or quality of care issues). 
 
140.2.7 - Definitions -  
(Rev. 12, 10-18-02) 
 
You may encounter the terms listed below. The definitions are provided to give a general understanding. 
Specific terms may apply differently based upon the circumstances of a particular bankruptcy case. 
 
Adversary Proceeding is litigation in bankruptcy court to recover money or property; determine the 
validity, priority or ranking of an interest in property; get approval for selling an estate's property 
interest; revoke a discharge or an order of confirmation; and obtain declaratory judgments related to 
matters of the bankruptcy estate. Litigation against CMS to turn over recouped monies is an example of 
an adversary proceeding. 
 
Affirmative Recovery Actions is debtor's assumption of its executory contract (its provider agreement). 
 
Automatic Stay is an injunction that automatically springs into effect concurrent with the filing of the 
bankruptcy petition. The automatic stay protects the assets of the estate from lawsuits, foreclosures, 
garnishments, and any other collection activities that are not specifically exempt from the stay by statute 
or specifically approved by the bankruptcy court. The automatic stay applies to Medicare overpayment 
letters that demand repayment, assess interest or otherwise attempt to gain possession of property of the 
bankruptcy estate. 
 
Bankruptcy Trustee is a private individual or corporation appointed to represent the interests of the 
bankruptcy estate and the debtor's creditors. 
 
Bar Date is the deadline for filing a proof of claim. In general the bar date for government agencies such 
as CMS is 180 days after the date of the order for relief (usually, the date the provider files for 
bankruptcy). In some bankruptcies, however, the court may set a different date.  
 
Claim is the creditor's right to payment or equitable relief creating a right to payment from a debtor or 
the debtor's property whether or not that right is reduced to judgment, liquidated, unliquidated, fixed, 
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. The date a 
claim arises determines whether it is prepetition or postpetition. In Medicare, the date of service is the 
date of the claim. 
 
Confirmation is bankruptcy court approval of a plan of reorganization. 
 
Contingent Claim is a claim that may be owed by the debtor under certain circumstances, for example, 
where the debtor is a co-signer on another person's loan and that person has not yet defaulted, but may 
fail to pay.  
 
Creditor is a person or a business to which the debtor owes money or which claims to be owed money 
by the debtor.  
 
Debtor is a person or business who has filed a bankruptcy petition. 
  Discharge is a release of a debtor from liability for certain dischargeable debts. It prevents the creditors 
that are owed those debts from taking any action to collect those debts from the debtor or the debtor's 
property. Prohibited actions include making telephone calls, sending letters, and having contact that is 
intended to induce the debtor to pay the debt.  
 
Dischargeable Debt is a debt for which the Bankruptcy Code allows the debtor's personal liability to be 
eliminated.  
 
Dismiss does not release a debtor from liability on any debts. It does not prevent creditors that are owed 
those debts from taking appropriate action to collect those debts from the debtor or the debtor's property. 
When a case is dismissed it is as if the debtor never filed. Therefore, you may proceed with actions that 
include making telephone calls, sending demand letters, and having contact that is intended to induce 
the debtor to pay the debt. 
 
Estate is the name for the Debtor's property interests overseen by the bankruptcy court. Filing a petition 
in bankruptcy creates an estate consisting of all legal and equitable interests the Debtor has. In general, a 
legal interest is a direct ownership of property. In contrast, an equitable interest typically is indirect and 
may require court involvement to obtain control or exercise the property rights. 
 
Executory Contract is a contract under which the parties to an agreement have duties remaining to be 
performed. A Medicare Part A provider agreement is treated as an executory contract. 
 
Exemption is property that the Bankruptcy Code or applicable state law permits a debtor to keep from 
creditors.  
 
Fraudulent Transfer is a knowing and fraudulent transfer or concealment of property by the debtor with 
intent to defeat the provisions of the Bankruptcy Code. 
 
Lien is a recorded claim upon specific property in order to secure payment of a specific debt or 
performance of an obligation. Medicare does not have a lien on overpayments.  
Liquidation is the conversion of the debtor's property into cash with the proceeds to be used for the 
benefit of creditors. 
 
Liquidated Claim is a creditor's claim for a fixed amount of money. 
 
Motion to Lift the Automatic Stay is a request by a creditor to allow the creditor to take an action 
against a debtor or the debtor's property that would otherwise be prohibited by the automatic stay.  
 
Non-Dischargeable Debt is a debt that cannot be eliminated in bankruptcy. Overpayments resulting 
from fraud are non-dischargeable. A complaint to determine dischargeability must be filed in the 
bankruptcy court. See Adversarial Proceeding, above. 
 
Plan of Reorganization is a debtor's detailed description of how the debtor proposes to pay creditors' 
claims over a fixed period of time. 
 
Priority is the Bankruptcy Code's statutory ranking of unsecured claims. It determines the order in which 
unsecured claims will be paid if there is not enough money to pay all unsecured claims in full. 
  Priority Claim is an unsecured claim that is entitled to be paid ahead of other unsecured claims that are 
not entitled to priority status. Administrative expenses for preserving the estate (e.g., certain accounting 
fees or postpetition Medicare overpayments) are considered priority claims. 
 
Secured Debt is a debt backed by a mortgage, pledged collateral, or other lien. The creditor that has a 
secured debt has the right to pursue specific pledged property upon default. See lien above. 
 
Schedule is a list submitted by the debtor along with the petition (or shortly thereafter) showing the 
debtor's assets, liabilities, and other financial information. (There are official forms a debtor must use.)  
 
Settlement Agreement is an agreement settling a dispute between two or more parties.  
 
Stipulation is an agreement between parties respecting the conduct of legal proceedings approved by the 
Bankruptcy Court. With appropriate approval, Medicare may enter a stipulation agreement to facilitate a 
change of ownership or to resolve an overpayment earlier than could be expected by litigation. 
 
United States Trustee is an officer of the Department of Justice responsible for supervising the 
administration of bankruptcy cases, estates, and trustees, monitoring plans and disclosure statements, 
monitoring creditors' committees, monitoring fee applications, and performing other statutory duties.  
 
Unsecured debt is one that is not backed by property or collateral. Medicare's claims are generally 
unsecured. 
 
140.3 - Contractor's Establishment of Relationships to Ensure Effective Actions 
Regarding Providers in Bankruptcy 
(Rev. 12, 10-18-02) 
 
140.3.1 - Contractor Staff Must Establish Relationships to Ensure That the RO and 
Regional Counsel Receive Prompt Notice of Provider Bankruptcies, so That 
Medicare Can Take Quick Action 
(Rev. 12, 10-18-02) 
 
The contractor may receive notice of a bankruptcy from many sources including the provider, other 
fiscal intermediaries or carriers, the State, the regional office certification staff, or regional counsel. It is 
imperative that contractor staff act quickly when a provider files for bankruptcy in order to meet filing 
deadlines in the bankruptcy court. Therefore, contractor staff must establish relationships to ensure that 
they receive information promptly about provider bankruptcies. 
 
140.3.2 - Contractors Must Recognize and Advise RO Staff About Potential 
Provider Bankruptcies  
(Rev. 12, 10-18-02) 
 
Contractor staff must be alert to news or notices of bankruptcy and notify RO staff immediately. 
Contractor staff should alert the RO to all potential bankruptcies via a telephone call, an e-mail, or a fax.  
 
Bankruptcy warning signs for contractors (indications that a provider is experiencing financial 
difficulty, and may file for bankruptcy): 
1.  Frequent unfiled or late-filed cost reports.   2.  Failure to make timely payments on an extended repayment plan schedule.  
3.  Frequent changes of ownership.  
4.  Litigation  
5.  Voluntary or involuntary termination from the Medicare Program.  
6.  Provider has difficulty meeting payroll.  
7.  History of significant overpayment determinations.  
8.  Significant decline in Medicare and/or total patient census. 
 
 
 
140.3.3 - Contractor Staff Will Establish a Relationship With the RO That has 
Jurisdiction Over the Bankruptcy  
(Rev. 12, 10-18-02) 
 
Contractors will proactively establish and maintain ongoing communications with the RO that has 
jurisdiction over a particular bankruptcy case. This is important because bankruptcy law may differ 
significantly from one jurisdiction to another, due to the structure of the federal court system. 
 
In the federal system, a party may appeal lower level court decisions to a higher court, which has the 
power to affirm or reverse the lower court. In order of increasing rank and authority, the federal system 
is comprised of Bankruptcy Courts, District Courts, Courts of Appeals, and the Supreme Court. Each 
court in this list generally hears appeals from the court immediately preceding it. Although the Supreme 
Court has the final word, it hears a highly limited number of cases each year. This permits conflicts 
between lower court decisions to continue for many years until they are resolved by the Supreme Court. 
 
As a result, absent a Supreme Court decision, the most authoritative precedents that may exist (and 
which may conflict with one another) are issued by the Courts of Appeals. There are 11 Courts of 
Appeals (known as Circuits) covering various States, plus a District of Columbia Circuit. The decision 
of each Court of Appeals is controlling within the States covered by that Circuit.  
 
As discussed in greater detail below, CMS may want to take different actions in a bankruptcy case for 
different providers, including suspending payments, or recouping overpayments. In addition, CMS may 
have taken such actions before the provider filed for bankruptcy. Whether CMS can legally take or leave 
in place such actions may well depend on where the provider filed for bankruptcy, and the existing legal 
precedents within that Circuit. 
 
For example, at the time of this writing there is conflict in the Circuits about whether CMS may recoup 
prepetition overpayments from postpetition payments without first obtaining relief from the automatic 
stay. The Third Circuit (covering Pennsylvania, New Jersey, Delaware and the Virgin Islands) forbids 
recoupment over different fiscal years without such relief. By contrast, the Ninth Circuit (Alaska, 
Arizona, California, Guam, Hawaii, Idaho, Nevada, Oregon and Washington) and the District of 
Columbia Circuit permit such recoupment. No other Court of Appeals has decided the issue. There are 
various District Court decisions going both ways.  
  There are also conflicting decisions by District Courts on whether CMS may continue to suspend 
payments due to suspected fraud when the provider files for bankruptcy.  
For these reasons, the contractors should neither initiate nor discontinue significant action affecting 
payment without first contacting Regional Counsel.  
 
140.3.4 - RO Jurisdiction Generally Parallels the Bankruptcy Court Where Case is 
Filed 
(Rev. 12, 10-18-02) 
 
In most cases, the RO which has jurisdiction over a bankruptcy case is the one which has jurisdiction 
over the State in which the debtor files for bankruptcy (bankruptcy is filed in federal court). This RO 
will usually be the lead RO. The RO will contact the contractor. 
 
The ROs will review each bankruptcy, even when no current overpayments exist, since the possibility of 
overpayment determinations remains until the FI settles all cost reports. Medicare is an unsecured 
creditor in bankruptcy, and is among the last creditors to receive a distribution of funds, unless it takes 
proactive steps to protect Medicare's interests. 
 
140.3.5 - Contractor and Regional Office Bankruptcy Point of Contact Staff 
Member-  
(Rev. 12, 10-18-02) 
 
The contractors should contact their home RO to determine which RO will have responsibility for the 
bankruptcy case. The RO point of contact may be at the RO level or the Consortium level in keeping 
with Consortium agreements. The RO point of contact will consolidate information and manage, report, 
and coordinate ongoing communication and activities among the appropriate involved parties (e.g., 
contractors, other ROs, Chief Counsels, and Central Office) regarding bankruptcies. The RO will 
communicate the name, phone number, fax and e-mail address of the point of contact in writing or via e-
mail to the Accounting Management Group, Regional Counsel, and the affected Associate Regional 
Administrators for Financial Management and respective contractors. 
 
140.4 - Actions to Take When a Provider Files for Bankruptcy 
(Rev. 12, 10-18-02) 
 
 
140.4.1 - Establish Effective Lines of Communications With  
(Rev. 12, 10-18-02) 
 
As soon as the contractor learns that a provider has filed for bankruptcy, it must immediately notify the 
following partners: 
 
RO, Division of Financial Management Staff  
Program Integrity Staff.  
 
Obtain the name of individual(s) whom you should contact to obtain information quickly and to 
communicate information about the bankrupt Medicare provider.  
 
140.4.2 - Respond to RO Requests for Information 
(Rev. 12, 10-18-02)   
1.  For Part A bankruptcies, provide overpayment information using the Part A Referral Checklist (see 
Attachment A). 
 
Contractor staff must divide the overpayment information into prepetition and postpetition amounts. 
 
The contractor will report the following overpayment information to the RO using the Referral 
Checklist as a reference when the contractor is seeking technical advice: 
a.  Provider Information:  
1.  Provider Number  
2.  Provider Name  
3.  Provider Address  
4.  Tax Identification Number (TIN) 
b.  Information about each overpayment:  
1.  Cost year end  
2.  Determination date  
3.  Original overpayment  
4.  Whether overpayment is based on a tentative or final settlement  
5.  Notice of Program Reimbursement containing overpayment determination  
6.  Amounts Recouped  
7.  CMS 750/751 Line 7 reports a total ending balance for region. The intermediary would need to 
provide specific information on specific bankrupt providers, which are reflected on Line 7.  
8.  The date of the CMS 750/751 report on which the receivable was reported  
9.  Overpayment type  
c.  Information to Estimate Potential Future Overpayments:  
1.  Cost Reports in-house pending settlement with expected completion date  
2.  Cost Reports pending submission with expected dates  
3.  Cost Reports, which are overdue, and total amount of payments made for those cost years  
4.  Interim Rate Information by Cost Year for Previous three years  
5.  Overpayment History by Cost Year for Previous three years  
6.  Medical Review Overpayments or Fraud and Abuse Overpayments or Investigations. You 
should also include these in the totals above. 
NOTE:   If the bankruptcy involves a provider with an audit and claims intermediary, (e.g., hospital 
with a provider-based home health agency or hospice), the RO will establish guidelines for  obtaining information through the audit intermediary or establish direct communication with 
both intermediaries.  
 
