47458 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 405 

[CMS–6025–F] 

RIN 0938–AN42 

Medicare Program; Limitation on 

Recoupment of Provider and Supplier 

Overpayments 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule implements a 

provision of the Medicare Prescription 

Drug, Improvement, and Modernization 

Act of 2003 (MMA) which prohibits 

recouping Medicare overpayments from 

a provider or supplier that seeks a 

reconsideration from a Qualified 

Independent Contractor (QIC). 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 final 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: Effective Date: These regulations 

are effective on November 16, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Debbie Miller (410) 786–1492. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Prior to passage of the MMA, CMS 

could recoup overpayments regardless 

of whether a provider or supplier had 

appealed. Section 935(f)(2) of the MMA, 

codified at section 1892(f) of the Social 

Security Act, prohibits the recoupment 

of Medicare overpayments during a 

provider or supplier appeal to a 

Qualified Independent Contractor (QIC). 

CMS will also stop recoupment during 

the first level of appeal, the 

redetermination, if the provider or 

supplier files a timely request for 

appeal, as explained in detail within the 

text of this regulation. However, the 

contractor may initiate or resume 

recoupment, whether or not the 

provider or supplier subsequently 

appeals the QIC determination to the 

Administrative Law Judge (ALJ), the 

Medicare Appeals Council, or Federal 

court. 

This final rule defines the 

overpayments to which the limitation 

on recoupment applies, how the 

limitation works in concert with the 

appeals process, and sets time limits for 

recouping overpayments, specifically 

providing 41 days for a provider or 

supplier to file the first level of appeal 

before the contractor can begin 

recoupment and providing the provider 

or supplier 60 days to appeal at the 

second level before the contractor can 

begin recoupment. 

This final rule also changes how 

interest is to be paid to a provider or 

supplier whose overpayment is 

subsequently reversed at the ALJ, 

Medicare Appeals Council, or Federal 

court levels of appeal. Before the MMA 

was passed, CMS was liable for interest 

charges if it did not pay within 30 days 

of an underpayment determination. This 

final rule requires that if an 

overpayment determination is 

overturned in administrative or judicial 

appeals, above the QIC level of appeal, 

CMS is liable for interest on recouped 

overpayments that has accrued since the 

original determination. This final rule 

implements this new requirement, 

while leaving all other interest 

calculation regulations intact. Therefore, 

if a provider or supplier takes advantage 

of the limitation on recoupment, and 

ultimately loses on appeal, it will still 

be liable for all accrued interest. 

A. Legislation 

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 final 

rule implements the second of these 

provisions—the limitation on 

recoupment. 

The statute requires us 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 QIC. We note that the 

changes to recoupment and interest 

work in tandem with Medicare fee-forservice claims appeal process. We refer 

readers to the September 22, 2006 

proposed rule (71 FR 55406) or to the 

applicable regulations at 42 CFR 

405.900 for a further discussion of the 

claims appeal process. The September 

22, 2006 proposed rule includes a brief 

discussion of the appeals process and a 

detailed chart which sets forth the levels 

of appeals as well as applicable time 

frames and amount in controversy 

requirements. 

B. Appeals and 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. Section 1893 of the Act 

as amended by Section 935 of the MMA 

and the provisions of this final rule do 

not alter the rebuttal process. The 

regulatory definition of ‘‘recoupment’’ is 

set forth at § 405.370. See § 405.374 for 

information on the rebuttal process. 

An appeal is an examination of the 

validity of the overpayment 

determination. 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 was 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) of the Act 

was enacted, our recoupment process 

was changed. Section 1893 (f)(2) of the 

Act states: 

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. 

C. Assessment of Interest 

In addition to changing the 

recoupment 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. (See also, § 405.378.) An 


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underpayment would usually result 

when we had recovered, through 

recoupment or otherwise, an 

overpayment; the decision was fully or 

partially reversed at some point in the 

appeal process; and after appropriate 

adjustments, we owed the balance to the 

provider or supplier. Interest would 

accrue from the date of the ‘‘final 

determination’’ and was owed if the 

underpayment was not paid within 30 

days. Following an appeal decision 

favorable to a provider or supplier, the 

Medicare contractor would effectuate 

the decision. If the decision created an 

underpayment, the contractor would 

issue a written determination of the 

amount Medicare owed as an 

underpayment. The written 

determination was considered a new 

final determination; interest would 

accrue from the date of the final 

determination and would be owed/ 

payable if the underpayment was not 

paid by the Medicare contractor within 

30 days of the final determination of the 

underpayment. 

