55404 Federal Register / Vol. 71, No. 184 / Friday, September 22, 2006 / Proposed Rules 

Technology Laboratory Superfund Site 

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SFUND–1994–0009, by one of the 

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Dated: September 12, 2006. 

Robert W. Varney, 

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England. 

[FR Doc. 06–7965 Filed 9–21–06; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 405 

[CMS–6025–P] 

RIN 0938–AN42 

Medicare Program; Limitation on 

Recoupment of Provider and Supplier 

Overpayments 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

implement a new provision of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 that prohibits recouping Medicare 

overpayments when an appeal is 

received from a provider or supplier 

until a decision is rendered by a 

Qualified Independent Contractor (QIC). 

The QIC is the second level of appeal in 

the Medicare claims appeal process. 

This provision changes how interest is 

to be paid to a provider or supplier 

whose overpayment is reversed at 

subsequent administrative or judicial 

levels of appeal. This proposed rule 

defines the overpayments to which the 

limitation applies, how the limitation 

works in concert with the appeals 

process, and the change in our 

obligation to pay interest to a provider 

or supplier whose appeal is successful 

at levels above the QIC. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on November 21, 2006. 

ADDRESSES: In commenting, please refer 

to file code CMS–6025–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

three ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 


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in this regulation to http:// 

www.cms.hhs.gov/regulations/ 

ecomments. (Attachments should be in 

Microsoft Word, WordPerfect, or Excel; 

however, we prefer Microsoft Word.) 

2. By mail. You may mail written 

comments (one original and two copies) 

to the following address only: Centers 

for Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–6025–P, P.O. 

Box 8017, Baltimore, MD 21244. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

9994 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

FOR FURTHER INFORMATION CONTACT: 

Nancy Braymer, (410) 786–4323. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this rule to assist us in fully 

considering issues and developing 

policies. You can assist us by 

referencing the file code CMS–6025–P 

and the specific ‘‘issue identifier’’ that 

precedes the section on which you 

choose to comment. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. CMS posts all electronic 

comments received before the close of 

the comment period on its public Web 

site as soon as possible after they have 

been received. Hard copy comments 

received timely will be available for 

public inspection as they are received, 

generally beginning approximately 3 

weeks after publication of a document, 

at the headquarters of the Centers for 

Medicare & Medicaid Services, 7500 

Security Boulevard, Baltimore, 

Maryland 21244, Monday through 

Friday of each week from 8:30 a.m. to 

4 p.m. To schedule an appointment to 

view public comments, phone 1–800–

743–3951. 

I. Background 

[If you choose to comment on issues in this 

section, please include the caption 

‘‘Background’’ at the beginning of your 

comments.] 

Section 935 of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173) amended Title XVIII of the 

Social Security Act (the Act) to add a 

new paragraph (f) to section 1893 of the 

Act, the Medicare Integrity Program. 

This new sub-section contains eight 

substantive provisions addressing the 

recovery of overpayments. This 

proposed rule would implement the 

second of these provisions—the 

limitation on recoupment. 

The statute requires CMS to change 

the way we recoup certain 

overpayments. It also changes how 

interest is to be paid to a provider or 

supplier whose overpayment 

determination is reversed at 

administrative or judicial levels of 

appeal above the Qualified Independent 

Contractor (QIC). Since these changes to 

recoupment and interest are tied to the 

Medicare fee-for-service claims appeal 

process and structure, we will start with 

a general discussion of the appeal 

process. Then we will explain the 

changes to CMS’s overpayment 

recoupment policy, and how CMS will 

now pay interest on reversals of 

overpayment determinations at certain 

levels of the appeal process. 

Medicare Claims Appeals Process 

The Medicare, Medicaid and SCHIP 

Benefits and Improvement and 

Protection Act of 2000 (BIPA) (Pub. L. 

106–554) amended section 1869 of the 

Act to require a major restructuring of 

the Medicare claims appeals process. 

CMS incorporated these changes in 

federal regulations found at 42 CFR Part 

405, Subpart I. The appeals process was 

changed to make one unified structure 

for both Parts A and B of Medicare. 

Further, QICs were created as new 

independent review entities that 

conduct second level appeals after 

Medicare contractors conduct a 

redetermination of initial 

determinations. An overpayment 

determination is considered a revised 

initial determination. 

The chart below outlines the levels of 

appeal and decision-making time frames 

under this restructured process: 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

Limitation on Recoupment 

Recoupment is the recovery of a 

Medicare overpayment by reducing 

present or future Medicare payments 

and applying the amount withheld 

against the debt. Under our existing 

regulations, providers and suppliers can 

challenge an overpayment 

determination through both the rebuttal 

and appeals processes. The rebuttal 

process provides the debtor the 

opportunity to submit a statement and/ 

or evidence stating why recoupment 

should not be initiated. The outcome of 

the rebuttal process could change how 

or if we recoup. The new MMA 


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provision and this implementing rule do 

not alter the rebuttal process. 

An appeal is an examination of the 

validity of the overpayment. Before 

section 1893(f)(2) of the Act was 

enacted, if a provider or supplier elected 

to appeal, there was no effect on our 

ability to recover the debt. However, if 

the overpayment determination were 

reversed in whole or in part at any stage 

of the administrative or judicial appeal 

process, appropriate adjustments would 

be made to the overpayment and the 

amount of interest assessed. 

When section 1893(f)(2) was enacted, 

our recoupment process was changed. 

The relevant statutory text is as follows: 

In the case of a provider of services or 

supplier that is determined to have received 

an overpayment under this title and that 

seeks a reconsideration by a qualified 

independent contractor on such 

determination under section 1869(b)(1), the 

Secretary may not take any action (or 

authorize any other person, including any 

Medicare contractor, as defined in 

subparagraph (C)) to recoup the overpayment 

until the date the decision on the 

reconsideration has been rendered. 

To the extent that the statutory 

language affords any discretion in 

implementation, we have exercised that 

flexibility to strike a balance among the 

following three objectives: 

(1) To give effect to Congressional intent 

that providers and suppliers be given 

expedited access to an objective party 

(independent from the originating contractor) 

to review the overpayment determination, 

prior to recouping, in the interest of fairness; 

(2) To carry out our fiduciary responsibility 

to recover erroneous payments to providers 

or suppliers; to allow them to retain program 

funds to which they are not entitled under 

the Medicare statute would be unfair to the 

intended beneficiaries of Medicare and to the 

taxpayers who contribute to the trust funds; 

and 

(3) To ensure that providers’ and suppliers’

procedural due process rights to challenge an 

overpayment determination through the 

appeal process are not adversely affected. 

Under the statutory language of 

section 1893(f)(2), if a provider or 

supplier seeks a reconsideration by a 

QIC on an overpayment determination, 

CMS and its Medicare contractors may 

not recoup the overpayment until the 

date the decision on the reconsideration 

has been rendered. Yet before reaching 

the QIC, a provider or supplier must 

initially go through the first level of 

appeal by requesting a redetermination 

by the Medicare contractor. 

Based on the statutory language, we 

could recoup during the period in 

which the provider is actively pursuing 

an appeal at this first level. This 

approach would reduce the 

administrative complexity of 

implementing this new statutory 

provision. Also, it would shorten the 

period of deferred recoupment under 

the Act thereby minimizing risk to the 

Medicare trust funds. However, this 

approach would mean, in many 

instances, we would have recouped the 

overpayment before a provider could 

request a reconsideration and thereby 

invoke the benefit of the limitation on 

recoupment. Although legally 

permissible, we believe this is 

inconsistent with Congressional intent. 