2.  For Part B Bankruptcies, carriers and/or DMERCs will provide overpayment information using the 
Referral Checklist (see Attachment A) as a reference when the contractor is seeking technical advice 
from the RO: 
 
Provider Information:  
1.  Provider Number  
2.  Provider Name  
3.  Provider Address  
4.  Tax Identification Number (TIN) 
a.  Overpayment Information:  
1.  Claim numbers related to the overpayment  
2.  Dates of service for related claims (check with Regional Counsel on the need for this)  
3.  Dates of payment for related claims (check with Regional Counsel on the need for this)  
4.  Determination date of original overpayment  
5.  Correspondence notifying provider of overpayment  
6.  Original overpayment  
7.  Amounts recouped  
8.  CMS 750/751 Line 7 reflects outstanding receivable balance totals for entire region (both 
principal and interest)-You must request specific outstanding balances from FI carried for 
specific providers  
9.  The date of the CMS 750/751 report on which the receivable was reported  
10.  Overpayment Type  
11.  Medical Review overpayments  
12.  Fraud and Abuse overpayments or investigations 
3. Inform the RO of any underpayments owed to providers. Ascertain whether any prepetition or 
postpetition underpayments have been determined. Do not release such funds until you have received 
RO approval. 
 
140.4.3 - Immediate Contractor Directives From the RO 
(Rev. 12, 10-18-02) 
 
The RO will give the contractors the following guidance as soon as a provider files for bankruptcy. 
 
1. The RO will notify the Contractor of Provider Bankruptcy/Litigation.  a.  Bankruptcy Filed 
The RO will inform the contractor that the RO has opened a bankruptcy case. RO will inform the 
contractor that it should clear any future actions concerning the bankrupt provider(s) through the RO.  
b.  Bankruptcy Filing Date. 
The RO will notify the contractor of the bankruptcy filing date, since it impacts on actions that the 
contractor can take and the evaluation of whether payments are prepetition or postpetition. 
c.  Immediate response to requests. 
Since bankruptcy has court imposed deadlines, the contractor must take immediate action whenever the 
RO or Regional Counsel makes a request.  
d.  Obtain approval of all correspondence to provider. 
The contractor must submit all correspondence addressed to the provider to the RO for approval prior to 
release. The RO will inform Part B Carriers/DMERCs that they should write a notification letter to 
replace the system generated demand letter.  
e.  Lead RO 
 
If another RO has the lead on the bankruptcy, the RO will provide the contractor with a contact 
name and telephone number. The regional office that supervises the contractor may need to 
continue to assist the contractor in an advisory role.  
2.  The RO Will Notify Contractor of Immediate Actions It Must Take. 
a.  Interim Rate Adjustment. 
After consultation with regional counsel, RO will direct the intermediary to immediately perform an 
interim rate adjustment to ensure that payments are accurate and that no future overpayments occur. 
(Medicare Intermediary Manual 2760.1(C.). 42 CFR 413.64(i). 
b.  Recoupment. 
RO will inform the contractor (after discussion with regional counsel) whether it should continue 
or cease any current recovery action.  
c.  Administrative Freeze. 
 
RO will inform the contractor (after discussion with Regional Counsel) whether or not it should 
place payments in administrative freeze.  
3. Actions The Contractor Must Take on an Ongoing Basis. 
a.  Expedite Cost Report Settlement 
RO will tell the FI to expedite the settlement of any open cost reports. RO will caution the FI not 
to perform any tentative settlements unless explicitly requested by the RO (in consultation with  Regional Counsel) and not to issue any final settlements to the provider without first obtaining 
permission from the RO (in consultation with Regional Counsel). 
b.  Contractors should suspend payments if provider does not timely file cost report. 
If the bankrupt provider fails to submit a timely, acceptable cost report, immediately notify the 
RO and Regional Counsel prior to placing the provider in 100% withhold and immediately 
notify the RO and Regional Counsel that you have done so. When the provider submits an 
acceptable cost report consult with the RO and the Regional Counsel prior to release of the 
withheld funds.  
c.  Part B - Tracking Overpayments and Refunds 
The carrier or DMERC may need to track overpayments and voluntary refunds for a 
bankrupt provider. The RO will work with Regional Counsel to determine what information 
Regional Counsel needs. The contractor should be aware of the impact on beneficiary 
deductibles and coinsurance in a Part B bankruptcy.  
d.  Contractors should check with RO before making other payments to provider.  
 
It is important that intermediaries, carriers, and DMERCs establish a process to ensure they do 
not make payments (e.g., underpayments, lump sum payments, or payments resulting from 
appeals) to bankrupt providers who have outstanding overpayments unless the RO (in 
consultation with regional counsel) so directs. This is especially critical for intermediaries who 
must continue to settle open cost reports.  
4. Contractors Will Track and Report Information to RO. 
a.  Cost Report Settlements and Claims Processed 
Contractor staff should notify the RO promptly of any and all proposed cost report 
settlements, changes in the amount of determined overpayments or underpayments, and 
claims processed. 
b.  Appeals  
If a bankrupt provider files an appeal on an overpayment, contractor staff must keep RO 
staff informed on the outcome of the appeal. Appeals may take place at the contractor 
location, with an Administrative Law Judge, or at any Office of Hearings and Appeals, at the 
Provider Reimbursement Review Board, or at Federal District Court. If the appeal is 
favorable to the provider, it may require CMS to amend its proof of claim because the 
provider would have a smaller overpayment. Alternatively, in some cases, the RO may 
direct the contractor to freeze any outgoing funds. The contractor will keep the RO and 
Regional Counsel updated on the status of appeals. 
5. Record-Keeping. 
a.  Interest 
The RO will advise the contractor whether or not it should continue to calculate interest for 
overpayments. Medicare's ability to assess interest varies based on the circumstances of 
the case. RO will consult with the Regional Counsel before determining whether the 
contractor should make an adjustment. If the bankruptcy is in a district where interest  should stop accruing on the petition filing date, the contractor must make an adjustment to 
remove the interest.  
The contractor should post these adjustments to the contractors' internal systems, the 
Provider Overpayment Reporting System (PORS) and the Physician Supplier Overpayment 
Report (PSOR) within ten (10) days of notice of transaction. The PORS reflects interest 
assessed and the PSOR reflects interest collected. It should also post the adjustments to the 
CMS 750/751 reports.  
b.  PORS/PSOR Update 
RO will instruct the contractor to update the PORS/PSOR with appropriate bankruptcy status 
codes. 
c.  Bankruptcy Case At Contractor's Location. 
RO will inform the contractor that they may not refer bankruptcy cases to the Debt 
Collection Center for collection under the Debt Collection Improvement Act. If the contractor 
has already referred a case to DCC and no recovery action has begun, the RO will take 
steps to retrieve the case. The overpayment case will remain at the contractor location for 
financial reporting purposes until the case is ready for termination write-off, or until the RO 
advises the contractor otherwise. 
140.4.4 - Tracking Debts/CO Communications 
(Rev. 12, 10-18-02) 
 
Financial Reporting. While the lead RO is responsible for managing the bankruptcy case, all bankruptcy 
debt will remain at the contractor location for financial reporting purposes on the CMS 750/751 report. 
RO staff must work with contractor staff to ensure proper reporting on CMS 751 reports throughout the 
bankruptcy. 
140.5 - Chain Bankruptcies 
(Rev. 12, 10-18-02) 
 
140.5.1 - Chain Providers  
(Rev. 12, 10-18-02) 
 
A chain provider is one that is owned by the same entity that owns another provider or providers. Chain 
affiliates may include facilities that are public, private, charitable, or proprietary. They may also include 
subsidiary organizations and holding corporations. Provider-based facilities, such as hospital-based 
clinics, are not chain affiliates (MFMM  2760.1). 
 
As set forth in 140.3.4, the lead RO for a bankruptcy is generally the office with jurisdiction over the 
state in which the provider files for bankruptcy. Nevertheless, Central Office staff may assign a chain 
bankruptcy to a specific region, or the Regional Counsel may request that a specific RO take the lead in 
a specific chain bankruptcy. 
 
When a chain files bankruptcy, there may be multiple contractors involved in processing payments for 
the chain. If the bankruptcy involves other ROs and their contractors, the lead RO will work directly 
with the contractors, after informing their home RO(s) that they will be communicating directly with 
their contractor on the bankruptcy case. The lead RO and Regional Counsel are responsible for making  all decisions. However, the lead RO should keep the contractor's home RO informed about its 
contractor's workload in connection with the bankruptcy. 
 
140.5.2 - Single Providers Serviced by a National Contractor 
(Rev. 12, 10-18-02) 
 
When a single provider who is serviced by a national contractor files for bankruptcy, the same principle 
for processing a bankruptcy of a chain provider will apply. The location where the bankruptcy is filed 
will determine the lead RO. The lead RO will work directly with the national contractor staff on the 
bankruptcy case. The lead RO will keep the home RO of the national contractor informed in all issues 
related to the case (e.g., a provider within the jurisdiction of the San Francisco RO files for bankruptcy 
and their contractor is Mutual of Omaha). The San Francisco RO will assume lead responsibilities and 
will keep the Kansas City RO informed of all issues related to this case. 
 
140.6 - Affirmative Recovery Actions  
(Rev. 12, 10-18-02) 
 
 
140.6.1 - Working With the RO and Regional Counsel's Office  
(Rev. 12, 10-18-02) 
 
The contractor will notify the RO/Regional Counsel's office immediately after it receives information 
that a provider has filed for bankruptcy. It is essential that you obtain information on all Part A, Part B, 
or DME entities involved in the bankruptcy, including Medicare identifying information, such as 
provider and supplier numbers. If the contractor has difficulty obtaining this information, it will consult 
with the RO/Regional Counsel. After gathering the information described in 140.4.2 , it will send it to 
the RO. 
 
The contractor will discuss with RO/Regional Counsel whether it should put payments in administrative 
freeze (a holding account) until Medicare has time to assess its position in the bankruptcy. Also, during 
initial discussions with Regional Counsel, the RO will determine when the proof of claim is due and 
whether the Regional Counsel or the RO will need additional information to prepare the proof of claim. 
The contractor shall share all new information regarding the provider's overpayments and 
underpayments, cost report settlements, etc. with RO/Regional Counsel. The contractor will not take any 
further steps without obtaining the advice of RO/Regional Counsel. For example, the contractor should 
not send any overpayment letters to the debtor without RO/Regional Counsel approval. In addition, the 
contractor should not initiate new withholding or discontinue withholding without RO/Regional Counsel 
approval. 
 
As the bankruptcy progresses, the Regional Counsel may ask the contractor to expedite settlement of 
cost reports, update the Regional Counsel on provider overpayments or underpayments, and provide 
Counsel with assistance on all aspects of the bankruptcy. As bankruptcy cases often have short 
deadlines for filing pleadings and other documents, requests from RO/Regional Counsel must have the 
highest priority in the workload, in order to protect Trust Fund assets.  
 
140.6.2 - Assumption of the Medicare Provider Agreement  
(Rev. 12, 10-18-02) 
  The Medicare Part A Provider Agreement is considered an executory contract for purposes of 
bankruptcy. Bankruptcy law permits a debtor to affirm ("assume") or reject each of its executory 
contracts. The debtor must first get the formal approval of the bankruptcy court. 
If the debtor formally assumes the Medicare provider agreement, and the Bankruptcy Court approves 
that assumption, the relationship between the provider and Medicare will generally return to the 
ordinary course of business. The RO will inform the contractor if the provider assumes the Provider 
Agreement. 
 
If the debtor rejects the Provider Agreement, the rejection is a voluntary termination of the Provider 
Agreement. The RO will inform the contractor if the provider terminates its provider agreement in this 
way. The contractor should not reimburse the provider for services it performs after the date it 
rejects/terminates the Provider Agreement. 
If the bankrupt provider sells a facility to another entity and that entity assumes the debtor's provider 
agreement, any outstanding Medicare underpayments or overpayments regarding that facility should be 
transferred to the new owner (the purchaser) when the new owner assumes the provider agreement. 
Although the debtor and the new owner may have a private agreement regarding who is responsible for 
refunding Medicare overpayments and who should receive any Medicare underpayments, CMS is not 
bound by such agreements.  
 
The contractor shall calculate net amounts that may be due to or owing from the debtor 
140.6.3 - Settlement Agreements or Stipulations  
(Rev. 12, 10-18-02) 
 
During the course of a bankruptcy, the RO and the Regional Counsel, working with DOJ, may negotiate 
a settlement agreement or stipulation with the debtor's attorney. Once a settlement agreement or 
stipulation goes into effect, the RO will advise all affected contractors, ROs, and the Office of Financial 
Management, CO. The contractors will consult with the lead RO to ensure that they conform to the 
conditions established in the settlement agreement or stipulation. 
 