The new interest provision found in 

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

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). 

Section 1893(f)(2)(B) of the Act states: 

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. 

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

not specifically amend sections 1815(d) 

and 1833(j) of the Act. In addition, the 

MMA conference report does not 

reference these sections. The statute and 

the conference report are both silent on 

the relationship between paying or 

collecting interest: (1) Based on the final 

determination concept embodied in 

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

and (2) 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. 

The statute does not change the 

obligation of the provider or supplier to 

pay interest if the overpayment 

determination is affirmed at any level of 

administrative or judicial appeal. In 

accordance with sections 1815(d) and 

1833(j) of the Act, interest continues to 

accrue from the date of the final 

determination as defined in 

§ 405.378(c). 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 provision, the date of 

the final determination is the date of the 

original notice of overpayment (that is, 

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, the statute does not 

change 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 and the 

appeal decision generates an 

underpayment. At these levels of 

appeal, interest would continue to be 

payable by Medicare if an 

underpayment is not paid to the 

provider or supplier within 30 days of 

the date 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 where the decision results in a 

full or partial reversal and Medicare 

previously recouped funds. 

We determine the rate of interest in 

accordance with § 405.378 by 

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. 

Since February 2001 to the present time, 

it has ranged from a low of 10.75 

percent to a high of 14.125 percent. In 

accordance with § 411.24(m)(2), interest 

is calculated on Medicare Secondary 

Payer (MSP) debts in the same manner 

as for Medicare overpayments and 

underpayments. In addition, 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. 

D. Suspension 

We note that this new MMA provision 

does not affect how we recover 

overpayments from providers or 

suppliers that have been placed on 

payment suspension. Under § 405.371, 

an intermediary, a carrier, or CMS 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 as specified in 

§ 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. Furthermore, we do not 

interpret section 1893(f) of the Act to 

require that suspended payments be 

released to a provider or supplier once 

an overpayment amount is determined. 

If the suspended payments are 

insufficient to fully eliminate any 

overpayment, and the provider or 

supplier meets the requirements of this 

final rule, the limitation on recoupment 

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

Act will 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 that follow 

suspension actions. Providers and 

suppliers may continue to appeal the 

overpayment determination as they 

could before the enactment of the MMA. 

II. Provisions of the Proposed 

Regulations and Response to Comments 

In the September 22, 2006 Federal 

Register (71 FR 55404), we published 

the proposed rule entitled, ‘‘Limitation 

on Recoupment of Provider and 

Supplier Overpayments’’ and provided 

for a 60-day comment period. The rule 

proposed to implement a provision of 

the MMA that prohibited recouping 

Medicare overpayments when a 

reconsideration appeal is received from 


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47460 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Rules and Regulations 

a provider or supplier until a decision 

is rendered by a QIC. The 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. The proposed rule defined 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. 

We received a total of 11 timely 

comments from physicians, hospital 

associations, home health facilities, 

medical equipment providers, and other 

individuals and health care 

associations. 

Brief summaries of each proposed 

provision, a summary of the public 

comments we received, and our 

responses to the comments are set forth 

below. 

A. General Comments 

Most of the comments received 

ranged from general comments that 

supported or opposed the proposed 

provisions, to very specific questions or 

comments regarding the proposed 

changes. 

Comment: We received two comments 

that supported CMS’s decision to halt 

recoupment during the period that the 

provider seeks a first level of appeal 

(redetermination) as stated in proposed 

§ 405.379(d)(1). 

Response: We appreciate the 

commenters recognizing that CMS has 

attempted to fairly implement the 

requirements of section 1893(f)(2) of the 

Act while still fulfilling its fiduciary 

responsibility to collect overpayments 

aggressively. 

Comment: One commenter expressed 

concern that CMS’s limitation on 

recoupment provisions afford greater 

protections to overpaid providers than 

to providers who are merely suspected 

to have overpayments and for whom 

payments are suspended while an 

overpayment is being determined. 