Instead, we propose in this rule to 

cease recoupment when a valid first 

level appeal is received. If the provider 

loses at the first level, we would then 

proceed to recoup 30 days after giving 

notice to the provider unless the 

provider appeals to the QIC in the 

interim. A provider who acts in a timely 

fashion can preclude any recoupment 

until the QIC decision is rendered as 

contemplated under the MMA. 

Assessment of Interest 

In addition to tying the recoupment 

process to the appeals process, section 

1893(f)(2) of the Act also has the effect 

of changing how we pay interest to a 

provider or supplier who is successful 

in having an overpayment 

determination fully or partially reversed 

at the latter stages of the appeal process. 

Previously, we paid interest on 

underpayments solely in accordance 

with sections 1815(d) and 1833(j) of the 

Act. An ‘‘underpayment’’ would usually 

result when we had recovered, through 

recoupment or otherwise, an 

overpayment; the decision was reversed 

at some point in the appeal process; and 

after appropriate adjustments, we owed 

the balance to the provider or supplier. 

Interest accrues from the date of the 

‘‘final determination’’ and is owed if the 

underpayment is not paid within 30 

days. Following an appeal decision 

favorable to a provider, the Medicare 

contractor must effectuate the decision 

and make a written determination of the 

amount Medicare owes. This is 

considered a new final determination, 

and interest accrues from that date. 

The new interest provision found in 

section 1893(f)(2)(B) of the Act amends 

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 (the QIC reconsideration). The 

statutory text is as follows: 

Insofar as the determination on such 

appeal is against the provider of services or 

supplier, interest on the overpayment shall 

accrue on and after the date of the original 

notice of overpayment. Insofar as such 

determination against the provider of 

services or supplier is later reversed, the 

Secretary shall provide for repayment of the 

amount recouped plus interest at the same 

rate as would apply under the previous 

sentence for the period in which the amount 

was recouped. 

This language did not specifically 

amend sections 1815(d) and 1833(j) of 

the Act. Nor did the MMA conference 

report reference these sections. The 

statute and the conference report are 

both silent on the relationship between 

paying or collecting interest (a) based on 

the final determination concept 

embodied in sections 1815(d) and 

1833(j) of the Act; and (b) the concept 

of paying interest based on how long we 

held funds, ultimately determined 

through the latter stage of the appeal 

process to belong to the provider, as 

incorporated in section 1893(f)(2)(B) of 

the Act. 

There has been no change in the 

obligation of the provider or supplier to 

pay interest if the overpayment 

determination is affirmed at any level of 

administrative or judicial appeal. 

Interest continues to accrue from the 

final determination in accordance with 

sections 1815(d) and 1833(j) of the Act. 

Section 1893(f)(2)(B) of the Act explains 

that if an appeal of an overpayment is 

upheld before the QIC, ‘‘interest on the 

overpayment shall accrue on and after 

the date of the original notice of 

overpayment.’’ For overpayments 

subject to the limitation on recoupment, 

the first final determination is the date 

of the demand letter. Therefore, section 

1893(f)(2)(B) of the Act is consistent 

with sections 1815(d) and 1833(j) of the 

Act and does not alter our ability to 

assess interest against the provider or 

supplier. 

In addition, there has been no change 

in the obligation of Medicare to pay the 

provider or supplier interest if the 

overpayment determination is reversed 

at the first (redetermination) or second 

(reconsideration) level of the 

administrative appeal process. 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. The 

change in the method of paying interest 

resulting from section 1893(f)(2)(B) of 

the Act is applicable only where the 

reversal occurs at the Administrative 

Law Judge (ALJ) level or subsequent 

levels of administrative appeal or 

judicial review. At these higher levels of 

administrative appeal or judicial review, 

interest becomes payable by Medicare 

based on the period we recouped and 

retained the provider’s or supplier’s 

funds. 

We determine the rate of interest in 

accordance with 42 CFR 405.378 by 


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comparing the private consumer rate 

with the current value of funds rate. 

Interest is assessed at the higher of these 

two rates that is in effect on the date of 

the final determination of the amount of 

the overpayment or underpayment. The 

current interest rate for Medicare 

overpayments and underpayments is 

12.625 percent (the private consumer 

rate). Since February, 2001 to the 

present time, it has ranged from a low 

of 10.75 percent to a high of 14.125 

percent. By regulation 42 CFR 

411.24(m)(2), interest is calculated on 

Medicare Secondary Payer (MSP) debts 

in the same manner as for Medicare 

overpayments and underpayments, and 

the same interest rate is used. 

Interest accrues daily but is assessed 

and calculated in full 30 day periods. 

We charge simple rather than 

compound interest, and payments we 

receive are applied first to accrued 

interest and then to principal. 

Interest we collect on overpayments 

and MSP recoveries goes to the general 

fund of the U.S. Treasury. The principal 

amount we recover is used to reimburse 

the applicable Medicare trust fund—the 

Hospital Insurance (Part A) or the 

Supplementary Medical Insurance (Part 

B and now D) trust funds, which are 

special accounts in the U.S. Treasury. 

Interest we pay on Medicare 

underpayments comes from the 

applicable Medicare trust fund. 

Suspension 

We note that this new MMA provision 

does not affect how CMS recovers 

overpayments from providers or 

suppliers that have been placed on 

payment suspension. Under our 

authority at 42 CFR 405.371, CMS, an 

intermediary, or carrier may suspend 

the payment of claims if there is reliable 

information that an overpayment, fraud 

or willful misrepresentation exists or 

that payments to be made may not be 

correct. Once an overpayment amount is 

determined, suspended payments must 

first be applied to eliminate any 

overpayment pursuant to § 405.372(e). 

We do not interpret section 1893(f)(2) of 

the Act as amending our authority to 

apply suspended payments toward 

reducing or eliminating an 

overpayment. In addition, we do not 

interpret the Act to require that we 

return the suspended payments to a 

provider or supplier once an 

overpayment is determined. Section 

1893(f)(2) of the Act prevents the 

Secretary from taking any ‘‘action * * * 

to recoup the overpayment.’’ Yet, the 

disposition of suspended funds as 

explained in 42 CFR 405.372(e) is not a 

‘‘recoupment’’ as that term is defined in 

§ 405.370. When the Congress chose to 

limit CMS’s ability to recoup funds to 

satisfy an overpayment, it specifically 

used the word ‘‘recoup’’ which has been 

a long-standing defined term by CMS. 

There is no evidence that the Congress 

intended to broaden or alter CMS’s 

definition of recoupment to also apply 

to suspended funds. Because 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. 

If the suspended payments are 

insufficient to fully eliminate any 

overpayment, and the provider or 

supplier meets the requirements of this 

proposed rule, the limitation on 

recoupment provision under section 

1893(f)(2) of the Act would be 

applicable to any remaining balance still 

owed to CMS. 

We also note that section 1893(f)(2) of 

the Act does not alter the process for 

providers or suppliers to appeal 

overpayment determinations. Providers 

and suppliers may continue to appeal 

the full amount of an overpayment 

determination at the conclusion of a 

suspension as they could prior to the 

enactment of the MMA. 