140.6.4 - Recoupment  
(Rev. 12, 10-18-02) 
 
Generally, bankruptcy law prohibits recovery of prepetition debt (debt arising prior to the filing of the 
bankruptcy petition) from postpetition payments. However, Medicare Part A payments require 
adjustments of ongoing payments to a provider to account for overpayments previously made to that 
provider. 42 U.S.C. 1395g(a); 1395x(v)(1)(A). Most courts recognize this method of adjusting 
payments as recoupment, which is permitted in bankruptcy, and is not subject to the automatic stay. 
Alternatively, they recognize that bankruptcy law does not alter the adjustment of payments that the 
Medicare statute requires. Thus, in most jurisdictions recoupment is appropriate. Nevertheless, the 
contractor should always consult RO/Regional Counsel's office about the adjustment (or recoupment) of 
any payments to a bankrupt provider before you take, omit, continue or discontinue any action. (See 
also, discussion of Recoupment in 140.2.5). 
 
Some courts do not agree that Medicare can recoup overpayments (without first obtaining relief from 
the automatic stay), unless the provider incurred the overpayments in the current fiscal year. For 
instance, in bankruptcy cases filed in Pennsylvania, New Jersey, Delaware and the Virgin Islands, 
Medicare cannot recoup overpayments across fiscal years unless the debtor assumes the Medicare 
provider agreement or Regional Counsel obtains permission from the court. RO/Regional Counsel will 
advise the contractor whether it can recoup overpayments in these jurisdictions. Again, the contractor 
must consult RO/Regional Counsel before adjusting or recouping payments to a bankrupt provider.    
140.6.5 - Administrative Freeze/Set-off   
(Rev. 12, 10-18-02) 
 
Medicare can ask the court's permission to set-off prepetition debts against prepetition payments 
(payments for prepetition services, even if made postpetition) and postpetition debts against postpetition 
payments (payments for postpetition services). Regional Counsel, through DOJ will file a motion 
requesting permission to set-off. 
 
Bankruptcy law allows a creditor like Medicare to freeze payments if it thinks it has the right to set-off 
those payments. Generally, in the Part A context, the first 2-3 weeks of Medicare payments after a 
debtor files for bankruptcy result from prepetition services. Therefore, the RO and Regional Counsel 
might decide to freeze all payments for prepetition services and then request bankruptcy court 
permission to set-off those payments against prepetition overpayments. Because there is such a short 
period during which there might be prepetition payments available to set-off available to freeze for set-
off, it is critical to find out about the bankruptcy and the provider's overpayments quickly. 
 
Other prepetition payments, such as underpayments or payments delayed because of medical review 
may be available to set-off against prepetition overpayments. It is important to notify the RO and 
Regional Counsel of any such underpayments or delayed payments. 
 
Finally, because the U.S. Government is considered one creditor in bankruptcy, a contractor may be 
asked to freeze prepetition payments to recover the debts owed by the provider to other government 
agencies. However, we must use prepetition payments to recover Medicare overpayments before 
applying them to debts owed to other agencies. 
 
140.7 - Preparing and Filing Proof of Claim  
(Rev. 12, 10-18-02) 
 
We provide a working definition of the term "claim" in 140.2.7. The proof of claim form alerts the 
court to the existence of Medicare's claim. While exceptions exist, the general rule of thumb is that in 
order to share in the bankruptcy estate Medicare must file a proof of claim. Regional Counsel will file 
the proof of claim. It is critical that contractors produce accurate and detailed overpayment data to the 
RO and Regional Counsel when requested so that Regional Counsel can file a timely proof of claim. 
 
In Chapter 7 and Chapter 13 bankruptcies, the deadline ("bar date") for the Government to file a proof 
of claim is 180 days after the bankruptcy court's order granting relief from creditors (usually the date the 
provider files for bankruptcy). The bankruptcy court establishes the bar date by court order in Chapter 9 
and Chapter 11 bankruptcies. In order to meet the bar date the Government must: 
1.  Get notice of the bankruptcy;  
2.  Direct that notice to the appropriate agency and appropriate personnel;  
3.  Determine exactly how many payment agreements the entity in bankruptcy has with Medicare 
(i.e., do they owe Medicare and if so how much);  
4.  Determine the status of each payment agreement  
5.  Prepare the proof of claim form;  
6.  Get Regional Counsel approval;   7.  Sign it; and  
8.  File it in the bankruptcy court. 
Because the time to finalize a proof of claim can be short, contractors should update overpayment 
information on an ongoing basis. 
 
140.8 - Closure of Bankruptcy Cases and Treatment Of Overpayment Reporting 
Systems at End of Bankruptcy 
(Rev. 12, 10-18-02) 
 
 
140.8.1 - Closing the Bankruptcy Case 
(Rev. 12, 10-18-02) 
 
After a bankruptcy case is fully administered and the bankruptcy court has discharged the trustee (if 
there was one), the bankruptcy court closes the case. RO/Regional Counsel will provide guidance to the 
contractor regarding any required further actions. 
 
Once the debtor has emerged from bankruptcy it resumes business as usual. A Chapter 11 bankruptcy 
ordinarily ends with the debtor emerging from Chapter 11 with a confirmed plan of reorganization. The 
ordinary course of business typically begins on the "effective date" of the plan of reorganization. In the 
case of a Chapter 7, the bankruptcy typically ends when the Trustee has dissolved the corporation, shut 
down operations, and distributed assets to pay creditors. RO/Regional Counsel will provide specific 
guidance to the contractor.  
 
When a bankruptcy case closes, whether a Chapter 7, a Chapter 11, or a proceeding under some other 
chapter of the bankruptcy code, the contractor must modify its financial records to reflect the outcome 
of the bankruptcy. In general, amounts that bankruptcy law does not require the provider to repay are 
considered "discharged," and Medicare must release the provider from liability for the debt.  
 
All of the contractor's debt information, including the POR, PSOR, CMS-750, CMS-751, and Schedule 
9 of contractor's financial statement, must incorporate the bankruptcy outcome by writing off or 
adjusting the amounts owed in accordance with applicable bankruptcy orders. This frequently will 
require you to remove line items and include new line items on affected reports. You must maintain 
detailed support for all revisions, as well as for any extended repayment arrangements. Detailed 
documentation related to principal, interest charges and immediate payments and extended repayment 
plans without interest are especially important in global settlement adjustments which are common in 
chain bankruptcy situations. These amounts may need to be modified based on the global settlement. In 
global settlements which may cut across providers in a chain, existing amounts may be removed from 
the provider listing and the new amount(s) substituted in accordance with the bankruptcy documents. 
This will require close coordination among the Regional Counsel, the RO, CO and affected contractor 
staff. Coordination and immediate action is especially important if you discover that a bankruptcy 
discharge for a provider has occurred in a previously unknown bankruptcy proceeding. 
 
Occasionally, the court dismisses a bankruptcy because the debtor does not qualify for bankruptcy or for 
some other reason. When there is a dismissal, with the advice of Regional Counsel, the RO and 
contractor can usually treat the case as if the bankruptcy had never occurred and continue the normal 
recovery process, which might include an "intent to refer" letter and subsequent transfer to the Debt 
Collection Center. Contractors and ROs must ensure that their internal processing systems and financial 
reports no longer reflect the case as one under bankruptcy, and interest should be reassessed.   
Always contact the RO/Regional Counsel for guidance on the closure of a bankruptcy. There is no 
formula for closing a bankruptcy, as it all depends upon the nature of the proceedings and the court 
orders in the case. The closure could be preceded by a successful reorganization under Chapter 11, a 
conversion to Chapter 7, or the result of a settlement agreement or stipulation. In all cases, obtain 
approval from the RO/Regional Counsel before closing the bankruptcy. 
 
140.8.2 - Debt Located at the Debt Collection Center or Department of the Treasury 
(Rev. 12, 10-18-02) 
 
If a debt is at the Debt Collection Center (DCC) and the provider files for bankruptcy, the certifier 
of the debt (contractor or RO) must immediately notify the Central Office Division of Financial 
Reporting and Debt Referral (DFRDR). The certifier must request that Central Office recall this debt 
from DCC as debts in bankruptcy status are ineligible for crossservicing and offset. 
NOTE:  Debts for unfiled cost reports are not reported on the H751 and/or R751, therefore, if these 
debts become "bankrupt," you will record no transaction on these forms. 
 
If the debt is active (less than two years old), the DFRDR, Central Office will recall the debt, update the 
POR/PSOR to reflect a bankruptcy status, and change the location back to the contractor location. DCB 
will send an email or fax of the location change to the RO.  
 
If the DCC or Department of Treasury receives the initial notification of a bankruptcy filing while 
servicing a debt, they will notify CMS Central Office, who, in turn, will notify the RO of the 
bankruptcy. 
 
140.8.3 - Managing Bankruptcy Debt at the Contractor Location  
 (Rev. 12, 10-18-02) 
 
All bankruptcy debts will remain at the contractor location throughout the life of the debt. The lead RO 
will assume full ownership and the responsibility for managing the debt at the respective contractor site. 
The contractor, will help the RO establish communication procedures and will ensure that contractor 
staff follow them. 
 
When chain providers are involved, the lead RO will contact the appropriate contractor and RO staff and 
establish dialogue procedures that will provide timely and accurate transfer of required information. 
 
The lead RO is responsible for management of the debt from the initial filing of the Proof of Claim until 
the closure of the Bankruptcy. The Associate Regional Administrator for the Division of Financial 
Management will have the authority to terminate collection activity for cases that meet the criteria for 
being written off at the Associate Regional Administrator level. 
 
 
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(PDF). To view PDF files, you must have the Adobe Acrobat Reader (minimum version 4, version 5 
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150 - ACCELERATED PAYMENTS- FI ONLY 
(Rev. 29, 01-02-04)   
An accelerated payment may be issued where there is: 
 
  A delay in payment by the FI for covered services rendered to beneficiaries and this delay has 
caused financial difficulties for the provider, 
 
  In highly exceptional situations where a provider has incurred a temporary delay in its bill 
processing beyond the providers normal billing cycle, or 
 
  In highly exceptional situations where CMS deems an accelerated payment is appropriate.   
 
A request for an accelerated payment shall not be approved unless the provider meets all eligibility 
requirements, including an assurance that recoupment of the payment will be made on a timely basis.  
The amount of the accelerated payment is computed as a percentage (sufficient to alleviate the impaired 
cash position but in no case to exceed 70 percent) of the amount of net reimbursement represented by 
unbilled discharges or unpaid bills applicable to covered services rendered to beneficiaries.   
 
Accelerated payments shall be approved by the FI and the appropriate regional office.  The regional 
office will review each request for an accelerated payment to assure that the accelerated payment 
provisions are being correctly and consistently applied and to provide the Administration with timely 
information concerning provider and FI bill processing.   
 
150.1 - Eligibility for Accelerated Payment  
(Rev. 29, 01-02-04) 
 
Provider eligibility for accelerated payments is contingent on the provider meeting all of the following 
conditions; 
 
  A shortage of cash exists whereby the provider cannot meet current financial obligations; and 
 
  The impaired cash position described in A is due to abnormal delays in claims processing 
and/or payment by the FI.  However, request for accelerated payments based on isolated 
temporary provider billing delays may also be approved where the delay is for a period of time 
beyond the providers normal billing cycle.  In this instance, the provider must assure and 
demonstrate that the causes of its billing delays are being corrected and are not chronic; and  
 
  The providers impaired cash position would not be alleviated by receipts anticipated within 30 
days which would enable the provider to meet current financial obligations; and 
 
  The basis for financial difficulty is due to a lag in Medicare billing and/or payments and not to 
other third-party payers or private patients; and 
 
  The FI is assured that recovery of the payment can be accomplished according to the instructions 
in 150.4. 
 
NOTE:  Each FI is cautioned that neither the revision of the current financing regulations nor the 
recovery of current financing payments is a basis for justifying a providers request for an accelerated 
payment. 
 
150.2- Computation of the Accelerated Payment   
(Rev. 29, 01-02-04) 
To compute the accelerated payment on account: 
 
1.  Determine the amount of the interim reimbursement for unbilled and unpaid claims; 
 
2.  Subtract the deductibles and coinsurance amounts, and 
 
3.  Multiply by 70% to determine the net reimbursable amount which can be paid to the provider. 
 
150.3 - Recoupment of the Accelerated Payment 
(Rev. 227, Issued: 09 17-13, Effective: 10-04-13, Implementation: 10-04-13) 
 
The Medicare Contractor shall attempt to recover any accelerated payment within 90 days after it is 
issued.  To the extent that a delay in the providers billing process is the basis for the accelerated 
payment, recoupment is made by a 100 percent withhold against the providers bills processed by the 
(Part A) contractor or other monies due the provider after the date of issuance of the accelerated 
payment.  Any remainder is recovered by direct payment by the provider not later than 90 days after 
issuance of the accelerated payment. 
 