Response: Section 1893(f)(2) of the 

Act prevents the Secretary from taking 

any ‘‘action * * * to recoup the 

overpayment’’. The disposition of 

suspended funds as explained in 

§ 405.372(e) is not a ‘‘recoupment’’ as 

that term is defined in § 405.370. The 

statute does not broaden or alter CMS’s 

definition of recoupment to also apply 

to the application of 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. 

B. 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. In the September 22, 2006 

proposed rule, we proposed to revise 

the authority citation to explicitly add 

Section 1893 of the Act, amended by 

section 935 of the MMA, to add the 

limitation on recoupment as well as 

other provisions addressing the recovery 

of overpayments. We received no 

comments on this provision. Thus, in 

this final rule, we are adopting the 

authority citation provisions of the 

proposed rule without change. 

C. Proposed Change to § 405.370 

Definitions 

Section § 405.370 defines key terms 

that apply to subpart C of part 405. In 

the September 22, 2006 proposed rule, 

we proposed to revise § 405.378 and add 

a new § 405.379. We added new 

definitions to § 405.370. We also 

proposed that selected terms used in 

§ 405.378 and proposed § 405.379 be 

given the same meaning as in the 

appeals context. 

Comment: Several commenters 

suggested that the definition of 

Medicare contractor be amended to 

include Recovery Audit Contractors 

(RACs). 

Response: We agree with the 

commenter and have revised the 

definition of Medicare Contractor to 

include this change. We note that our 

intent was not to exclude RACs from 

being subject to the rule. 

Accordingly, we are revising the 

definition of Medicare Contractor, and 

finalizing all other definitions in 

§ 405.370 as proposed without change. 

D. § 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. 

Specifically, § 405.373(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. In the September 22, 2006 

proposed rule, we proposed to revise 

the introductory text of paragraph (e) to 

explicitly refer to § 405.379, 

implementing the statutory limitation 

on recoupment, as a separate basis to 

stop recoupments that have been put 

into effect. 

We received no comments on these 

provisions. Accordingly, we are 

finalizing § 405.373 as proposed without 

modification. 

E. § 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 and determines 

whether we pay interest on an 

underpayment or collect interest on an 

overpayment. 

In paragraph (c), we define what 

constitutes a final determination both 

for overpayments and underpayments 

arising from a cost report determination 

as well as those that are claims based. 

In paragraph (d), we establish 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 (§ 411.24(m) which 

references § 405.378(d)). 

In the September 22, 2006 proposed 

rule, we proposed to revise § 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. In § 405.378, we 

proposed to 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 would continue 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 

methodologies depending upon the 

appeal level at which the reversal 

occurs. If a full or partial 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 to the 

provider or supplier if the 

underpayment is not paid within 30 

days of the final determination as that 

term is defined in the proposed 

revisions to § 405.378(c). 

It is only where the reversal occurs at 

the ALJ level or Departmental Appeals 

Board’s Appeals Council level of 


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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. 

In the September 22, 2006 proposed 

rule, we proposed to amend § 405.378(a) 

by adding the reference to 1893(f)(2)(B) 

of the Act, which is one of the 

enumerated provisions of the Act that 

this regulatory section is designed to 

implement. 

We also proposed 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. 

In addition, we proposed 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 proposed to remove 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, we proposed to make 

these changes at paragraph (j). 

Second, we proposed 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 was 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 proposed 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 was 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 of the written 

determination to the provider or 

supplier 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 proposed changes to the final 

determination definitions are intended 

to work in conjunction with the 

limitation on recoupment requirements 

in § 405.379. Providers and suppliers 

can take advantage of the limitation on 

recoupment by not paying during the 

redetermination and reconsideration 

levels of appeal. However, 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. 

We proposed to revise 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 proposed to redesignate 

paragraph (h), respectively as paragraph 

(i) and paragraph (i) as paragraph (h). 

We note that the text of these 

redesignated paragraphs did not change. 

In addition, we proposed to add a 

new paragraph (j) to establish the 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 states, 

‘‘[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.’’ In paragraph (j), 

we 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. 

In paragraph (j)(1), we state 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 specified in paragraph (d) of this 

section, is the higher of the private 

consumer rate or the current value of 

funds rate. We note that the interest rate 

established in paragraph (d) changes 

periodically. 