II. Provisions of the Proposed 

Regulations 

[If you choose to comment on issues in this 

section, please include the caption 

‘‘Provisions’’ at the beginning of your 

comments.] 

A. Proposed Change to Authority 

Citation for Subpart C of Part 405 

Subpart C of part 405 implements 

several sections of the Act including 

sections authorizing the recovery of 

overpayments and assessment of 

interest. We propose to revise the 

authority citation to explicitly add 

section 1893 of the Act which was 

amended by section 935 of the MMA to 

add the limitation on recoupment as 

well as other provisions addressing the 

recovery of overpayments. 

B. Proposed Change to § 405.370 

Definitions 

Section 405.370 defines key terms 

that apply to subpart C of part 405. We 

are proposing to revise § 405.378 and 

add a new § 405.379 to implement the 

statutory limitation on recoupment. We 

propose to add definitions for terms 

used in § 405.378 and the new 

§ 405.379. The limitation on 

recoupment is tied to the Medicare 

claims appeals process and structure 

(the regulations for which appear in 42 

CFR Part 405). We propose that selected 

terms used in the proposed revisions to 

§ 405.378 and the new § 405.379 be 

given the same meaning as in the 

appeals context. Therefore, these terms 

are defined by reference to the 

definitions set forth in § 405.902. 

C. Proposed Change to § 405.373 

Proceeding for Offset or Recoupment 

Section 405.373 establishes the 

general rules and procedures to be 

followed once CMS or a Medicare 

contractor determines that an offset or 

recoupment should be put into effect. 

Paragraph (e) addresses the duration of 

a recoupment or offset that has been put 

into effect and identifies the three 

specific circumstances under which a 

recoupment or offset would stop. We 

propose to revise the introductory text 

of paragraph (e) to explicitly refer to the 

new § 405.379, implementing the 

statutory limitation on recoupment, as a 

separate basis to stop recoupments that 

have been put into effect. 

D. Proposed Revisions to § 405.378 

Interest Charges on Overpayment and 

Underpayments to Providers, Suppliers 

and Other Entities 

Section 405.378 implements sections 

1815(d) and 1833(j) of the Act which 

requires us to charge interest on 

overpayments and pay interest on 

underpayments if payment is not made 

within 30 days of the date of the ‘‘final 

determination’’. Under sections 1815(d) 

and 1833(j) of the Act, the date of the 

final determination dictates when 

interest begins to accrue whether we 

pay interest on an underpayment or 

collect interest on an overpayment. 

Paragraph (c) of this section defines 

what constitutes a final determination 

both for overpayments and 

underpayments arising from a cost 

report determination as well as those 

that are claims based. Paragraph (d) 

establishes the basis for the interest rate 

used for Medicare overpayments and 

underpayments as well as for other 

Medicare program activities, for 

example Medicare Secondary Payer 

recoveries (see 42 CFR 411.24(m) which 

references § 405.378(d)). 

We propose to amend § 405.378 to 

specify how interest is assessed for the 

subset of overpayments subject to the 

limitation on recoupment under section 

1893(f)(2) of the Act. The proposed 

revisions in § 405.378 clarify that if a 

provider or supplier overpayment 

determination is affirmed at any level of 

administrative or judicial appeal, 

interest owed by the provider or 

supplier continues to accrue from the 

final determination. If the overpayment 

determination is reversed in favor of the 

provider or supplier, interest may be 

payable by Medicare to the provider or 

supplier under one of two different 


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methodologies depending upon the 

appeal level at which the reversal 

occurs. If the reversal in favor of the 

provider or supplier occurs at the first 

(redetermination) or second 

(reconsideration) level of the 

administrative appeal process, interest 

may be payable by Medicare if the 

underpayment is not paid within 30 

days of the final determination. It is 

only where the reversal occurs at the 

ALJ level or subsequent levels of 

administrative appeal or judicial review 

that interest becomes payable by 

Medicare based on the period that we 

recouped and retained the provider’s or 

supplier’s funds. 

We propose to amend § 405.378 

paragraph (a) by adding the section 

reference 1893(f)(2)(B) as one of the 

enumerated provisions of the Act that 

this regulatory section is designed to 

implement. 

We propose to revise paragraph (b)(2), 

which states the basic rule that interest 

accrues from the date of final 

determination, to clarify there is a new 

exception to this rule by referencing 

paragraph (j) of this section. 

We propose to amend paragraph 

(c)(1)(ii) which lists what constitutes a 

final determination in cases where a 

Notice of Amount of Program 

Reimbursement (NPR) is not issued. 

First, we removed the existing final 

determination definition based on 

certain Administrative Law Judge (ALJ) 

decisions under paragraph(c)(1)(ii)(C). 

The change in how interest is assessed 

under section 1893(f)(2) of the Act 

applies at the third level of appeal (ALJ) 

and subsequent administrative and 

judicial review levels. Therefore, these 

levels of appeal are now discussed in 

proposed paragraph (j). 

Second, we propose to add an 

additional definition for a final 

determination, at paragraph (c)(1)(ii)(C), 

arising from a full or partial reversal at 

the redetermination level of appeal. 

This change is designed to clarify that 

if an overpayment is reversed in whole 

or in part at the first level of appeal—

the redetermination level—interest 

accrues from the date of the ‘‘final 

determination’’ and is owed by 

Medicare if the underpayment is not 

paid within 30 days. Following a 

redetermination decision favorable to a 

provider or supplier, the contractor 

must effectuate the decision and make 

a written determination of the amount 

Medicare owes. Interest accrues from 

the date of the written determination. 

Finally, we propose to add paragraph 

(c)(1)(ii)(D) as an additional type of final 

determination. This is a written 

determination arising from a full or 

partial reversal of an overpayment 

determination at the QIC 

reconsideration level (the second level 

of appeal). This addition is designed to 

clarify that if an overpayment 

determination is reversed in whole or in 

part at the QIC reconsideration, the final 

determination for purposes of assessing 

interest is the date the contractor 

effectuates the QIC reconsideration 

decision and make a written 

determination of the amount Medicare 

owes. Interest accrues from the date of 

this written determination and is owed 

to the provider or supplier if the 

underpayment is not paid within 30 

days. 

These changes to the final 

determination definitions are intended 

to work in conjunction with the 

limitation on recoupment requirements 

in the new proposed § 405.379. 

Providers and suppliers can take 

advantage of the limitation on 

recoupment by not paying during the 

redetermination and reconsideration 

levels of appeal, yet interest will still 

continue to accrue during those periods. 

If a provider or supplier loses at either 

level of appeal, and they did not pay 

their overpayment during the appeal, 

they will owe both the overpayment 

amount and accrued interest. Therefore, 

they receive a benefit during the first 

two levels of appeal by retaining their 

funds, but by doing so, they run the risk 

that they will owe interest on the 

unpaid overpayment amounts. 

We propose to amend paragraph (c)(2) 

by adding the cross references to 

paragraphs (i) and (j) of this section 

which states the exceptions to assessing 

interest based on the date of final 

determination. 

For purposes of clarity and to group 

the exceptions to the ‘‘final 

determination’’ rule in a logical 

sequence, we propose to redesignate 

paragraph (h) as paragraph (i). We 

propose to redesignate paragraph (i) as 

paragraph (h). The text of these 

redesignated paragraphs is not changed. 

We propose to add a new paragraph 

(j). This paragraph would establish the 

new basis for paying interest to a 

provider or supplier whose 

overpayment determination is reversed 

in whole or in part at the third level of 

administrative appeal (ALJ) or above. 