If the payment is necessitated by abnormal delays in claims processing and/or payment by the 
contractor, recovery by recoupment will be reasonably scheduled to coincide with improvement in the 
contractors bill processing situation and such recoupment will not impair the providers cash position.  
In this situation, recoupment shall be completed within 90 days of the contractor processing the 
providers claims. 
 
If recovery is not complete 90 days after the accelerated payment is issued or 90 days after the 
contractor begins processing claims, the accelerated payment is considered delinquent.  The contractor 
shall immediately send out an initial demand letter.  This letter shall state that 100 percent recoupment 
by withhold of all payments is in effect and that the recoupment will remain so until the debt is paid in 
full or acceptable payment arrangements are made. 
 
Contractors shall include the Intent to Refer language required to refer the debt to the Treasury 
Department. (See Chapter 4, 70)  Interest shall begin to accrue on the 31st day after the date of the 
demand letter at the prevailing rate set by the Treasury Department.  If the contractor does not hear from 
the provider within 15 days from the date of the demand letter, the contractor shall attempt to contact the 
provider by telephone.  If the demand letter is returned undeliverable the contractor shall attempt to 
locate the provider using some of the guidelines set forth in Chapter 4, 10.  If the contractor does not 
hear from the provider within 60 days of the date of the demand letter, the contractor shall input the debt 
into the Debt Collection System for referral to the Treasury Department for additional collection 
activity. 
 
SAMPLE FORMAT FOR PROVIDER REQUEST FOR ACCLERATED PAYMENT: 
 
1.  Provider:_________________________________        Provider Number:_________ 
 
Address:____________________________________________________________________________
___________________________________________________________ 
 
2.  Contractor: ____________   
3.  Check (a) or (b) if applicable: 
 
Cash balance is seriously impaired due to: 
 
(a)  Abnormal delay in Title XVIII claims processing and/or payment by the health insurance 
Contractor. 
 
(b)  Delay in provider billing process of an isolated temporary nature beyond the providers normal 
billing cycle and not attributable to other third party payers or private patients. 
 
Note:  If 3b is checked the provider should also include a narrative explaining the nature of the 
problem, how it will be fixed, and the expected duration of the delay. 
 
4.  a.  General fund cash position for provider as of ________      $_____ 
 
     b.  Anticipated receipts from all sources (exclusive of accelerated    $_____ 
  payments) in the next 30 days 
 
     c.  Anticipated expenditures in next 30 days          $_____ 
 
     d.  Indicated cash position in next 30 days          $ ____ 
  (a + b  c) 
 
160 - Debt Close-Out 
(Rev. 11787; Issued:01-19-23; Effective: 04-21-23; Implementation:04-21-23) 
 
The contractor can request close-out for any eligible debt.  However, the final decision to close- out any 
debt must be approved by CMS.  (See Chapter 4,  70.16 and 70.17.2) 
 
160.1- Reserved for Future Use 
 
160.2 - Reserved for Future Use 
 
170  General Overpayment Provisions 
(Rev. 29, 01-02-04) 
 
The general overpayment provisions mentioned in this section are important to the overpayment collection  
process but could not be categorized into another section.  Some of these provisions require input from 
other manual instructions and are only briefly mentioned in this manual.  When necessary, another manual 
reference has been cited for additional information.  
 
170.1 - Offset of Overpayments Against Other Benefits Due  FI 
(Rev. 29, 01-02-04) 
 
 
A.  Benefits Payable Under Part B - FI 
  Where the FI determines that a Part A overpayment has been made to a provider on behalf of a 
beneficiary, it shall ascertain whether the beneficiary is entitled to any Part B payment for the services 
in question.  (See Medicare Benefit Policy, Chapter 6.) If it appears that Part B benefits are payable, it 
shall arrange for billings under Part B. It shall use any Part B benefit as an offset against the Part A 
overpayment. 
 
B.   Use of Lifetime Reserve Days - FI 
 
If a Part A overpayment for which a beneficiary is liable was caused by payment for services rendered 
after exhaustion of benefit period days, the FI shall reduce the amount of the overpayment by the 
application of the beneficiarys lifetime reserve days, unless the individual elected not to use them.  An 
individual who has been overpaid for services rendered after exhaustion of benefits can elect not to use 
reserve days only if the individual refunds the overpaid amount.  (See Medicare Benefit Policy, Chapter 
5.) 
 
170.2 - When the Carrier Does Not Attempt Recovery Action 
(Rev. 29, 01-02-04) 
 
The carrier shall not attempt recovery action on individual overpayments if: 
 
A.   Total Overpayment Less Than $10 
The cost of recovering such a small amount ordinarily exceeds the amount recovered.  However, the 
Carrier shall accept unsolicited overpayment refunds regardless of the amount.  See 160.1 for 
termination of collection action procedures. 
 
B - The Carrier Has Not Taken Action to Reopen the Payment Decision Within Four Years (48 
Months) after the Date of the Initial Payment Determination 
Unless fraud or similar fault is present, a payment determination may not be reopened where the Carrier 
has not taken some action (which can be documented) questioning the correctness of the determination 
within 4 years (48 months) after the date the initial determination was approved.  (See Medicare Claims 
Processing, Chapter 30, Correspondence and Appeals for policies governing the reopening and revision 
of decisions to allow or disallow a claim.) 
 
C - Payments to Providers for Medically Unnecessary Services or Custodial Care Where Waiver of 
Liability Applies 
Where both the beneficiary and provider were without fault (see Medicare Claims Processing, Chapter 
31, Limitation on Liability), the Carrier shall waive liability for the overpayments. 
  
170.3 - Information and Help Obtainable from the Social Security Office (SSO) 
(Rev. 29, 01-02-04) 
Occasionally, it may be possible for the FI or carrier to get information or help from the local SSO.  For 
instance, if the beneficiary has moved, the SSO may know the new address, or if the beneficiary has 
died, it may know the administrator of the estate.  If the beneficiary takes a check representing an 
incorrect payment to the SSO, the SSO forwards the check to the FI or carrier.  However, the FI or 
carrier shall not ask the SSO to collect, or indirectly aid in, the collection of an overpayment. 
  170.4 - Recovery Where Physician or Other Individual Practitioner Is Deceased - 
Carrier Only 
(Rev. 29, 01-02-04) 
Where a physician or other individual practitioner who is liable for an overpayment dies, the 
overpayment should be withheld from other Medicare payments due their estate.  If recovery is not 
possible by recoupment, the carrier shall ascertain whether an administrator or executor has been 
appointed and then send a letter to the estate of the decedent at the address of the legal representative, if 
known, or the last known address of the deceased. 
If the reply to the letter indicates that the estate will not refund the overpayment, or if a reply is not 
received within 30 days, the case should be forwarded to CMS for possible litigation.  When referring 
such overpayments, the carrier shall include any information about the appointment of a legal 
representative, the size of the estate, etc., and copies of any correspondence with survivors or others 
concerning the overpayment. 
 
170.5 -Provider Offers to Settle on Compromise Basis 
(Rev. 29, 01-02-04) 
 
An overpaid provider may offer to compromise an overpayment.  The FI/Carrier shall forward 
compromise offers to the RO only when further collection efforts would be unproductive and would not 
benefit the Medicare Program.   
 
170.6 - Unsolicited Overpayment Refunds 
(Rev. 29, 01-02-04) 
 
When a provider believes that an overpayment has been received and makes an unsolicited refund, the 
FI/Carrier accepts it regardless of the amount.  All documentation submitted with the unsolicited refund 
should be forwarded to the correct department.  (See Program Integrity Manual, Ch. 3,  8.4 for unsolicited 
refunds related to an outstanding fraud investigation.)   
 
170.7 - Timely Deposit of Overpayment Refund Checks 
(Rev. 29, 01-02-04) 
 
Promptly deposit all refund checks into the Medicare Federal Health Insurance Benefits Account.  The 
FI/Carrier shall credit all such deposits on the day following the date of receipt in its mailroom or initial 
point of entry. (It shall credit within 2 days if the bank is not located in the same city as the contractor.). 
(See Ch.5, 100.3) 
 
170.8  Informal Referral to RO  
(Rev. 29, 01-02-04) 
 
For Medicare overpayment purposes a referral is a request to the Regional Office for assistance in an 
overpayment.  This may be for a waiver determination, a termination request, a request for technical 
assistance, a referral to the Department of Justice, or any other aspect of the debt collection process.  The 
referral may be in the form of an email, phone, fax, or written correspondence.  Any referral to the RO 
should occur before the debt is eligible to be referred to the Department of Treasury.  If changes occur to 
the debt during the referral process, the FI/Carrier should immediately notify the RO. 
 
Attachment A, located after the bankruptcy section, includes a referral checklist that FI/Carriers should 
utilize if necessary. 
 
180 - Reserved  (Rev. 227, Issued: 09 17-13, Effective: 10-04-13, Implementation: 10-04-13) 
 
190  Collection of Fee-for-Service Payments Made During Periods of Medicare 
Advantage (MA) Enrollment 
(Rev. 315, Issued: 05-17-19, Effective: 06-18- 19, Implementation: 06-18-19) 
 
The term Medicare beneficiary identifier (Mbi) is a general term describing a beneficiarys Medicare 
identification number. For purposes of this manual, Medicare beneficiary identifier references both the 
Health Insurance Claim Number (HICN) and the Medicare Beneficiary Identifier (MBI) during the new 
Medicare card transition period and after for certain business areas that will continue to use the HICN as 
part of their processes. 
 
Effective October 1, 2003, Common Working File (CWF) implemented the informational unsolicited 
response edit based on the same coding files made available for the reject edits in the risk-based MA 
Enrollment coding files described in the CWF System Documentation at http://cms.csc.com/cwf/. 
Upon receipt of notification that a beneficiary has previously enrolled in a MA Plan and the enrollment 
is posted to the CWF, the CWF will search claims history to determine whether any fee-for-service 
claims were erroneously approved for payment during a period of retroactive MA enrollment.  The 
CWF compares the period between the MA enrollment start date and the date of service of the claims in 
history.  Services that fall within the responsibility of the MA Organizations are identified. 
The CWF generates an Informational Unsolicited Response (IUR) with trailers 05 & 24 containing the 
identifying information regarding the claim subject to the risk based MA payment rules. The IUR has all 
necessary information to identify the claim including the Internal Control Number or the Document 
Control Number, and the Medicare beneficiary identifier. The CWF electronically transmits the IUR to 
the contractor that originally processed the claim.  The IUR is included in the existing CWF response 
file.  The IURs in that file for claims to be adjusted are identified with a unique transaction identifier.  
The previously submitted claim is not canceled and will remain on the CWF paid claims history file, 
pending subsequent adjustment. 
Upon receipt of the IUR the Shared System software reads the trailer for each claim and either a manual 
or automated adjustment is performed.  The contractor must initiate overpayment recovery procedures 
to retract the original Part A and Part B payment and must generate an adjustment to update or cancel 
the claim to update CWF and contractor history. 
Carriers 
When CWF receives an adjustment for the fee-for-service claim on history, the deductible is updated on 
the beneficiarys file, and the corrected deductible information is returned to the carrier in trailer 11.  
Carriers are to recover any monies due back to Medicare resulting from these denials, by following the 
standard or (customary) recovery process.  Carriers are also responsible for providing the M/A plan 
number to the providers in their correspondence. 
In the event that a denial is reversed upon appeal, for carrier claims, the Group Health Organization 
(GHO) override code of 1 must be used to allow payment. 
Fiscal Intermediaries (FIs) 
When CWF receives an adjustment for the fee-for-service claim on history, the deductible is updated on 
the beneficiarys file, and the corrected deductible information is returned to the intermediary in trailer 
11.  To recover any monies due back to Medicare resulting from these denials, claims are to be adjusted 
and overpayments are to be recovered through the customary recovery process.  In the event that a denial is reversed upon appeal, a 1 byte override code field is created at the header 
level for FI claims.  The FIs should use override code 1 in this field for adjustments to all inpatient 
claims, including home health.  For an Outpatient Denial with a 'N' No Pay Code, use a value of '2' in 
the HMO override field.  The purpose of using 1 or 2 is to by-pass the CWF edit, which allows no 
changes to the amount initially paid for claims. 
Messages To Be Used With Denials Based On Unsolicited Response 
The following messages should be used when the carrier receives a reject code from CWF indicating 
that the services were rendered during a period when the beneficiary was enrolled in a MA, and billing 
should have been submitted to the Managed Care Plan for payment. 
Remittance Advice 
At the claim level, report adjustment reason code 24 - Payment for Charges Adjusted.  Charges are 
covered under a capitation agreement/managed care plan. 
Information to be made available to providers via letter (or an alternate method). 
Language for Carriers to Use in Letter to Provider 
Carriers 
This beneficiary was enrolled in [Plan Alpha Numeric ID]; a risked based managed care organization, 
for the date of service of this claim. You must contact the Managed Care organization for payment for 
these services.  A list that provides the MCO name and address associated with the MCO number is 
available on the CMS Internet at 
http://www.cms.hhs.gov/HealthPlansGenInfo/claimsprocessing20060120.asp#TopOfPage. 
Fiscal Intermediaries 
The plan number is not required on intermediary communications. Those providers are to determine 
which plan to contact through an eligibility inquiry or by contacting the beneficiary directly. 
New Medicare Summary Notice (MSN) 
The MSN code 16.57 - Medicare Part B does not pay for this item or service since our records show that 
you were in an Medicare + Choice Plan on this date.  Your provider must bill this service to the 
Medicare + Choice Plan. 
16.57 - La Parte B de Medicare no paga por este articulo o servicio ya que nuestros expedientes 
muestran que en esta fecha usted estaba en un plan de Medicare + Opcion. Suproveedor debe facturar 
este servicio a el plan de Medicare + Opcion. 
 