In paragraph (j)(2), we describe 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. 

In paragraph (j)(3), we explain how 

interest would be calculated. Interest 

will be paid on the total principal 

amount recouped. We will pay simple 

rather than compound interest, and will 

not pay interest on interest; this mirrors 

the manner in which we assess interest 

against providers. Monies we recoup 

and apply to interest will 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 will 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 

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 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 state 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 state 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 


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47462 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Rules and Regulations 

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 specified in 

paragraph (j). 

All comments and CMS’s responses 

related to the proposed revisions of 

§ 405.378 are discussed below: 

Comment: Two commenters suggested 

that § 405.378(j) be revised to state that 

Medicare must pay interest from the 

date of recoupment regardless of 

whether the reversal occurs at the 

redetermination, reconsideration, or ALJ 

level. 

Response: Section 1893 (f)(2)(B) of the 

Act clearly states that CMS must pay 

interest to a provider or supplier only 

when a reconsideration is ‘‘later 

reversed.’’ Therefore, we are not 

authorized by statute to pay interest 

from the date of recoupment if a 

decision at the redetermination or 

reconsideration level of appeal reverses 

a prior determination or decision. The 

statute only requires the payment of 

interest back to the date of recoupment 

when a finding by an ALJ, or other 

higher administrative or judicial entity, 

reverses a QIC reconsideration decision. 

CMS only pays interest when 

specifically obligated by statute. We 

believe the commenter’s suggestion is 

contrary to the plain meaning of the 

statute. 

Comment: One commenter suggested 

that because interest charges continue to 

accrue against a provider or supplier 

even if they avail themselves of the 

limitation on recoupment, CMS will 

make itself whole by satisfying the 

overpayment through interest 

collections. 

Response: CMS must forward to the 

(Department of Treasury) General Fund 

any interest collected. CMS neither 

retains, nor is made whole by interest 

collected on behalf of the Treasury. 

Comment: One commenter stated that 

the proposed new definitions of when 

CMS pays interest on underpayments 

that result from a reversal, in whole or 

in part, at the redetermination level and 

at the reconsideration level 

(§ 405.378(c)(1)(ii)(C) and (c)(1)(ii)(D)), 

are not fair to providers or suppliers, 

and result in providers or suppliers 

giving interest-free loans to Medicare for 

the period of time between the decision 

and when Medicare effectuates the 

decision. 

Response: Medicare’s longstanding 

policy is that a final determination 

occurs when the determination sets 

forth a specific amount that is due. 

Further, as explained in § 405.378(e)(4), 

interest to a provider or supplier does 

not begin to accrue until the date of the 

written determination notifying the 

provider or supplier of the amount of 

the underpayment. Although it is 

possible that a decision at the QIC level 

could include the precise amount that is 

owed as an underpayment, more often, 

the decision requires that the Medicare 

contractor compute the amount due to 

the provider. For example, if the QIC 

decision is a partial reversal of an 

overpayment where extrapolation was 

used to determine the overpayment, it 

typically must be recalculated to 

account for the revisions made to the 

sample claims upon which the 

extrapolated overpayment is based. 

Only after the recalculation of the 

overpayment is completed will the 

contractor become aware of any 

potential underpayment. A written 

determination on appeal that Medicare 

owes an underpayment but without 

specific information as to what the 

amount is owed, does not permit 

sufficient information to determine the 

payment amount and subsequent 

interest. Interest is paid when a specific 

amount is known and is not paid within 

30 days. Similarly, providers have 30 

days to repay an overpayment where the 

amount has been determined before 

interest is assessed. 

In considering the comment, we 

decided to remove § 405.378(c)(1)(ii)(C) 

and (c)(1)(ii)(D). These two provisions 

included in our proposed rule explained 

when a final determination of an 

underpayment occurred during the first 

two levels of administrative appeal. 

However, we believe the language in 

§ 405.378(c)(1)(ii)(B), which states that a 

written determination of an 

underpayment constitutes a final 

determination, adequately covers these 

two levels of appeal. Thus, we believe 

paragraphs (c)(1)(ii)(C) and (c)(1)(ii)(D) 

are unnecessary. After all levels of 

appeal, an underpayment will be 

determined when a sum certain is 

calculated and the provider or supplier 

is notified of the underpayment, 

regardless of whether a QIC or a 

contractor performs the recalculation. 