This new interest provision is required 

by section 1893(f)(2)(B) of the Act which 

provides ‘‘[i]nsofar as such 

determination against the provider of 

services or supplier is later reversed, the 

Secretary shall provide for repayment of 

the amount recouped plus interest at the 

same rate as would apply under the 

previous sentence for the period in 

which the amount was recouped.’’ This 

new paragraph (j) would explain how 

interest is assessed against the 

government at any administrative and 

judicial appeal level above the QIC 

reconsideration. This new method 

applies only to overpayments subject to 

the limitation on recoupment under 

§ 405.379. It is predicated upon the 

recoupment and retention of funds by 

CMS or the Medicare contractor at the 

time the decision reversing the 

overpayment determination, in whole or 

in part, is rendered. 

Proposed paragraph (j)(1) states that 

the rate of interest is the same rate that 

CMS charges on overpayments and pays 

on underpayments to providers, 

suppliers and other health care entities. 

This rate, as provided in the existing 

and unchanged paragraph (d) of this 

section, is the higher of the private 

consumer rate or the current value of 

funds rate. 

The interest rate established in 

accordance with paragraph (d) changes 

periodically. The proposed paragraph 

(j)(2) describes the point in time where 

the applicable interest rate is fixed. This 

is the date the decision reversing the 

overpayment is issued by the ALJ, 

Medicare Appeals Council, Federal 

district court or other Federal reviewing 

court. 

The proposed paragraph (j)(3) 

explains how interest will be calculated. 

We propose that interest will be paid on 

the total principal amount recouped. We 

propose to pay simple rather than 

compound interest, and we will not pay 

interest on interest; this mirrors the 

manner in which we assess interest 

against providers. 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. 

In calculating the period in which the 

amount was recouped, we propose to 

deduct days in which either or both the 

ALJ’s or the Medicare Appeals Council’s 

adjudication time frames are tolled due 

to specific actions by the appellant over 

the which the government has no 

control. Our rules on the procedures 

and time frames to request an ALJ 

hearing provide that if the appellant 

fails to copy the other parties or files the 

request with an entity other than that 

specified in the QIC’s reconsideration, 

the ALJ’s 90 day adjudication deadline 

is tolled. Similarly, our rules on the 

procedures and time frames to request a 

Medicare Appeals Council review 

provide that if the appellant fails to 


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copy the other parties or files the 

request with an entity other than that 

specified in the notice of the ALJ’s 

action, the Medicare Appeals Council’s 

adjudication period to conduct a review 

is tolled. Therefore, in paragraph 

(j)(3)(iv) and (v) we propose that in 

calculating how much interest we owe 

a provider or supplier, we account for 

these potential delays by deducting days 

attributable to actions by the provider or 

supplier which have the effect of 

extending the time in which we had 

possession of the recouped funds. 

We propose in paragraph (j)(4) that, in 

the cases of a partial reversal of an 

overpayment determination, we would 

allocate the funds recouped first to that 

portion of the overpayment 

determination affirmed by the ALJ, 

Medicare Appeals Council, or any 

Federal court. If after this allocation 

excess recouped funds remain, interest 

would be paid to the provider or 

supplier on this amount in accordance 

with the other provisions of this new 

paragraph (j). 

E. Proposed New § 405.379 Limitation 

on Recoupment of Provider and 

Supplier Overpayments 

We propose to add a new section to 

subpart C of Part 405 to implement the 

statutory limitation on recoupment 

under section 1893(f)(2) of the Act. 

Proposed paragraph (a) cites section 

1893(f)(2) of the Act as the statutory 

basis for this section and briefly 

summarizes the underlying purpose. 

This is to impose a limit on our 

recoupment of Medicare overpayments 

if a provider of services or supplier 

appeals until a decision by a QIC is 

made. 

Proposed paragraph (b) delineates 

those types of overpayments that are 

expressly subject to the recoupment 

limitation. We propose that the 

limitation on recoupment applies to (1) 

overpayments that may be appealed by 

the provider or supplier under the 

Medicare claims appeal process; and (2) 

post-pay denial of claims for benefits 

under Medicare Part A and Part B for 

which a demand for payment has been 

made. We propose that this provision 

also apply to a small subset of Medicare 

Secondary Payer (MSP) recoveries; these 

would be MSP recoveries where the 

provider or supplier received a 

duplicate primary payment and MSP 

recoveries based on the provider’s or 

supplier’s failure to file a proper claim 

with the third party payer plan, program 

or insurer for payment. 

Section 935(b) of the MMA specified 

that section 1893(f)(2) shall apply to 

‘‘actions’’ taken after the date of 

enactment of the MMA; that is, 

‘‘actions’’ taken after December 8, 2003. 

For purposes of delineating those 

provider and supplier overpayments 

subject to this provision and those that 

are not, we interpret ‘‘actions’’ to refer 

to those instances where the initial 

recoupment occurred or will occur on or 

after December 9, 2003. For ease of 

administration and to establish a clear 

rule, we are defining the initial 

recoupment to be the date that the 

Medicare contactor could have 

instituted recoupment in compliance 

with established Medicare policies 

whether or not a recoupment occurred 

in fact. Therefore, for Part A 

overpayments, including a MSP 

recovery based on the provider’s failure 

to file a proper claim for Part A benefits, 

the limitation applies to debts 

determined on or after November 24, 

2003. For Part B overpayments, 

including a MSP recovery based on the 

supplier’s failure to file a proper claim 

for Part B benefits, the limitation applies 

to debts determined on or after October 

29, 2003. In addition, this section 

applies to that small group of MSP 

recoveries in which the provider or 

supplier received a duplicate primary 

payment and for which a written 

demand for payment was issued on or 

after October 10, 2003. 

For purposes of clarity, we propose 

that paragraph (b) also identify 

categories of overpayments to which the 

limitation does not apply, although this 

is not framed as an exhaustive list of 

exclusions. The limitation would not 

apply to all MSP recoveries other than 

provider/supplier MSP duplicate 

primary payment recoveries or MSP 

recoveries attributable to the provider’s 

or supplier’s failure to file a proper 

claim. It would not apply to beneficiary 

overpayments nor overpayments that 

arise from a cost report determination 

and are appealed under the provider 

reimbursement process. 

Proposed paragraph (c) specifies how 

two key actions that trigger the 

limitation on recoupment are to be 

construed. The limitation on 

recoupment is tied to the Medicare 

claims appeals process. Recoupment of 

an overpayment once initiated will be 

stopped at the first two levels of the 

appeals process (the redetermination 

and the reconsideration) upon receipt of 

a timely and valid appeal request 

applicable to that level. The provider or 

supplier does not have to take any 

affirmative action to invoke the 

limitation on recoupment beyond the 

act of appealing. What constitutes a 

valid and timely request for a 

redetermination and, subsequently, 

what constitutes a valid and timely 

request for a reconsideration must be 

determined in accordance with 

established Medicare appeal regulations 

and implementing policies. Therefore, 

in this paragraph, we make the interplay 

between recoupment and appeals 

explicit by referencing the requirements 

for a redetermination request as those 

contained in § 405.940 through 

§ 405.958 and the requirements for a 

reconsideration request as those 

contained in § 405.974 through 

§ 405.978. 

Proposed paragraph (d) lays out the 

general framework for implementing the 

limitation on recoupment. 