200 - Section 935 of the Medicare Modernization Act (MMA) - Limitation on 
Recoupment Overpayments 
 (Rev. 293, Issued: 09-14-17, Effective: 04- 02-18, Implementation: 04-02-18) 
 
For purposes of this instruction, the Provider, Physician and other Supplier will be 
referred to as Provider. 
Section 1893 (f)(2)(a) of the Social Security Act provides limitations on the recoupment of Medicare 
overpayments and the limitations extend to the redetermination (first level) and the reconsideration 
(second level). This section provides protection to providers during the initial stages of the appeal 
process.  It also requires the payment of interest on monies recouped when the provider prevails at the 
Administration Law Judge (ALJ) or subsequent levels of appeal. These limitations do not affect a 
providers right to appeal nor the requirements and timeframes associated with appealing; however, to 
stop recoupment, a provider must act decidedly to appeal. If the contractor discovers a Bankruptcy or  the provider is in bankruptcy and appeals an overpayment, the contractor shall refer to publication 
100.06, Chapter 4, Bankruptcy,  140.4.3 
 
The contractor shall cease recoupment or not begin recoupment when a valid redetermination or 
reconsideration request is received timely on an overpayment subject to these limitations (see 
 200.1 below). The provider has until the appeal deadline to file an appeal (refer to 
publication 100.04, Chapter 29).  If a provider wants to delay recoupment, it must submit the 
redetermination appeal request within 30 days of the demand letter date. To continue the delayed 
recoupment, the provider will have 60 days from the redetermination decision to submit a 
reconsideration request. If the request is received before the appeal deadline but after recoupment 
has started, the contractor shall stop the recoupment. The contractor shall not refund any monies 
collected back to the provider, unless otherwise directed by the Centers for Medicare & Medicaid 
Services (CMS). The contractor shall be accountable to ensure the debts continue to age and accrue 
interest until the debt is paid in full. 
 
After the first two levels of appeal are completed, the contractor shall resume recoupment and Normal 
debt collection processes. Whether or not the provider subsequently appeals the overpayment to the 
ALJ, or subsequent levels (Department Appeals Board (DAB), or Federal court), the contractor shall 
initiate recoupment at 100% until the debt is satisfied in full, unless an Extended Repayment Schedule 
(ERS) is established. If the debt was referred to Treasury and the provider files for an appeal, the 
contractor shall recall the debt from Treasury while in an appeal status. If the appeal decision is 
unfavorable to the provider, any outstanding debt will be referred back to Treasury, unless an 
approved ERS is established or the provider pays the debt in full. 
 
The contractor shall take the necessary steps to adjust affected account receivables (AR) after each 
favorable appeal decision. The contractor shall apply the funds collected (ERS payments, voluntary 
payments or recoupments) to any outstanding eligible overpayments first (monies shall be applied to 
interest first and then to principal) and any funds in excess will then be refunded to the provider. 
 
If the provider prevails at the third level of appeal or higher:  Payment of Section 935 (f)(2) interest is only applicable to overpayments recovered through 
involuntary recoupment under the limitation on recoupment provisions. Interest is not payable 
on the principal amount recouped on voluntary payments, (e.g., payments from existing ERS, 
immediate recoupment prior to the Qualified Independent Contractor (QIC) decision, payment 
suspensions and check payments, including checks paid to Treasury). 
 
Requirements that remain in effect: 
 
1. The appeal timeframes and filing requirements.  (Refer to Publication 100.04, Chapter 29) 
 
2. Overpayment interest accrual and assessment requirements. (Refer to 42 CFR 405.378 and 
Publication 100.06, Chapter 4) 
 
3. Underpayment interest requirements. (Refer to 42 CFR 405.378 and Publication 100.06, 
Chapter 4) 
 
4. Rebuttal requirements.  (Refer to 42 CFR 405.373-405.375) 
 
Note: Rebuttal statements are not appeal requests. Only valid appeal requests at the first and 
second level trigger Section 935(f)(2) Limitation on Recoupment rights in accordance with 42 
CFR 405.379. 
 
5. Suspended payment requirements.  (Refer Publication 100-08, Chapter 4) 
 
200.1 - Limitation on Recoupment Section 935 (f)(2) Eligibility 
(Rev. 293, Issued: 09-14-17, Effective: 04- 02-18, Implementation: 04-02-18) 
The contractor shall determine if the limitations apply once an overpayment is determined (refer 
to 200.1.1 and 200.1.2 for guidance).  This will trigger the creation of the appropriate 
initial demand letter and recoupment timeframes. 
 
200.1.1 - Overpayments Subject to Limitation on Recoupment 
(Rev. 293, Issued: 09-14-17, Effective: 04- 02-18, Implementation: 04-02-18) 
 
This applies to most Fee-For-Service claims for which a demand letter is issued (refer to 42 CFR, 
405.379), such as: 
A. Post-pay denial of claims (refer to 200.1.2 for exclusions). 
 
B.  Medicare Secondary Payer (MSP) Duplicate Primary Payment (DPP). 
(That was referred to the MAC contractor by the BCRC, CRC, other MAC contractor, or due 
to Self-Reporting (42 CFR 411.25)). 
 
C.  MSP recovery due to provider's failure to file a proper claim with the third party payer plan,  program, or insurer for payment. 
 
D. Final Claims associated with a Home Health Agency (HHA) Request for Anticipated 
Payment (RAP) under Home Health Prospective Payment System (HH PPS), (refer to 
200.1.2(D) for exclusions). 
 
200.1.2 - Overpayments Not Subject to Limitation on Recoupment 
(Rev. 293, Issued: 09-14-17, Effective: 04- 02-18, Implementation: 04-02-18) 
 
A. All other MSP overpayments that arent identified in  200.1.1 above. 
 
B. Beneficiary overpayments 
 
C.  Cost report overpayments 
 
D. HHA Request for Anticipated Payment (RAP) (refer to 200.1.1 (D) for exceptions). 
 
Note: This is not considered a claim for purposes of Medicare appeals regulations; however, it is 
submitted using the same format as Medicare claims.  RAPs under the Home Health Prospective 
Payment System (HH PPS) do not have appeal rights during (1) the 120 days from the start of 
the episode; or (2) 60 days from the payment date of the RAP to submit the final claim; 
rather, appeals 
rights are tied to the claims that represent all services delivered for the entire HH PPS 
episode (refer to Publication 100-04 Medicare Claims Processing Manual, Chapter 10, 10.1.10 
through 10.1.12, 
40.1 & 50). 
 
E. Hospice Caps calculations 
 
F. Provider initiated claim adjustments (including MSP DPP provider initiated adjustments) 
 
G. Accelerated/Advanced Payments 
 
H. Reopening of claims (Clerical errors and mass adjustments) 
 
I.  Periodic Interim Payment (PIP) rate adjustments (with the exception of a RAC claim 
review, which determines an overpayment) 
 
J. Payment Suspensions 
 
200.1.3 - Adjustment of the Fee-For-Service Claims  
(Rev. 293, Issued: 09-14-17, Effective: 04- 02-18, Implementation: 04-02-18) 
The contractor shall adjust the claims after the 935 overpayment is determined. This will 
trigger the creation of the initial demand letter to begin recoupment on the 41st day after 
the date of the demand letter. 
 
200.1.4  The Rebuttal Process and the Limitation on Recoupment 
(Rev. 293, Issued: 09-14-17, Effective: 04-02-18, Implementation: 04-02-18) 
  In 42 CFR 405.373 through 405.375, regulations require that providers be given an opportunity 
to rebut before recoupment takes effect. The provider can submit a statement that includes any 
pertinent information as to why recoupment should not be put into effect on the date specified in 
the notice/demand letter within 15 days. The rebuttal process is not an appeal. A rebuttal permits 
the provider a vehicle to indicate why the proposed recoupment should not take place. The 
contractor may, based on the rebuttal statement, determine to stop recoupment or proceed with 
recoupment. In contrast, the limitation on recoupment provision mandates that no recoupment 
begins when a valid and timely request for a first level or second level appeal is received. 
 
Refer to Publication 100.08, Medicare Program Integrity Manual, Chapter 3, Verifying Potential 
Errors and Taking Corrective Actions,  3.6.5 - Provider Financial Rebuttal of Findings 
 
200.1.5  Extrapolated 935 Overpayments 
(Rev. 293; Issued: 09-14-17, Effective: 04-02-18, Implementation: 04-02-18) 
 
The contractor shall create one account receivable (AR) for the total amount of the extrapolated 
overpayment, which includes the statistical sampling of claims. Refer to Publication 100-08, 
Medicare Program Integrity Manual (PIM) for instructions on extrapolations. 
 
 
200.1.6  Medicare Secondary Payer (MSP) Provider Duplicate Primary Payment 
(DPP)  
(Rev. 293; Issued: 09-14-17, Effective: 04-02-18, Implementation: 04-02-18) 
 
The contractor shall not process new MSP DPP debts where the debtor is an individual or entity 
other than the provider; however, contractors shall continue to process provider MSP DPP Debts. 
The contractors shall separately identify MSP DPP (including provider initiated) debts from all 
Non-MSP Debts for budget purposes only. Contractors shall process MSP DPP debt as a 935 debt 
with the exception when the provider requests or initiates the adjustment, it will not be subject to the 
limitation on recoupment. 
 
Note: All MSP DPP debt workload and cost associated need to be accounted for under the MIP 
funding. 
 
1.  All Contractors shall : 
 
a)  Adjust claims to reprocess as secondary when the Explanation of Benefits (EOB)/primary 
payment sheet is included with claims. 
 
b)  Adjust claims to a full claims denial when the EOB/primary payment sheet is not included 
with the submitted claim(s). 
 
i. Contractors shall process these overpayments as any other 935 overpayment in 
accordance to the procedures outlined in Publication 100.06, Chapters 3, 4 & 5. 
 
A.  Contractors on HIGLAS shall: 
 
Use the existing PART A and PART B MSP Transaction Type Codes for the 935 MSP 
DPP that was referred to the MAC contractor by the BCRC, CRC, other MAC 
contractor, or due to Self-Reporting (42 CFR 411.25).   
They are as follows: 
 
1. MAGHP-PROV935 
2. MANONGHP-PROV935 
3. MBGHP-PROV935 
4. MBNONGHP-PROV935 
 
B.  Contractors on HIGLAS shall: 
 
Use the transaction types for Provider Initiated Adjustments Not Subject to the 
Limitation on Recoupment. 
 
These transaction types will be mapped to APROV1 and BPROV1 letters. 
 
1. (APROV1.pdf): Part A Non-935 Aggregate Demand 
Letter (To be used for MSP DPP Part A Provider Initiated) 
 
  MAGHP-PROV: 
  MANONGHP-PROV 
 
2. (BPROV1.pdf): Part B Non-935 Initial Letter 
( To be used for MSP DPP Part B Provider Initiated) 
 
  MBGHP-PROV 
  MBNONGHP-PROV 
 
C.  Contractors not on HIGLAS shall: 
 
1. Provider Initiated Overpayments: 
 
Refer to Publication 100.6, Chapter 4, 20.1 for Non-MSP / Non-935 demand 
letter language (Not Subject to Limitation on Recoupment) 
 
2. All other MSP DPPs : 
Refer to Publication 100.6, Chapter 4, 20.1 for the Non-MSP 935 Demand Letter 
Language Use the HIGLAS-CMS Receivable Balance Detail Report (Extract) or CMS Receivable 
Activity 
Report to account for all MSP DPP debts under MIP. 
 
200.1.7 - Immediate Recoupment Requirements for 935 Overpayments 
(Rev. 293; Issued: 09-14-17, Effective: 04-02-18, Implementation: 04-02-18) 
 
Contractors shall offer providers the opportunity to request immediate recoupment. Providers 
can elect this process to avoid making payment by check and/or avoid the assessment of interest 
if the immediate recoupment pays the debt in full before day 31. If providers request an immediate  recoupment, they must understand that it is considered a voluntary repayment. The request for 
immediate recoupment should be received in writing at least 16 days from the date of initial demand 
letter to avoid the assessment of interest, however when the request is received after 16 days 
from the date of the demand letter, the debt shall be placed in an immediate recoupment 
status and interest will continue to accrue if the debt is not fully collected by day 31. 
 
A. Contractors shall offer two immediate recoupment options. 
 
1.  A one-time request on the total overpayment amount (All accounts receivables) in a 
single demand letter and any future demanded overpayments; Or 
 
2.  A request on the demanded overpayment (All accounts receivables) addressed in 
a single demand letter only. 
 
B. Contractors shall incorporate the following minimum information related to immediate 
recoupment on its website: 
 
1. This option is ONLY for overpayments that receive a demand letter. 
 
  The request must be in writing, and may be submitted using regular mail, 
Facsimile, or email with an encrypted  file. 
 