Comment: One commenter stated that 

interest should be prorated for periods 

less than 30 days. 

Response: CMS will continue to pay 

interest on underpayments it owes the 

provider or supplier, the same way it 

assesses interest on overpayments owed 

by the provider or supplier. Periods of 

less than 30 days are not counted. Only 

full 30 day periods are used to calculate 

interest. This is based on § 405.378(b)(2) 

where interest accrues and is paid for 

each full 30 day period that payment is 

delayed. 

Comment: Two commenters asked 

CMS to reconsider the proposal to 

deduct from the interest owed to the 

provider those days that are tolled 

during an ALJ or Appeals Council 

adjudication period. 

Response: The appeals regulations in 

§ 405.1014 and § 405.1106 provide 

extensions (or tolling) of the 

adjudication timeframe for issuance of 

ALJ decisions and Medicare Appeals 

Council review decisions when certain 

specific actions are taken by an 

appellant that are outside the 

government’s control, (for example, the 

appellant fails to copy the other parties 

on their request for an ALJ hearing). We 

believe that our proposal to deduct the 

days that are associated with an 

appellant’s actions aligns itself with the 

language in the appeals regulations. 

CMS should not be required to pay 

interest on days that the appellant is in 

control of, or is perfecting an appeal 

request, or takes action that delays the 

administrative proceedings. 

Accordingly, we are finalizing 

§ 405.378 as proposed with 

modifications, as noted above. 

F. § 405.379 Limitation on Recoupment 

of Provider and Supplier Overpayments. 

In the September 22, 2006 proposed 

rule, we proposed to add a new section 

§ 405.379 to subpart C of Part 405 to 

implement the statutory limitation on 

recoupment under section 1893(f)(2) of 

the Act. 

Specifically, in proposed paragraph 

(a) we explained that 1893(f)(2)(B) of the 

Act is the statutory basis for this section. 

In addition, we stated that the basis and 

purpose of this section is to impose a 

limit on our recoupment of Medicare 

overpayments, if a provider or supplier 

appeals until a decision by a QIC is 

made. 

In paragraph (b), we delineated those 

types of overpayments that are expressly 

subject to the recoupment limitation: (1) 

those appealed by the provider or 

supplier under the Medicare claims 

appeal process; (2) post-pay denial of 

claims for benefits under Medicare Part 

A and Part B for which a demand for 

payment has been made; and (3) 

Medicare Secondary Payer (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) of the Act shall 

apply to ‘‘actions’’ taken after the date 

of enactment of the MMA; that is 

actions taken after December 8, 2003. 


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For these purposes, we defined these 

actions to be the date the contractor 

could have instituted recoupment action 

based on Part A debts determined on or 

after November 24, 2003, Part B debts 

determined on or after October 29, 2003, 

and a small group of MSP debts 

determined on or after October 10, 2003. 

In paragraph (b), we also provided the 

categories of overpayments to which the 

limitation does not apply, although this 

is not 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. 

In paragraph (c), we specified how 

two key actions that trigger the 

limitation on recoupment are to be 

construed. A provider must act 

decidedly to stop recoupment. 

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 is already 

described in established Medicare 

appeal regulations and implementing 

policies. (See 42 CFR part 405 subpart 

I). 

In paragraph (d), we proposed 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. This means 

we can recoup during the period when 

a provider’s or supplier’s right to 

request a redetermination has not 

expired. This places the obligation on 

the provider or supplier who wishes to 

capitalize on the benefit afforded by the 

recoupment limitation to request a 

redetermination. 

Under the Benefits Improvement and 

Protection Act of 2000, 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 proposed 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. 

In paragraph (d)(3), we specified that 

the Medicare contractor shall cease 

recoupment upon receipt of a timely 

and valid request for a reconsideration. 

If recoupment has not 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 proposed in 

paragraphs (d)(4) and (d)(5) states 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). 

In paragraph (d)(6), we clarified 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. 

In paragraph (d)(7), we stated that 

amounts properly recouped before 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. 