Once an overpayment is determined 

and the substantive and procedural 

requirements to afford the provider or 

supplier an opportunity for rebuttal 

under § 405.374 and § 405.375 are 

satisfied, recoupment can proceed 

unless and until a valid request for a 

redetermination is received. (The 

redetermination is the first level of 

appeal, and a provider or supplier has 

120 days to file a request for a 

redetermination of the overpayment 

determination.) This means we can 

recoup during the period when a 

provider’s or supplier’s right to request 

a redetermination has yet to expire. This 

places the obligation on the provider or 

supplier who wishes to capitalize on the 

benefit afforded by the recoupment 

limitation to act on a timely basis to 

request a redetermination. 

Under BIPA, the Medicare contractor 

is required to make a redetermination 

decision within 60 calendar days of the 

date the contractor receives a timely 

filed request for a redetermination. We 

propose in paragraph (d)(2) that if the 

redetermination is an affirmation in 

whole or in part, we can proceed to 

recoup any outstanding principal and 

interest 30 days after notice unless a 

valid request for a reconsideration is 

received in the interim. 

A provider or supplier that wishes to 

appeal an adverse redetermination 

decision (an affirmation or partial 

affirmation of the overpayment 

determination) has 180 calendar days to 

file a request from the date of receipt of 

the notice of the redetermination. Once 

the 30 day notice period is over and in 

the absence of the receipt of a valid 

request for a reconsideration, we 

propose to initiate or resume 

recoupment. As with the first level of 

appeal, this approach places the onus 

on the provider or supplier who wishes 

to take advantage of the benefit offered 

by the limitation on recoupment to act 

on a timely basis in requesting a QIC 

reconsideration. 

We propose in paragraph (d)(3) that 

the Medicare contractor shall cease 

recoupment upon receipt of a timely 


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and valid request for a reconsideration. 

If recoupment has not yet gone into 

effect, the contractor shall not initiate it. 

The contractor may initiate or resume 

recoupment upon final action by the 

QIC in accordance with paragraph (f) 

which is explained in detail below. 

The general rule we propose in 

paragraph (d)(4) and (5) is that, unless 

the reconsideration results in a full 

reversal of the overpayment 

determination, recoupment of 

outstanding principal and interest may 

be initiated or resumed upon final 

action by the QIC whether or not the 

provider or supplier appeals to the ALJ, 

the Medicare Appeals Council, or 

Federal court. If the provider or supplier 

subsequently appeals, the contractor 

may continue recouping outstanding 

overpayments in accordance with 

§ 405.373(e). 

We also propose in paragraph (d)(6) to 

clarify that each overpayment 

determination and its appeal status is 

separate and distinct from other debts 

owed by the same provider or supplier. 

Therefore, we make explicit that if an 

overpayment determination is appealed 

and recoupment stopped, this would 

not preclude the Medicare contractor 

from recouping other overpayments 

owed by the provider or supplier. 

We propose in paragraph (d)(7) to 

make explicit that amounts properly 

recouped prior to the imposition of the 

recoupment limitation, at either or both 

the first and second levels of appeal, 

may be retained until and unless there 

is an administrative or judicial reversal 

of the overpayment determination. 

We propose in paragraph (d)(8) that if 

an overpayment determination is 

reversed through the administrative or 

judicial process, appropriate 

adjustments in the debt and the amount 

of interest charged will be made to give 

effect to these decisions. 

Proposed paragraph (d)(9) makes 

explicit that interest is payable on 

overpayments, subject to the 

recoupment limitation, in accordance 

with the provisions of § 405.378. 

Proposed paragraph (e) states the 

specific rules for initiating or resuming 

recoupment after the redetermination 

decision. The necessary conditions are 

that the debt (remaining unpaid 

principal balance and interest) has not 

been liquidated and the substantive and 

procedural rebuttal requirements have 

been satisfied. Recoupment can resume: 

(i) Immediately upon receipt of a 

request to withdraw the redetermination 

request; (ii) on the 30th calendar day 

after the date of the notice of 

redetermination affirming the 

overpayment determination in whole; or 

(iii) on the 30th calendar day after a 

written notice to the provider or 

supplier of the revised overpayment 

amount if the redetermination results in 

an affirmation in part. We propose in 

paragraph (e)(2) that recoupment would 

be stopped again upon receipt of a 

timely and valid request for a 

reconsideration by the QIC. 

Proposed paragraph (f) sets forth the 

specific rules for initiating or resuming 

recoupment after final action by the 

QIC. It also defines what constitutes 

final action by a QIC for purposes of this 

section. As is the case when recoupment 

is resumed after the redetermination 

decision, the conditions necessary for 

resumption are that the debt (remaining 

unpaid principal balance and interest) 

has not been liquidated and the 

substantive and procedural rebuttal 

requirements have been satisfied. 

Under the statute, once a provider or 

supplier has sought a reconsideration by 

the QIC, we may not take any action to 

recoup the overpayment until the date 

the decision on the reconsideration has 

been rendered. We believe it is an 

appropriate balancing of interests and in 

keeping with the intent of this provision 

to interpret ‘‘the date the decision on 

the reconsideration is rendered’’ as the 

date on which the QIC issues its final 

action with respect to a reconsideration. 

There are three possible actions that 

a QIC may take with respect to a request 

for reconsideration. First, it may 

complete its review and issue a 

reconsideration. Second, in appropriate 

circumstances, it may dismiss the 

request for reconsideration. Third, if the 

QIC is unable to complete its 

reconsideration within the mandated 

sixty (60) day time frame, it may issue 

a notice to the parties that it will not be 

able to complete its reconsideration in 

the allotted time and advise them of 

their right to escalate their appeal to the 

ALJ level. The parties may then notify 

the QIC of their intent to escalate the 

appeal. Following the receipt of this 

notice, the QIC must either issue its 

reconsideration within 5 days or issue a 

notice acknowledging the escalation 

request and forward the case file to the 

ALJ hearing office. 

We propose that the earliest to occur 

of these three actions (a reconsideration, 

a dismissal, and the written notification 

to the parties that the reconsideration 

has been escalated) or the receipt of a 

withdrawal request from the provider or 

supplier would constitute the final QIC 

decision for purposes of ending the 

prohibition on our recouping an 

overpayment. The provider or supplier 

who elects to escalate the appeal from 

the QIC to the ALJ would thereby lose 

the benefit of the limitation on 

recoupment (recoupment could begin). 

However, we do not view this as a 

disadvantage to the provider or supplier 

who retains the ability to seek escalation 

or not. The proposed language also 

clarifies that where the final action is 

the notice of the reconsideration, in 

order to institute or resume recoupment, 

the reconsideration decision must affirm 

the overpayment determination in 

whole or in part. 

Proposed paragraph (g) addresses 

through a series of specific rules and 

situations how recouped funds are to be 

applied. Funds recouped prior to receipt 

of a timely and valid redetermination 

request may be retained and applied 

first to accrued interest and then to the 

principal balance. If the overpayment in 

question is reversed at the first level of 

appeal, consistent with current policies, 

the amount held may be applied to any 

other debt owed by the provider or 

supplier; any excess would then be 

released to the provider or supplier. In 

the case of a partial reversal at the 

redetermination level in which the 

decision reduces the debt below the 

amount already recouped, the same 

policies would be followed with respect 

to the application of the recouped 

funds. In the case of an affirmation 

where the provider or supplier appeals 

to the next level, the Medicare 

contractor would retain the monies and 

apply them first to interest and then to 

the principal balance pending final 

action by the QIC on the reconsideration 

request. 