  The request must include the following: 
 
1. Provider Name and contact phone number 
2. Providers Medicare Number and/or the National Provider Identification (NPI) 
3. Provider, Administrator or CFOs signature (someone with authority is 
required to sign) 
4. Letter number or a copy of demand letters first page 
5. Which option the provider is requesting 
 
  The contractor shall scan, copy or keep the original request for proof of receipt. 
 
2. Contractors shall use their discretion when a provider does not submit all 5 requirements to 
either: 
 
  Reach out to provider for the missing information or 
  Not accept the request based on missing information 
 
3. Contractors shall continue to maintain or update the website on the immediate recoupment  process as needed. 
 
C.  Contractors shall inform providers that going through the immediate recoupment 
process is considered voluntary payments and will not be subject to 935 (f)(2) 
interest pursuant to  1893(f)(2). 
 
D. Contractors shall consider all written requests for an immediate recoupment as a 
payment arrangement that constitutes a voluntary payment except for immediate 
recoupment 30 calendar days after reconsideration decision. 
 
  When the provider appeals to the ALJ and prevails. 
 
1.  Any money recouped (applied to the principal balance) 30 days 
after the reconsideration decision will be subject to 935 Interest. 
 
2.  Contractors shall follow the 935 (f)(2)interest calculation rules when the 
provider prevails and recoupment continued after an unfavorable 
reconsideration decision. 
 
E.  Contractors shall ensure the demand letter and website explain that, when there is a 
remaining principal balance after the initial immediate recoupment, they shall continue 
recoupment and other collection activities. 
 
F. Contractors shall update all ARs associated to the request within 14 calendar 
days from the Mailroom-stamped receipt date. 
 
G. As applicable, contractors on HIGLAS shall use the functionality in HIGLAS, 
which allows user to set the flag to immediate recoupment for multiple ARs 
instead of only one AR. 
 
H. Contractors shall update ALL ARs within the demand letter(s) in the shared 
systems when a provider requests the immediate recoupment option. 
 
I.  Contractors shall accept a written request to discontinue participation in the immediate 
recoupment process at any time. Once received, Contractors shall stop the 
immediate offset process as soon as possible from the mailroom receipt date, but 
no later than 14 calendar days from mailroom receipt date. 
 
J.  Contractors shall consider all written requests for an immediate recoupment as a 
payment arrangement that constitutes a voluntary payment. 
 
200.2 - Requirements for All Initial Demand Letters (Manual or 
Electronic) 
(Rev. 293; Issued: 09-14-17, Effective: 04-02-18, Implementation: 04-02-18) 
 
Contractors shall issue demand letters for all overpayments subject to the limitation on 
recoupment protections. Refer to Publication 100.6, Chapter 4,  20 and 20.1 for the  935 demand letter template. In addition to the requirements listed in Chapter 3 & 4, on 
Initial Demand Letters (excluding Cost Report Demand Letters) the following are 
specific requirements for overpayments subject to the Limitation on recoupment 
protections: 
 
Contractors shall: 
 
1. Include a claim level detail report of the claim adjustments (ARs) that comprise the 
overpayment along 
with each demand letter to each provider. 
 
2. Use the language in the letter templates in chapter 4,  20.1 for Overpayments subject to 
the limitation on recoupment protections. 
 
  HIGLAS users shall select the appropriate system generated letters 
listed in Chapter 4, 20 and 20.1 
  Non-HIGLAS users shall use the template for the 935 Initial Demand Letter 
  Use the 935 Initial Demand Letter Template for manual letters. 
  Contractors shall use the paragraph under (RAC Demand Letter Language 
only) in the 
935 Initial Demand letter for RAC overpayments subject to 935 in chapter 4, 20 
and 20.1. 
 
3. Scan or copy all letters in the internal system for non-HIGLAS users and HIGLAS 
users shall use the Tool (Paper Clip) to ensure the availability to obtain a copy of manual 
letters as needed. 
 
4. Send the demand letter by first-class mail. 
 
200.2.1  935 Initial Demand Letter  
(Rev. 293; Issued: 09-14-17, Effective: 04-02-18, Implementation: 04-02-18) 
 
Refer to Publication 100.6, Chapter 4, Debt Collections,  20.1 
 
200.2.2 - Recoupment After the Initial Demand:   When Does it Begin? 
(Rev. 311, Issued: 02-22-19, Effective: 10-07-19, Implementation: 10-07-19) 
 
Timeframe   Medicare Contractor   Provider  
Day 1    Send demand letter.   Receives notification by first class 
mail of overpayment determination.  
(The letter date is the determination 
date).   Day 1-15   Process rebuttal  Can submit a rebuttal request within 
requests received  15 days from the date on the demand 
before or by day   letter.  (The letter date is the 
15  deadline.    No  determination date).  Can request an 
recoupment occurs.  
Immediate recoupment  
Day 16-30   Process rebuttal  Can request a redetermination and 
   requests received  potentially prevent any recoupment 
   before or by day 15.    from occurring on day 41.  
  
  
Performs administrative 
activity (i.e., validating 
Redeterminations and 
updating account 
receivables to the 
Redetermination 
status).  
  
No recoupment occurs 
unless the provider 
requested the 
Immediate  
Recoupment  
Day 31-40   Performs administrative  Can request a redetermination and 
activity (i.e. validating  potentially prevent any recoupment 
Redeterminations and  from occurring.   
updating account 
receivables to the  
Redetermination 
status).   
  
No recoupment occurs 
unless the provider 
requested the 
Immediate 
Recoupment.  
Day 41   Recoupment begins on  Can request a redetermination and 
overpayments without a  potentially stop recoupment from 
validate  continuing.  
redetermination 
request.  
   
  
   1.  Recoupment shall proceed on day 41 (with the exception of 
immediate recoupment) from the initial demand letter without a 
timely and valid request for a redetermination.    
  
2.  To prevent recoupment from occurring on day 41, the 
provider must file the request for a redetermination no later than 
the 30th calendar day following the date of the initial demand 
letter.    
  
3.  Contractors shall refer to Publication 100-04 Medicare 
Claims Processing Manual, Chapter 29, and Appeals of Claims 
Decision, to determine what constitutes a valid request for  a 
redetermination.    
  
4.  Contractors shall have internal controls in place to ensure 
when a provider is in an                  immediate recoupment status 
the recoupment process continues unless a request from the                  
provider is received to stop the immediate recoupment.  
  
5.  Contractors shall continue to stop recoupment on or after 
day 41 from the demand letter   date when the appeal request is 
received and validated with an outstanding balance.  
  
 Providers have 120 days after the date of receipt of the initial 

determination (the  notice of initial determination is presumed 
to be received 5 days after the date of the notice unless there is 
evidence to the contrary) to request a redetermination in 
accordance with Publication 100.04, Chapter 29  
 
200.2.3 - Payments Made Upon Notice of Demand or Through An 
Immediate Recoupment Request   
(Rev. 311, Issued: 02-22-19, Effective: 10-07-19, Implementation: 10-07-19)  
  
Payments made by a provider in response to a demand are not recoupments as defined in 
405.372(e).  Recoupment is the recovery by Medicare of any outstanding Medicare debt 
by reducing present or future Medicare payments and applying the amount withheld to 
the indebtedness.  Therefore, payments and recoupments from the immediate recoupment 
process made in response to a demand is voluntary and are not subject to 935 interest.  
Refer to section 200.1.5 Immediate Recoupment requirements in section 200.1.5  
 
 
 
 
  200.2.4 - Payment Suspension Relating to Limitation on Recoupment  
(Rev. 311, Issued: 02-22-19, Effective: 10-07-19, Implementation: 10-07-19)  
  
Suspended funds involving providers, physicians and suppliers who have been put on 
payment suspension under 405.372 (e) not a recoupment for purposes of the limitation 
on recoupment.  Suspended funds is not a recoupment as this term is defined in 
405.370.  CMS is only limited by section 1893(f)(2) of the Act from recouping 
Medicare payments.  We are not restricted in our ability to apply suspended funds to 
reduce or dispose of an overpayment.   The Provider cannot appeal a payment 
suspension; only the resulting overpayment determination, may be appealed and 
subjected to limitation on recoupment.   
Exception:  If the suspended payments are insufficient to fully eliminate any 
overpayment, and the provider or supplier meets the requirements of 42 CFR  405.379 
"Limitation on Recoupment" provision under 1893(f)(2) of the act will be owed to 
Medicare.  
 
200.2.5   Timeframe for Stopping Recoupment After a Redetermination 
Request is Received  
(Rev. 311, Issued: 02-22-19, Effective: 10-07-19, Implementation: 10-07-19)  
  
Contractors corporate mailroom receives and stamps the date of receipt on each appeal 
request. The timeframe begins in the corporate mailroom starting with the stamped 
receipt/date.  The date for filing a request is defined as the date it was received by the 
appropriate contractor in the corporate mailroom, the date received via facsimile, or the 
date received in the secure internet portal/application in accordance with Publication 100-
04, Chapter 29,  310.2.           
           
Note:  If the appeal request is not readily identifiable as such in the corporate mailroom 
the date for filing a request is defined as the date the Medicare Contractor identifies the 
correspondence as an appeal request.  In such instances Contractors must ensure 
documentation is maintained on file justifying the alternate appeal request date.   
  
Contractors shall implement the following upon receipt of a Redetermination 
Request:   
  
A.  Contractors shall take eight (8) business days when the redetermination 
request is received on or after calendar day 31 to do the following:  
    
1.  Stamp the receipt date in mailroom  
2.  Review and validate the appeal request; and  
3.  Set the redetermination status to avoid/stop recoupment. (If the debt is 
under an immediate recoupment agreement, the recoupment continues 
and in the appeal status at the same time)  
    Note:  Providers run the risk at having recoupments occurring when the 
request is received on or           after day 31.  When a recoupment occurs on 
day 41 or later, the contractor shall apply the amounts to  
the overpayment and not refund those amounts.   
         
B.  Contractors shall have an exception to the eight (8) business day 
requirement when the Redetermination request received prior to calendar day 
31:   
  
  Contractors shall have the additional time to process a 
redetermination request when received prior to calendar day 31 
(from the date of the demand letter).    
  
  The additional time shall not exceed (2-3 calendar days) 
before day 41 from the demand letter date to update systems 
(HIGLAS, MCS, VMS) timely to avoid systematic offset/ 
recoupments of the providers overpayment.  
              
C.  Contractors shall have seven (7) additional business days (from the 
redetermination appeal  status update) to generate and send the 
redetermination receipt notice to provider.  
  
D.  Contractors shall communicate and coordinate between the appropriate 
operational areas, immediately following all validation(s), on 935 overpayment 
appeal requests.     
  
E.  Contractors shall have internal controls in place after the appeal 
validations for updating the redetermination status to stop recoupment from 
occurring on day 41.   
  
 When the provider has an immediate recoupment agreement in 
place this shall continue with the appeal status update, unless the 
provider request the immediate recoupment to stop).   
  
    Contractors shall update the appropriate systems (e.g., HIGLAS 
or VMS) to reflect the    redetermination appeal status, to prevents 
further recoupments from occurring after day 41.   
  
 Contractors on HIGLAS shall update closed debts to reflect the 
redetermination appeal status for tracking purposes.     
 
 
 
  200.3 - What to Do After the Validated Redetermination is Received 
(Rev.311, Issued: 02-22-19, Effective: 10-07-19, Implementation: 10-07-19)     
  
Action to take:  
  
1. Contractors shall cease recoupment on validated redetermination requests. 
(Refer to Section 200.2.3 above).   
  
2. If the contractor recouped funds prior to receiving and validating a 
redetermination request on or after day 41 from the demand letter date, the 
amount recouped shall be retained.  (Contractors shall use their discretion to 
refund if the request was timely received but recoupment did not stop 
timely).  
  
3.  Contractors shall continue to collect other debts not in an appeal 
status subject to 935.  
  
4. Contractors shall apply any excess monies from a check payment to 935 
overpayments as a  voluntary collection and update the system to reflect the 
collection as a check amount and not as a recoupment.  
   
5. Contractors shall not recoup (exception: immediate recoupment) or place 
in suspense any monies related to a 935 overpayment debt subject to 
Limitation on Recoupment while it is in an appeal  status.   
  
6.  Debts continue to age and accrue interest on the outstanding 
amounts.  
   
7. Contractors shall send a redetermination receipt notice to the provider 
within the timeframes allotted in Section 200.2.3 above.    
  
8.  Construct a short paragraph, such as Exhibit 1 below.    
  
Contractors shall use the sample letter as an example and can use their 
discretion to change the language to address the overpayment accordingly, as 
needed:  
  
Exhibit 1:  Redetermination Receipt Notice:  
  
Current Date  
Provider Name   
Address   
City, State ZIP Code   
   Provider Number:  
Demand Letter Number:  
Account Receivable Number:  
  
Dear Provider Name,  
  
This letter serves as a notification that we have received your request for a 
redetermination for the above accounts receivable or the services at issue.  
 All collection processes have ceased on the unpaid balance of the accounts 
receivable, unless you have entered into an extended repayment schedule, 
immediate recoupment or paid in full.     
Interest will continue to accrue on any outstanding unpaid balance of the 
overpayment as explained in your demand letter.  
If you have any questions, please contact our office at the number listed 
below.  You may also visit us at www._______________.com.  
  