In paragraph (d)(8), we stated that if 

an overpayment determination is 

reversed through the administrative or 

judicial process, appropriate 

adjustments in the debt and the amount 

of interest charged would be made to 

give effect to these decisions. 

In paragraph (d)(9), we made explicit 

that interest is payable on 

overpayments, subject to the 

recoupment limitation, in accordance 

with the provisions of § 405.378. 

In paragraph (e), we stated 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. We proposed that 

recoupment can resume: (1) 

Immediately upon receipt of a request to 

withdraw the redetermination request; 

(2) on the 30th calendar day after the 

date of the notice of redetermination 

affirming the overpayment 

determination in whole; or (3) 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 proposed in 

paragraph (e)(2), that recoupment would 

be stopped again upon receipt of a 

timely and valid request for a 

reconsideration by the QIC. 

In paragraph (f), we set 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 

consistent with this provision to 

interpret ‘‘the date the decision on the 

reconsideration is rendered’’ as the date 

on which the QIC issues its final 

decision, dismissal order, or notice with 

respect to escalation. 

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 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 


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request and forward the case file to the 

ALJ hearing office. 

We proposed that the earliest to occur 

of these three actions (a reconsideration, 

a dismissal, or 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 

action that would permit the initiation, 

or resumption, of the recoupment of 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 to seek escalation. We also 

clarified 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. 

In paragraph (g), we addressed a 

series of specific rules and situations on 

how recouped funds are to be applied. 

Funds recouped before 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. 

In paragraph (h), we specified how we 

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 

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. 

All comments and CMS’s responses 

related to § 405.379 are discussed 

below: 

Comment: Two commenters stated 

that in the proposed rule CMS 

explained that it would not recoup until 

after the requirement to afford the 

provider or supplier an opportunity for 

rebuttal was satisfied. In addition, the 

commenters asked if the rebuttal 

process conflicts with the proposed 

provisions. 

Response: The rebuttal process is a 

separate and independent right that is 

not affected by this regulation, and 

occurs independently of the appeals 

process set forth in part 405 subpart I. 

The statement in the proposed 

regulation regarding the rebuttal process 

was simply an acknowledgement that 

this process remains available to 

providers and suppliers. Sections 

405.373 through 405.375 explain the 

process by which CMS gives notice of 

an overpayment and offers an 

opportunity for rebuttal before it takes 

an action to offset or recoup that 

overpayment. The provider may submit 

a rebuttal statement within 15 days of 

the notice. The Medicare contractor has 

15 days to review the statement and 

determine whether to proceed with the 

recoupment or not to proceed, based on 

the rebuttal statement. In contrast, the 

limitation on recoupment provision 

does not afford the contractor any 

discretion in proceeding or stopping 

recoupment of an overpayment. If a 

valid request for a first or second level 

appeal is filed, the contractor must stop 

recoupment. As a practical matter, 

providers who want to ensure that CMS 

stops recoupment will avail themselves 

of the limitation on recoupment process 

through a timely and valid appeal rather 

than the rebuttal process. 

Comment: Several commenters 

recommended that CMS provide the full 

120-day filing period for a 

redetermination and the 180-day period 

for a reconsideration before starting 

recoupment of the overpayment. The 

commenters indicated that the proposed 

rule forces providers to choose either to 

initiate a timely appeal to stop 

recoupment, or take full advantage of 

the timeframe for filing an appeal. In 

addition, the commenters stated that 

recouping before the filing periods have 

concluded was not in compliance with 

the statute. 

Response: The comment that 

recoupment should be delayed 120 days 

after the receipt of an overpayment 

determination or 180 days after the 

notice of a redetermination is 

inconsistent with the applicable statute. 

In order to trigger the statutory 

limitation on recoupment, the provider 

must seek a reconsideration. The statute 

is clear that recoupment is either 

stopped, or may not begin, when a valid 

request for a reconsideration is filed. 