If funds are properly recouped 

between a redetermination decision and 

a provider’s subsequent request for a 

reconsideration, these would be 

retained and applied first to interest, 

then to principal pending final action by 

the QIC. If the final QIC action is a 

dismissal, receipt of a withdrawal, 

notice of escalation, or a reconsideration 

decision affirming the overpayment in 

whole, funds recouped are applied to 

interest, then to principal; recoupment 

may be resumed as necessary to 

liquidate the debt. If the QIC 

reconsideration decision is a full 

reversal, the amount recouped may be 

applied to any other debt (including 

interest) owed by the provider or 

supplier before any excess is released. If 

the reconsideration decision is a partial 

reversal and reduces the debt below the 

amount already recouped, the same 

policies would be followed with respect 

to the application of the recouped 

funds. 

Proposed paragraph (h) would 

insulate a provider or supplier, invoking 

the limitation on recoupment under this 

section, from the operation of 

§ 401.607(c)(2)(iv). This latter rule 

provides that missing one payment 


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under a 6 month extended repayment 

plan granted under the authority of 

§ 401.607(c)(2) constitutes a default 

allowing CMS to accelerate the debt. 

III. Collection of Information 

Requirements 

This document does not impose 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Statement 

[If you choose to comment on issues in this 

section, please include the caption ‘‘Impact’’

at the beginning of your comments.] 

A. Overall Impact 

We have examined the impacts of this 

proposed rule as required by Executive 

Order 12866 (September 1993, 

Regulatory Planning and Review), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, the Unfunded Mandates Reform 

Act of 1995 (Pub. L. 104–4), and 

Executive Order 13132. 

Executive Order 12866 (as amended 

by Executive Order 13258, which 

reassigns responsibility of duties) 

directs agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). We 

do not expect this proposed rule to have 

a substantial financial impact on 

beneficiaries, providers, or suppliers. 

We do anticipate that Federal costs to 

implement this proposed rule may be 

substantial, but we do not expect them 

to exceed the $100 million threshold in 

any 1 year. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and 

government agencies. Most hospitals 

and most other providers and suppliers 

are small entities, either by nonprofit 

status or by having revenues of $6 

million to $29 million in any 1 year. For 

purposes of the RFA, all providers and 

suppliers affected by this regulation are 

considered to be small entities. 

Individuals and States are not included 

in the definition of a small entity. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 (proposed 

documents)/604 (Final documents) of 

the RFA. For purposes of section 

1102(b) of the Act, we define a small 

rural hospital as a hospital that is 

located outside of a Metropolitan 

Statistical Area and has fewer than 100 

beds. 

We are not preparing analyses for 

either the RFA or section 1102(b) of the 

Act. We are uncertain how many small 

entities would be affected by this 

proposed rule as this would depend in 

part upon voluntary actions on the part 

of the provider or supplier. The purpose 

of this proposed rule is to limit our 

ability to recoup against providers or 

suppliers who appeal an overpayment 

determination. In order to impact a 

provider or supplier, the provider or 

supplier must have received an 

erroneous payment; an overpayment 

must be determined and demanded; the 

provider or supplier must elect to 

appeal; and the provider or supplier 

may not satisfy the overpayment by 

making either a lump sum payment or 

requesting to repay the debt in 

installments. The only possible adverse 

impact upon a provider or supplier is 

that by deferring repayment of the 

overpayment until final action by the 

QIC, the provider would owe additional 

interest. However, the provider or 

supplier can avoid the additional 

interest exposure by electing to satisfy 

the debt by a lump sum payment or an 

installment payment while still 

pursuing the appeal. In addition, should 

the overpayment determination be 

reversed at a level above the QIC, the 

provider or supplier potentially will 

receive additional interest beyond what 

CMS would be obligated to pay under 

current regulations. Therefore, we 

expect the impact of this proposed rule 

to be positive although the extent to 

which it would benefit any one provider 

would depend upon specific facts and 

circumstances and voluntary choices 

made by that provider. The impact on 

small rural hospitals is expected to be 

similarly positive but unpredictable. 

Therefore, we are certifying that this 

proposed rule would not have a 

significant impact on a substantial 

number of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule that may result in expenditure in 

any 1 year by State, local, or tribal 

governments, in the aggregate, or by the 

private sector, of $110 million. This rule 

will not have this effect on State, local, 

or tribal governments, or on the private 

sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it publishes a proposed 

rule (and subsequent final rule) that 

imposes substantial direct requirement 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. This proposed 

rule would not have a substantial effect 

on State or local governments. 

B. Conclusion 

For these reasons, we are not 

preparing analyses for either the RFA or 

section 1102(b) of the Act because we 

have determined that this proposed rule 

would not have a significant economic 

impact on a substantial number of small 

entities or a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 405 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medical 

devices, Medicare, Reporting and 

recordkeeping requirements, Rural 

areas, X-rays. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as follows: 

PART 405—FEDERAL HEALTH 

INSURANCE FOR THE AGED AND 

DISABLED 

Subpart C—Suspension of Payment, 

Recovery of Overpayments, and 

Repayment of Scholarships and Loans 

1. The authority citation for subpart C 

is revised to read as follows: 

Authority: Secs. 1102, 1815, 1833, 1842, 

1866, 1870, 1871, 1879, 1892 and 1893 of the 

Social Security Act (42 U.S.C. 1302, 1395g, 


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1395l, 1395u, 1395cc, 1395gg, 1395hh, 

1395pp, 1395ccc and 1395ddd) and 31 U.S.C. 

3711. 

2. Section 405.370 is amended by: 

A. Designating the existing text as 

paragraph (a); 

B. Adding a new paragraph (b); 

The additions read as follows: 

§ 405.370 Definitions. 

(a) * * * 

(b) For purposes of sections 405.378 

and 405.379, the following terms apply: 

Appellant means the beneficiary, 

assignee or other person or entity that 

has filed and pursued an appeal 

concerning a particular initial 

determination. Designation as an 

appellant does not in itself convey 

standing to appeal the determination in 

question. 

Fiscal intermediary means an 

organization that has entered into a 

contract with CMS in accordance with 

section 1816 of the Act and is 

authorized to make determinations and 

payments for Part A of title XVIII of the 

Act, and Part B provider services as 

specified in § 421.5(c) of this chapter. 

Medicare Appeals Council means the 

council within the Departmental 

Appeals Board of the U.S. Department 

of Health and Human Services. 

Medicare contractor, unless the 

context otherwise requires, includes a 

fiscal intermediary, carrier, and 

Medicare administrative contractor. 

Party means an individual or entity 

listed in § 405.906 that has standing to 

appeal an initial determination and/or a 

subsequent administrative appeal 

determination. 

Qualified Independent Contractor 

(QIC) means an entity which contracts 

with the Secretary in accordance with 

section 1869 of the Act to perform 

reconsiderations under § 405.960 

through § 405.978. 

Remand means to vacate a lower level 

appeal decision, or a portion of the 

decision, and return the case, or a 

portion of the case, to that level for a 

new decision. 

Vacate means to set aside a previous 

action. 

3. In § 405.373, paragraph (e) 

introductory text is revised to read as 

follows: 

§ 405.373 Proceeding for offset or 

recoupment. 