Sincerely,     
(Name and title)  
 
200.3.1  Outcome From the Redetermination Decision 
(Rev. 311, Issued: 02-22-19, Effective: 10-07-19, Implementation: 10-07-19) 
 
Contractors shall follow the appropriate actions below following notification of a 
redetermination decision:   
  
Fully and Partially Favorable Redetermination decisions:   
  
a.  Effectuate the decision (adjust the claims in system for the 
finalized claim payment) within  30 calendar days from the 
redetermination decision and    
  
b.  Recalculate the overpayment and refund the remaining excess 
amounts to the provider       within 30 calendar days from the final claim 
payment determination date as shown in (a) above. Or  
    
c.  Complete this entire process (a and b) within 60 calendar days 
from the redetermination decision date.   
  
 Refer to Publication 100.04, Chapter 29, 310.11 - Effectuation of the Redetermination 
Decision for additional guidance.  
   
A.  Redetermination Decisions:     
Contractors shall check the system on all favorable decisions prior to refunding the 
provider for other  outstanding debts that are eligible for offset/recoupment and apply 
monies to those debts first before  dispersing the refund amount this includes all open 
debts that are not in an exclusion status such as  appeals, bankruptcy, fraud etc. In 
accordance to Publication 100.6, Chapter 4, Section 70.14.8.1, and  chapter 5, section 
410.4 (10).    
  
  1. Full reversal - This is a Fully Favorable decision of the overpayment 
determination.    
            
Contractors shall follow current policies in adjusting the overpayment and the amount of 
interest charged in accordance with in Publication 100.06, chapter 4 30.    
  
                              a.  When there are NO recoupments/collections:  
                                    
  Contractors shall adjust the accounts receivables to close.  
  The Remittance Advice (RA) shall be acceptable 
in place of additional written notices.  
                b.  When there is a balance remaining after the claims have finalized:  
  
  Adjust the accounts receivables (AR) accordingly  
   Send a revised demand letter using the verbiage in 
Exhibit 2 no later than 30 calendar days from the finalized 
claims or 60 calendar days from the Redetermination date. 
c. When there is a recoupment/collection and an excess amount remains,    
contractors shall apply to outstanding overpayments before any refund is 
issued.  
  
  The RA shall be acceptable in place of additional 
written notices.  
d. When a reversal in favor of the provider occurs, interest may be payable       
by Medicare if the underpayment is not paid within 30 calendar days of 
the final determination (e.g.; claim adjustments finalized due to decision). 
Refer to 42 CFR 405.378).  
  
2. Partial reversal - This is a Partially Favorable decision of the overpayment 
determination in which the decision reduces the original principal overpayment amount.  
This decision requires the contractor to recalculate the original overpayment amount.   
 
a.  When there are no recoupments/collections contractors shall: 
 
  Adjust the accounts receivable (AR) accordingly 
1.  Send the Redetermination Revised Overpayment Letter in 
Exhibit 2 with the new revised amount within 30 calendar days 
from the finalized claim determination date or 60 days from the                       Redetermination decision date. 
 
  
b.  When there are no recoupments/collections contractors shall:  
  Adjust the accounts receivable (AR) accordingly  
  Send the Redetermination Revised Overpayment 
Letter in Exhibit 2 with the new revised  amount within 30 
calendar days from the finalized claim determination date 
or 60 days from the Redetermination decision date.  
  
2.  When there is recoupments/collections and a balance is remaining contractor shall:  
  
  Adjust the AR accordingly  
  
  Select the correct Language from Exhibit 2   
  
  Send the Redetermination Revised Overpayment 
Letter in Exhibit 2 with the new revised  amount within 30 
calendar days from the finalized claims determination date 
or 60 calendar days from the Redetermination decision 
date.  
  
d.  When there is a recoupment/collection and an excess amount 
remains the contractor shall:  
  
 Adjust the AR accordingly and apply monies to the 
remaining part of  the overpayment and/or any other 
outstanding debts first before refunding the provider.  
  
 Do not apply any excess funds to other overpayments that 
are in an appeal status or any other pending status in 
exclusion such as (Bankruptcy, suspensions, Fraud etc.).     
  
 Send the Redetermination Revised Overpayment Letter 
in Exhibit 2 within 30 calendar days from the finalized 
claims determination date or 60 calendar days from the 
Redetermination decision date.  
  
e.  When there is a recoupment/collection with an excess amount and 
no other outstanding overpayments:  
  
  Adjust the AR accordingly and apply monies to the 
remaining part of the unfavorable overpayment.  
  
  Contractors shall issue a refund on any remaining 
excess amounts.     
  Send the Redetermination Revised Overpayment 
Letter in Exhibit 2 within 30 calendar  days from the 
finalized claims determination date or 60 calendar days 
from the Redetermination decision date.  
  
       3.  Full Affirmation - This is a Fully Unfavorable decision of the overpayment 
determination.            
       Contractors shall follow current policies on interest calculations in accordance with 
Chapters  3 and 4.  
  
     a. Contractors shall select the correct language from Exhibit 2.    
   
  Send the Redetermination Notification letter on open balances only within 30 calendar 
days from the Redetermination decision date.   
 
b. Contractors shall follow normal collection processes, as in Publication 100.06, Chapter  
when sending the intent to refer letter when there is no second-level appeal recorded by 
calendar   
       day 76.    
  
B.   Recoupment after a Redetermination Decision   
  
While the Redetermination Revised Letter states that recoupment can begin no earlier 
than the 61st  calendar day, contractors shall utilize the additional 15 calendar days before 
recoupment begins on any unpaid balance to reconcile the payment or perform 
administrative actions.  The 15-calendar day period between when the provider is 
informed (recoupment can begin on day 61 and when recoupment actually begins on day 
76) is designed to facilitate communication between the Qualified Independent 
Contractor (QIC) and the contractor, should a reconsideration request or a payment is 
received.    
  
1. If the debt has been in an appeal status, when you initiate or resume 
recoupment, the status of the debt shall be changed to reflect eligible for 
internal offset" or resume offset.   
  
2. Recoupment shall not resume upon notification of the receipt of a timely 
and valid request for a reconsideration by the QIC.    
  
 However, if the provider notifies you a reconsideration request was sent timely to the 
QIC and;  
  
a.  There is no communication from the QIC or   
b.   The appeal is in the Medicare Appeal System (MAS), or   
c.    The 75th day is approaching,       
   Contractors shall:  
  
a. Contact the QIC to verify the receipt of the appeal request to avoid 
subsequent problems with the provider. or  
  
b. Accept copy of the tracking receipt as valid proof of the 
reconsideration request and place the overpayment in the 
Reconsideration Appeal status.    
  
 Use this source as proof to ensure recoupment does not start or to stop recoupment.    
  
C. When Recoupment Can Begin or Resume After the Redetermination Decision  
  
Timeframe   Contractor actions for  Provider  
recoupment  
Overpayment remains in an   Refund the overpayment 
Day 60   
Appeal Status - No  in full or submits a request 
  
recoupment occurs    for reconsideration.  
Day 61-75                                                                                                       
In receipt of the  Files reconsideration or 
reconsideration case-file  refunds the overpayment, 
and/or MAC has official  or requests an ERS.   
proof of request received 
and stamped, no recoupment 
occurs. Overpayment 
remains in the appeal status.  
Day 76                                                                        
Recoupment begins resumes  Provider has 180 days 
or stops with a valid receipt  from date of receipt of the 
date of the reconsideration.   redetermination to appeal 
to the reconsideration 
level.   
  
  
  
D. Redetermination Revised Overpayment Letter for Partially Favorable and 
Unfavorable Appeal Decisions  
  
1.  Contractors shall use the letter template below in Exhibit 2 for partially 
favorable and fully unfavorable decisions.  If the Medicare revised letter 
language does not address the scenario after the effectuation, as needed 
contractors shall be able to modify the language to address the          
overpayment.  
   a.  Contractors shall send a letter on partially favorable decisions 
when the recalculation resulted in:  
  
  Paying the new revised amount in full from previous 
recoupments/collections.   
  Reducing the revised amount from previous 
recoupments/collections   
  When the amounts are applied to other outstanding debts 
(State in letter    below, the   provider may request a listing of 
debts by contacting  xxx-xxx-xxxx).  
   Reducing the revised amount from previous 
recoupments/payments on an established ERS.  
  Reducing the original amount with no 
recoupments/collections  
  
b.  Refer to chapter 4, Section 50 for ERS instructions on a revised 
repayment schedule.  
  
c.  Contractors shall send a notification on the unfavorable decisions 
with an open balance only.  
  
Contractors shall select the correct Language Notification for Unfavorable decisions 
and           Revised demand letter for partially favorable decisions below.  
  
2.   Contractors shall be able to modify the language to address the overpayment when 
the Medicare revised letter language does not address the scenario after the effectuation, 
as needed.  
  
 Exhibit 2:   Medicare Redetermination Notification or Revised Demand Overpayment 
Letter  
  
Current Date  
  
Provider Name  
Address  
City, State ZIP Code  
  
Provider Number:  
Account Receivable Number:  
  
Dear [Provider Name],  
  
This letter is in reference to the redetermination decision dated__________, for the 
overpayment in the amount of____________ issued to you on _________ [Date of 
demand].    
   [Select the appropriate paragraph below:] (Option 1- Fully Favorable with a 
balance remaining revised demand letter)  
  
Based on the fully favorable decision and the recalculation, there was a balance 
remaining of Principal __________ and Interest __________.   A payment totaling 
__________ is due by __________.    
  
Or  
(Option 2 - Partial Favorable revised demand letter)  
  
Based on the Partially favorable decision and the recalculation, the revised balance of the 
Principal is __________ and Interest is __________.   A payment totaling __________ is 
due by __________.    
Or  
(Option 3 - Partially Favorable on debts paid in full due to decision)   
  
According to our records after the effectuation, your debt had an underpayment for 
[AMOUNT] that was applied to the remaining outstanding balance that paid the debt in 
full. You can appeal to the next level Reconsideration at the Qualified Independent 
Contractor.   
  
Or  
(Option 4- Partially Favorable applied excess funds to other overpayments with or 
without a refund)  
  
  According to our records after the effectuation, your debt had an underpayment for 
[AMOUNT] that was applied to other outstanding overpayments.  The provider may 
request a listing of debts by contacting [ xxx-xxx-xxxx].    
  
Or  
(Option 5 - Fully unfavorable notification letter)  
Based on the unfavorable decision the balance of the Principal is __________ and 
Interest is __________.   A payment totaling __________ is due by __________.    
  
  
When the redetermination decision is [Unfavorable or Partially Favorable], we may 
begin to recoup no earlier than 61 days after the date of this [Notification or Revised 
demand letter].  Please note if recoupment stops, interest continues to accrue.  
  
[Contractors shall select the correct option above based on the outcome of decision].   
  
Rebuttal Process:  
  
Under our existing regulations 42 CFR Sections 405.374, providers and other suppliers 
will have 15 days from the date of this demand letter to submit a statement of 
opportunity to rebuttal.  The rebuttal process provides the debtor the opportunity before  the suspension, offset, or recoupment takes effect, to submit any statement (to include 
any pertinent information) as to why it should not be put into effect on the date specified 
in the notice.   A rebuttal is not intended to request a review of supporting medical 
documentation nor to express disagreement with the overpayment decision.  A rebuttal 
shall not duplicate the redetermination process.  This is not an appeal of the overpayment 
determination.  Our office will advise you of our decision 15 days from the mailroom 
stamped receipt date of your request.    
  
The rebuttal statement does not cease recoupment activities consistent with Section 
935(f)(2) of the Medicare Modernization Act (MMA).  
  
If you wish to appeal this decision:  
  
If you disagree with this overpayment decision, you may file an appeal.  An appeal is a 
review performed by people independent of those who have reviewed your claim so far.  
The second level of appeal is the reconsideration.  You must file your request for the 
reconsideration within 180 days from date of receipt of the appeal decision letter in 
accordance to 42 CFR  405 962(a).  However, if you wish to avoid recoupment from 
occurring, you need to file your request for reconsideration within 60 days from the 
date of this letter, as described above.  Unless you show us otherwise, we assume you 
received this letter 5 days after the date of this letter.   
  
[Include this paragraph when there is a remaining balance owed.]  
  
If you have already sent a payment and will not be appealing to the next level 
appeal, thank you, and we ask that you disregard this letter.  If you are unable to 
repay the amount due in full, please visit our website for instructions on an extended 
repayment schedule (www.contractor.com).    
  
Please refer to your initial demand letter for any other information not disclosed in 
this letter.  
  
If you have any questions or concerns on this matter, please write to our office or contact 
us at the address at the bottom of this notice.  
  
Thank you,  
Analyst Name  
Title xxx-xxx-xxxx   
  
  
  E. Initiating or resuming recoupment after a Withdrawal or Dismissal     
  
1.  Contractors shall initiate or resume recoupment following:  
  
            A request for a withdrawal from the provider or other suppliers or 
a redetermination dismissal.     Remove the appeal status as soon as possible but no later 
than 30 calendar days from the dismissal notification to resume 
recoupment.  
  