* * * * * 

(e) Duration of recoupment or offset. 

Except as provided in § 405.379, if a 

recoupment or offset is put into effect, 

it remains in effect until the earliest of 

the following: 

* * * * * 

4. Section 405.378 is amended by—

A. Revising paragraph (a); 

B. Revising paragraph (b)(2); 

C. Republishing paragraph (c)(1) 

introductory text; 

D. Revising paragraph (c)(1)(ii) 

introductory text; 

E. Removing ‘‘or’’ from (c)(1)(ii)(B); 

F. Revising paragraph (c)(1)(ii)(C); 

G. Adding paragraph (c)(1)(ii)(D); 

H. Revising paragraph (c)(2); 

I. Redesignating existing paragraph (h) 

as paragraph (i) and existing paragraph 

(i) as paragraph (h) respectively; 

J. Adding paragraph (j). 

§ 405.378 Interest charges on 

overpayment and underpayments to 

providers, suppliers and other entities. 

(a) Basis and purpose. This section, 

which implements sections 1815(d), 

1833(j) and 1893(f)(2)(B) of the Act and 

common law, and authority granted 

under the Federal Claims Collection 

Act, provides for the charging and 

payment of interest on overpayments 

and underpayments to Medicare 

providers, suppliers, HMOs, 

competitive medical plans (CMPs), and 

health care prepayment plans (HCPPs). 

* * * * * 

(b) Basic rules. * * * 

(2) Except as provided in paragraph (j) 

of this section, interest accrues from the 

date of the final determination as 

defined in paragraph (c) of this section, 

and either is charged on the 

overpayment balance or paid on the 

underpayment balance for each full 30- 

day period that payment is delayed. 

(c) Definition of final determination. 

(1) For purposes of this section, any of 

the following constitutes a final 

determination: 

* * * * * 

(ii) In cases in which an NPR is not 

used as a notice of determination (that 

is, primarily under part B), one of the 

following constitutes a final 

determination—

* * * * * 

(C) A written determination by a 

Medicare contractor that effectuates a 

redetermination which reversed in full 

or in part an overpayment 

determination and the written 

determination reduces the amount of 

the overpayment below the amount that 

CMS has already recovered by 

recoupment or otherwise; or 

(D) A written determination by a 

Medicare contractor that effectuates a 

reconsideration by a Qualified 

Independent Contractor which reversed 

in full or in part an overpayment 

determination and the written 

determination reduces the amount of 

the overpayment below the amount that 

CMS has already recovered by 

recoupment or otherwise. 

* * * * * 

(2) Except as required by any 

subsequent administrative or judicial 

reversal and specifically as provided in 

paragraphs (i) and (j) of this section, 

interest accrues from the date of final 

determination as specified in this 

section. 

* * * * * 

(j) Special rule for provider or 

supplier overpayments subject to 

§ 405.379. If an overpayment 

determination subject to the limitation 

on recoupment under § 405.379 is 

reversed in whole or in part by an 

Administrative Law Judge (ALJ) or at 

subsequent administrative or judicial 

levels of appeal and if funds have been 

recouped and retained by the Medicare 

contractor, interest will be paid to the 

provider or supplier as follows: 

(1) The applicable rate of interest is 

that provided in paragraph (d) of this 

section. 

(2) The interest rate in effect on the 

date the ALJ, the Medicare Appeals 

Council, the Federal district court or 

subsequent appellate court issues a 

decision reversing the overpayment 

determination in whole or in part is the 

rate used to calculate the interest due 

the provider or supplier. 

(3) Interest will be calculated as 

follows: 

(i) Interest will be paid on the 

principal amount recouped only. 

(ii) Interest will be calculated on a 

simple rather than a compound basis. 

(iii) Interest will be calculated in full 

30-day periods and will not be payable 

on amounts recouped for any periods of 

less than 30 days in which the Medicare 

contractor had possession of the funds. 

(iv) In calculating the period in which 

the amount was recouped, days in 

which the ALJ’s adjudication period to 

conduct a hearing are tolled under 42 

CFR 405.1014 shall not be counted. 

(v) In calculating the period in which 

the amount was recouped, days in 

which the Medicare Appeals Council’s 

adjudication period to conduct a review 

are tolled under 42 CFR 405.1106 shall 

not be counted. 

(4) If the decision by the ALJ, 

Medicare Appeals Council, Federal 

district court or a subsequent Federal 

reviewing court, reverses the 

overpayment determination, as 

modified by prior levels of 

administrative or judicial review, in 

part, the Medicare contractor in 

effectuating the decision may allocate 

recouped monies to that part of the 

overpayment determination affirmed by 

the decision. Interest will be paid to the 


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provider or supplier on recouped 

amounts that remain after this allocation 

in accordance with this paragraph (j) of 

this section. 

5. Section 405.379 is added to read as 

follows: 

§ 405.379 Limitation on recoupment of 

provider and supplier overpayments. 

(a) Basis and purpose. This section 

implements section 1893(f)(2)(A) of the 

Act which limits recoupment of 

Medicare overpayments if a provider of 

services or supplier appeals until a 

decision is rendered by a Qualified 

Independent Contractor (QIC). 

(b) Overpayments subject to 

limitation. 

(1) This section applies to 

overpayments that meet the following 

criteria: 

(i) Is one of the following types of 

overpayments: 

(A) Post-pay denial of claims for 

benefits under Medicare Part A which is 

determined and for which a written 

demand for payment has been made on 

or after November 24, 2003; or 

(B) Post-pay denial of claims for 

benefits under Medicare Part B which is 

determined and for which a written 

demand for payment has been made on 

or after October 29, 2003; or 

(C) Medicare Secondary Payer (MSP) 

recovery where the provider or supplier 

received a duplicate primary payment 

and for which a written demand for 

payment was issued on or after October 

10, 2003; or 

(D) Medicare Secondary Payer (MSP) 

recovery based on the provider’s or 

supplier’s failure to file a proper claim 

with the third party payer plan, 

program, or insurer for payment and, if 

Part A, demanded on or after November 

24, 2003, or, if Part B, demanded on or 

after October 29, 2003; and 

(ii) The provider or supplier can 

appeal the overpayment as a revised 

initial determination under the 

Medicare claims appeal process at 42 

CFR Parts 401 and 405 or as an initial 

determination for provider/supplier 

MSP duplicate primary payment 

recoveries. 

(2) This section does not apply to all 

other overpayments including, but not 

limited to, the following: 

(i) All Medicare Secondary Payer 

recoveries except those expressly 

identified in this paragraph (b)(1)(i)(C) 

and (D); 

(ii) Beneficiary overpayments; and 

(iii) Overpayments that arise from a 

cost report determination and are 

appealed under the provider 

reimbursement process of 42 CFR Part 

405 Subpart R–Provider Reimbursement 

Determinations and Appeals. 

(c) Rules of construction. 

(1) For purposes of this section, what 

constitutes a valid and timely request 

for a redetermination is to be 

determined in accordance with 

§ 405.940 and § 405.958. 

(2) For purposes of this section, what 

constitutes a valid and timely request 

for a reconsideration is to be determined 

in accordance with § 405.974 through 

§ 405.978. 

(d) General rules. 

(1) Upon receipt of a timely and valid 

request for a redetermination of an 

overpayment, the Medicare contractor 

shall cease recoupment of the 

overpayment in question. If the 

recoupment has not yet gone into effect, 

the contractor shall not initiate 

recoupment. 

(2) If the redetermination decision is 

an affirmation in whole or in part of the 

overpayment determination, 

recoupment may be initiated or resumed 

in accordance with paragraph (e) of this 

section. 

(3) Upon receipt of a timely and valid 

request for a reconsideration of an 

overpayment, the Medicare contractor 

shall cease recoupment of the 

overpayment in question. If the 

recoupment has not yet gone into effect, 

the contractor must not initiate 

recoupment. 

(4) Following final action by the QIC 

on the reconsideration, the contractor 

may initiate or resume recoupment in 

accordance with paragraph (f) of this 

section. 

(5) If the provider or supplier 

subsequently appeals the overpayment 

to the ALJ, the Medicare Appeals 

Council, or Federal court, recoupment 

remains in effect as provided in 

§ 405.373(e). 

(6) If an overpayment determination is 

appealed and recoupment stopped, the 

contractor may continue to recoup other 

overpayments owed by the provider or 

supplier in accordance with this 

section. 

(7) Amounts recouped prior to a 

reconsideration decision may be 

retained by the Medicare contractor in 

accordance with paragraph (g) of this 

section. 

(8) If either the redetermination or 

reconsideration decision is a full 

reversal of the overpayment 

determination or if the overpayment 

determination is reversed in whole or in 

part at subsequent levels of 

administrative or judicial appeal, 

adjustments shall be made with respect 

to the overpayment and the amount of 

interest charged. 

(9) Interest accrues and is payable in 

accordance with the provisions of 

§ 405.378. 

(e) Initiating or Resuming 

Recoupment After Redetermination 

Decision. 

(1) Recoupment that has been 

deferred or stopped may be initiated or 

resumed if the debt (remaining unpaid 

principal balance and interest) has not 

been satisfied in full and the provider or 

supplier has been afforded the 

opportunity for rebuttal in accordance 

with the requirements of § 405.373 

through § 405.375. Recoupment may be 

resumed under any of the following 

circumstances: 

(i) Immediately upon receipt by the 

Medicare contractor of the provider’s or 

supplier’s request for a withdrawal of a 

request for a redetermination in 

accordance with § 405.952(a). 

(ii) On the 30th calendar day after the 

date of the notice of redetermination 

issued under § 405.956 if the 

redetermination decision is an 

affirmation in whole of the overpayment 

determination in question. 

(iii) On the 30th calendar day after the 

date of the written notice to the provider 

or supplier of the revised overpayment 

amount if the redetermination decision 

is an affirmation in part which has the 

effect of reducing the amount of the 

overpayment. 

(2) Notwithstanding paragraphs (e)(i), 

(ii) and (iii) of this section, recoupment 

must not be resumed, or if resumed, 

must cease upon receipt of a timely and 

valid request for a reconsideration by 

the QIC. 

(f) Initiating or resuming recoupment 

after final action by the QIC on the 

reconsideration request. 

(1) Recoupment may be initiated or 

resumed upon final action by the QIC 

subject to the following limitations: 

(i) The provider or supplier has been 

afforded the opportunity for rebuttal in 

accordance with the requirements of 

§ 405.373 through § 405.375; and 

(ii) The debt (remaining unpaid 

principal balance and interest) has not 

been satisfied in full; and 

(iii) If the final action by the QIC is 

the notice of the reconsideration, the 

reconsideration decision either affirms 

in whole or in part the overpayment 

determination, including the 

redetermination, in question. 

(2) For purposes of this paragraph (f), 

final action by the QIC on the 

reconsideration request is the earliest to 

occur of the following: 

(i) The QIC mails or otherwise 

transmits written notice of the dismissal 

of the reconsideration request in its 

entirety in accordance with § 405.972; 

or 

(ii) The QIC receives a timely and 

valid request to withdraw the request 


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Federal Register / Vol. 71, No. 184 / Friday, September 22, 2006 / Proposed Rules 55415 

for the reconsideration in accordance 

with § 405.972; or 

(iii) The QIC transmits written notice 

of the reconsideration in accordance 

with § 405.976; or 

(iv) The QIC notifies the parties in 

writing that the reconsideration is being 

escalated to an ALJ in accordance with 

§ 405.970. 

(g) Disposition of funds recouped. 

(1) If the Medicare contractor 

recouped funds before a timely and 

valid request for a redetermination was 

received, the amount recouped may be 

retained and applied first to accrued 

interest and then to reduce or eliminate 

the principal balance of the 

overpayment subject to the following: 

(i) If the redetermination results in a 

reversal, the amount recouped may be 

applied to any other debt, including 

interest, owed by the provider or 

supplier before any excess is released to 

the provider. 

(ii) If the redetermination results in a 

partial reversal and the decision reduces 

the overpayment plus assessed interest 

below the amount already recouped, the 

excess may be applied to any other debt, 

including interest, owed by the provider 

or supplier before any excess is released 

to the provider or supplier. 

(iii) If the redetermination results in 

an affirmation and the provider or 

supplier subsequently requests a 

reconsideration, the Medicare contractor 

may retain the amount recouped and 

apply the funds first to accrued interest 

and then to outstanding principal 

pending final action by the QIC on the 

reconsideration request. 

(2) If the Medicare contractor also 

recouped funds in accordance with 

paragraph (e) of this section, the amount 

recouped may be retained by the 

Medicare contractor and applied first to 

accrued interest and then to reduce or 

eliminate the outstanding principal 

balance pending final action by the QIC 

on the reconsideration request. 

(3) If the final action by the QIC is a 

dismissal, receipt of a withdrawal, a 

notice that the reconsideration is being 

escalated to an ALJ, or a reconsideration 

which affirms in whole the 

overpayment determination, including 

the redetermination, in question, the 

amount recouped is applied to interest 

first, then to reduce the outstanding 

principal balance and recoupment may 

be resumed as provided under 

paragraph (f) of this section. 

(4) If the final action by the QIC is a 

reconsideration, which reverses in 

whole the overpayment determination, 

including the redetermination, in 

question, the amount recouped may be 

applied to any other debt, including 

interest, owed by the provider or 

supplier to CMS or to HHS before any 

excess is released to the provider or 

supplier. 

(5) If the final action by the QIC is a 

reconsideration which results in a 

partial reversal and the decision reduces 

the overpayment plus assessed interest 

below the amount already recouped, the 

excess may be applied to any other debt, 

including interest, owed by the provider 

or supplier to CMS or to HHS before any 

excess is released to the provider or 

supplier. 

(h) Relationship to Extended 

Repayment Schedules. 

If (1) a provider or supplier has been 

granted an extended repayment 

schedule (ERS) under § 401.607(c); (2) 

the overpayment for which the ERS has 

been granted is one to which this 

section is applicable; and (3) a valid and 

timely request for a redetermination has 

been received by the Medicare 

contractor, then notwithstanding the 

language of § 401.607(c)(2)(iv), the 

provider or supplier will not be deemed 

in default if recoupment is not put into 

effect or stopped in accordance with 

this section. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: April 15, 2006. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: June 12, 2006. 

Michael O. Leavitt, 

Secretary. 

Editorial Note: This document was 

received in the Office of the Federal Register 

on September 18, 2006. 

[FR Doc. 06–8009 Filed 9–21–06; 8:45 am] 

BILLING CODE 4120–01–P 


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