      Exception to Recoupment:  
2.  When the Qualified Independent Contractor determines the 
Redetermination dismissal was  
  in  error, vacates the dismissal and remands the case back to the 
contractor.   
  
  Contractors shall update all AR/s back to the 
Redetermination appeal status and   
  Handle as a new Redetermination within eight (8) business 
days from the receipt date of  the remand notification.    
  
3.  For additional guidance, refer to 42 CFR 405.379, 405.952 and 
405.972 and publication  
100.04, Medicare Claims Processing Manual Chapter 29 - Appeals of Claims Decisions  
 
200.4 - Extended Repayment Schedules (ERS) With an Appeal That is 
Subject to Limitation on Recoupment
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
   
If a provider, physician or other suppliers has been granted an extended repayment 
schedule (ERS) and submitted a valid and timely request for a redetermination or 
reconsideration to the Medicare contractor, the provider or supplier will not be 
considered in default if payments were not made by the provider.  The appeal would 
supersede the ERS agreement; (under normal circumstances this would have been put on 
withhold due to default of payment).  The contractor shall send a notice to the provider 
that it must resume its ERS payments or be placed on recoupment according to IOM 
100.6 chapter 4 50. 
 
Payments made by a provider under an ERS are not recoupments for the limitation 
provision and are not subject to 935 interest if reversed at the ALJ appeal or above.  
However, if a provider defaults on the ERS schedule and recoupment begins before a 
valid and timely request has been received, those recoupments are subject to payment of 
interest under the 935 interest requirements.  For additional information on the Filing 
timeframes or instructions on Extended Repayment Schedules refer to Chapter 4 50. 
 
200.5 - Reserved for Future Use  
 
200.5.1 - Reserved for Future Use 
 
200.5.2 - Assessment of 935 Interest  
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
  The limitation on recoupment provisions also amended the way interest is to be paid to a 
provider or supplier whose overpayment determination is overturned in administrative or 
judicial appeals subsequent to the second level of appeal (QIC reconsideration).  This is 
called 935 interest, which is payable on an underpayment where the reversal occurs at the 
ALJ level or subsequent levels of administrative appeal based on the period that 
Medicare recouped the providers or suppliers funds.  Payment of 935 interest is only 
applicable to overpayments recovered under the limitation on recoupment provisions. 
Interest is only payable on the principal amount recouped. 
 
200.6 - Interest Rate and Calculation Periods for Appeal Decisions on 
Recouped Funds for Purposes of Paying 935 Interest 
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
 
We will pay simple interest rather than compound interest, and we will not pay interest 
on interest; this mirrors the manner in which we assess interest against providers, 
physicians and suppliers.  Monies we recouped and applied to interest would be 
refunded and not included in the amount recouped for purposes of calculating any 
interest due the provider.  The periods of recoupment will be calculated in full 30-day 
periods; and interest will not be payable for any periods of less than 30 days in which we 
had possession of the recouped funds. 
 
200.6.1 - Calculations for Each 30-Day Period at the ALJ Decision or a 
Final Determination Date 
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
 
Interest shall be calculated for each 30-day period using the interest Rate in Effect on the 
ALJ decision Date or the (revised written Final Determination Date).  The contractor will 
have 30 days to calculate and refund the provider from the ALJ Decision date or the final 
determination Date. 
 
NOTE:  Contractors will need to issue a revised written determination to the provider, 
physician or other supplier in accordance to Publication 100-04, Medicare Claims 
Processing Manual, Chapter 29. 
 
200.6.2 - Computing 935 Interest at the ALJ and Higher Levels  
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
 
Interest paid under 935 is only applicable at the ALJ or further appeal level when that 
decision results in a full or partial reversal of the prior decision and contractors retained 
recouped fund 
 
What is needed to calculate 935 interest 
 
The simple formula for calculating interest is: 1) Time; 2) Rate; and 3) Amount 
For each recoupment action:   
  1.  TIME:  Determine the total Julian Days starting from the recoupment date to 
the ALJ Decision date or date the revised notice with the new overpayment, if 
applicable.  Divide the number of Julian days by 30 to compute the number of 
30-day periods. The interest will not be payable for any periods of less than 30 
days in which we had possession of the recouped funds. 
 
2.  RATE:  Use the Annual Rate of interest at the time of the ALJ decision date or 
from the revised New Written Determination date from an effectuation and 
convert interest rate to a monthly interest rate.  (For example: The Rate of 
Interest as of April 18, 2008 is 11.375%).  Convert annual Rate to a monthly 
rate by dividing by 12. 
 
3.  AMOUNT:  The amounts that are to be used as the basis on which to compute 
interest earned by the provider are those amounts that are credited to principal 
resulting from any involuntary payments from the provider after the 
elimination/satisfaction of all Medicare debt.  Recouped monies applied to 
interest are not included in determining the 935 interest. Only those principal 
funds recouped via withholding (e.g. payments recouped under a defaulted ERS 
or offset) are included.  Do not include payments a provider makes under an 
ERS or other voluntary payments made by the provider. 
 
200.6.3 - How to Calculate 935 Interest 
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
 
Where there are multiple recoupments 935 interest must be calculated separately for each 
recoupment action and then total for the amount due the provider. 
 
Example: 
 
How to calculate 935 Interest: 
 
(935 interest at the ALJ and higher levels) 
 
Fully Favorable 
 
ALJ Decision Date: Jan 02,2008 
Recoupment  Recoup Date  Rate of  Length of Time  Interest 
Amounts  Interest   Money Held  Owed to 
from ALJ  Provider 
Decision 
Date 
1) $ 9062  March 07, 2007  12.5%  301 Julian Days   $ 943.95 
(10 mos. 1 day) 
2) $ 9806  May 18, 2007  12.5%  230 Julian Days  $ 715.02 
(7 mos. 20 days)  3) $ 9136  August 08, 2007  12.5%  148 Julian Days  $ 380.66 
(4 mos. 28 days)   
      Total 935   
Interest owed  $ 2,039.63 
 
Calculation example:                  Time x Rate x Amount =  Interest  
 
1.  10 x (.125 12) x $ 9062.00 =  $943.95 
2.  7 x (.125 12) x $ 9806.00 =   $715.02 
3.  4 x (.125 12) x $ 9136.00 =   $380.66 
4.  935 Interest amt owed Provider $2,039.63 
 
200.6.4 - Obligation to Pay the Providers, Physicians, or Suppliers Late 
Payment Interest 
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
 
Medicare has the obligation to pay providers, physicians and suppliers interest if the 
overpayment determination is reversed at the first (redetermination) and second 
(reconsideration) level of the administrative appeal process and the decisions are not 
effectuated timely.  At these levels of appeal, interest would continue to be payable by 
Medicare if the underpayment is not paid within 30 days of the final determination 
decision. See  30.1 of Chapter 4. 
 
200.7 - Tracking and Report on Limitation of Recoupment 
Overpayments 
(Rev. 141, Issued: 09-12-08, Effective: 09-29-08, Implementation: 09-29-08) 
 
Each calendar quarter, the Medicare contractor shall report 935 interest paid based on an 
ALJ or later decision that fully or partially reverses the previous decision. Reporting will 
be 935 Interest payment amounts aggregated by provider type.  Report will be sent via 
email to CMS_Medicareoverpayments@cms.hhs.gov.  The contractor will have 30 days 
from the end of the calendar quarter to submit the report to CMS. 
 
Example 8: 
 
1st Quarter: October, November and December 2007 
 
Provider Type          Total providers'                        Total amount 
 
Home Health                        20                            $ 135,000.00 
Skilled Nursing Facility                   05                             $   56,000.00 
Physicians                      02                            $     2,500.00 
DME Supplier                     10                            $   35,000.00 
Grand Total                      37                            $ 228,500.00 
  Transmittals Issued for this Chapter 
 
   Rev #  Issue Date Subject  Impl Date CR# 
R11787FM 01/19/2023 Publication (Pub.) 100-06, Chapter 4, Section 04/21/2023 12858 
70 Revision (Removal of Debt Collection 
System References and Corresponding 
Updates) and Inclusion of Existing Debt 
Close-Out (Termination of Collection 
Action) Instructions 
 
R11124FM 11/18/2021 Updates to Medicare Financial Management  12/21/2021 12518 
Manual Chapter 3, Section 140.1 Bankruptcy 
Forms 
R335FM  01/31/2020 Updates to Medicare Financial Management  03/02/2020 11386 
Manual Chapter 3, Section 140.1 Bankruptcy 
Forms 
R315FM  05/17/2019 Update to Publication (Pub.) 100-06 to  06/18/2019 11211 
Provide Language-Only Changes for the 
New Medicare Card Project 
R311FM  02/22/2019 Updating Chapter 3, Section 200, Limitation  10/07/2019 10336 
on Recoupment; Medicare Overpayments 
Manual, 2 of 4 CRs 
R293FM  09/14/2017 Revision to Publication 100-06, Chapter 3,  04/02/2018 9815 
Medicare Overpayment Manual, Section 200, 
Limitation on Recoupment 
R292FM  09/01/2017 Revision to Publication 100-06, Chapter 3,  04/02/2018 9815 
Medicare Overpayment Manual, Section 200, 
Limitation on Recoupment 
R294FM  10/06/2017 Pub. 100-6, Chapter 3 and 4 Revisions  07/03/2017 10079 
R285FM  06/02/2017 Pub. 100-6, Chapter 3 and 4 Revisions  07/01/2017 10079 
 
 
R275FM  11/18/2016 Pub. 100-06, Chapter 3, Section 90 (Provider 02/21/2017 9708 
Liability) Revision 
R260FM  01/29/2016 Revision to Chapter 3 Section 200:  03/01/2016 9458 
Limitation on Recoupment - Medicare 
Overpayments Manual 
R227FM  09/17/2013 Removal of POR and PSOR instructions and  10/04/2013 8322 
the Glossary of Acronyms from the Internet 
Only Manual, Publication 100-06, Chapter 3 
R225FM  09/04/2013 Removal of POR and PSOR instructions and  10/04/2013 8322 
the Glossary of Acronyms from the Internet 
Only Manual, Publication 100-06, Chapter 3  R224FM  08/02/2013 Revisions and Deletions to the Internet Only  09/03/2013 8347 
Manual, Publication 100-06, Chapter 3, 
Overpayment (Section 50.3); Chapter 4, Debt 
Collection (Section 50 - 50.6 and 100.6.4) 
Related to Extended Repayment Schedules 
(ERS) 
R222FM  06/14/2013 Revisions and Deletions to the Internet Only  07/17/2013 8324 
Manual, Publication 100-06, Chapter 3, 
Overpayments; Section 140.2.3 - Filing 
Bankruptcy Draws a Line in the Sand 
R220FM  06/07/2013 Removal of POR and PSOR instructions and  07/09/2013 8322 
the Glossary of Acronyms from the Internet 
Only Manual, Publication 100.06, Chapter 3 
 Rescinded and replaced by Transmittal 225 
R205FM  02/09/2012 Immediate Recoupment for Fee For Service  07/02/2012 7688 
Claims Overpayments 
R204FM  01/27/2012 Immediate Recoupment for Fee For Service  07/02/2012 7688 
Claims Overpayments  Rescinded and 
replaced by Transmittal 205 
R141FM  09/12/2008 Limitation on Recoupment (935) for  09/29/2008 6183 
Providers, Physicians, and Suppliers 
Overpayments 
R106FM  08/25/2006 Collection of Fee-for-Service Payments  06/26/2006 5105 
Made During Periods of Managed Care 
Enrollment 
R100FM  07/03/2006 Collection of Fee-for-Service Payments  06/26/2006 5105 
Made During Periods of Managed Care 
Enrollment - Replaced by R106FM 
R97FM  05/26/2006 Collection of Fee-for-Service Payments  06/26/2006 2801 
Made During Periods of Managed Care 
Enrollment  Replaced by R100FM 
R87FM  1/03/2006  Update to Carrier Demand Letter Appeals  01/03/2006 4211 
Language  
R64FM  02/11/2005 For Fiscal Intermediaries (FIs), a new  03/14/2005 3641 
Provider Type 80, Status Code CH, and 
Method of Recoupment codes. For Carriers 
and Durable Medical Equipment Regional 
Carriers (DMERCs) Status Code 2 
R61FM  12/10/2004 New Location Code ICC, Status Code AR  01/10/2005 3563 
and Modified Intent Letter for Unfiled Cost 
Reports Only 
R47FM  06/25/2004 Expanded Identification and Workload  10/04/2004 3256 
Reporting for CMS Medicare Systems  R43FM  04/30/2004 Replaced by Revision 47FM  10/04/2004 3256 
R41FM  04/30/2004 Change in Interest Calculation for Medicare  10/04/2004 3163 
Overpayments and Underpayments and 
Medicare Secondary Payer (MSP) 
Recoveries 
R29FM  01/02/2004 Revisions to Chapter 3 & 4  02/06/2004 2911 
R25FM  11/03/2003 Rates of Interest  FIs and Carriers  11/03/2003 2828 
R22FM  10/03/2003 Provider Overpayment Reporting System  10/20/2003 2782 
R12FM  10/18/2002 Rewrite of Chapter 3  10/25/2002 2350 
R03FM  08/30/2002 Initial Publication of Chapter  N/A  N/A 
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