However, the statute is silent with 

regard to actions CMS may take after an 

initial demand is issued and before a 

request for reconsideration is filed. CMS 

has a fiduciary responsibility to timely 

and aggressively collect Medicare debt 

or refer the debt to Treasury for 

collection as mandated by the Debt 

Collection Improvement Act. Unless a 

provider or supplier purposely avails 

themselves of the limitation on 

recoupment, CMS has a statutory 

obligation to collect these outstanding 

debts. Based on the statutory language 

CMS could recoup during the period the 

provider is actively pursuing a first level 

of appeal (redetermination). This 

approach would reduce the 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 Fund. However, as we 

noted earlier, this approach would 

result in many instances where CMS 

would have recouped the overpayment 

before the provider could request a 

reconsideration and thereby invoke the 

limitation on recoupment. We suggested 

in our September 2006 proposed rule 

that this view, while permissible, would 

unfairly impact many providers and 

suppliers. Using our discretionary 

rulemaking authority, CMS is also 

limiting recoupment when the provider 

requests a redetermination (that is, the 

first level of appeal). Based on this 

comment, CMS is revising § 405.379(a) 

to make clear that we are implementing 

the statutory requirement to limit 

recoupment during reconsideration, as 

well as limiting recoupment during 

redetermination, the first level of 

appeal. 


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In both cases, the provider or supplier 

must take some decided affirmative 

action, (that is, requesting a 

redetermination or a reconsideration). 

Moreover, to wait until the expiration of 

the appeals filing periods would 

adversely impact providers and 

suppliers who do not wish to appeal, 

because they would be subject to several 

months of interest. To avoid this, these 

providers and suppliers would have to 

take some affirmative action to indicate 

that they do not want to appeal which 

unfairly places a burden on these 

providers and suppliers who want to 

pay their overpayments and do not want 

to appeal. 

Therefore, CMS has determined that 

the timeframes established for 

recoupment are both reasonable for 

allowing providers sufficient time to 

initiate a timely appeal and are also 

consistent with our fiduciary 

responsibility for collecting Medicare 

debt. Based on the foregoing discussion, 

CMS is in compliance with the statute. 

We are not adopting the commenters’ 

suggestion. 

Comment: One commenter suggested 

that if CMS does not halt recoupment 

until the first and second level appeals 

periods expire, CMS should require a 

provider or supplier to inform the 

contractor of its intent to initiate an 

appeal. In addition, the commenter 

indicated that providers expressing their 

intent to appeal would not be subject to 

recoupment. 

Response: We believe the language of 

the statute that the provider must 

‘‘seek’’ a reconsideration clearly intends 

for a process that actively engages both 

the provider or supplier and CMS. An 

intent to file has no time limits for a 

provider or supplier and has the effect 

of staying any collections indefinitely. 

Further, simply signaling an intent to 

file has no binding effect on a party, and 

does not necessarily mean that a 

provider or supplier will ultimately seek 

any appeal. Thus, we are not adopting 

the commenter’s suggestion. 

Comment: One commenter suggested 

that CMS should ensure that language in 

the overpayment notices clearly advise 

the provider or supplier that if it files a 

request for a redetermination by a 

specified date that recoupment would 

be stayed and that these notices should 

also specify the time period in which 

recoupment would be stayed. 

Additionally, language in the notices 

should state that interest continues to 

accrue from the date of the original 

overpayment determination. 

Response: We agree with the 

commenter that language regarding 

when recoupment starts and stops and 

that interest continues to accrue from 

the date of the initial overpayment 

determination should be included in the 

overpayment determination letters. 

However, we view those procedures as 

part of the specific manual instructions 

to be issued to Medicare contractors. 

Manual instructions contain model 

letters and instructions to Medicare 

contractors on the preparation and 

content of demand letters. Thus, we do 

not believe it is necessary to revise the 

rule to include the commenter’s 

suggestion. 

Comment: Two commenters stated 

that the limitation of recoupment 

should apply to those Part B debts 

determined on or after October 29, 2003 

and Part A debts determined on or after 

November 29, 2003. The commenters 

further explained that this means that 

CMS could begin recoupment on the 

16th day or the 41st day after the notice 

of overpayment is issued and before a 

redetermination is filed depending on 

whether the notice came from the 

Medicare intermediary or the Medicare 

carrier. The commenter expressed that 

this is disparate treatment and asked 

CMS to explain the rationale for the 

policy. 

Response: Medicare contractors’ 

internal shared systems largely 

determined when those contractors 

instituted recoupment. Recoupment 

began approximately 16 days after the 

notice of overpayment, if the notice was 

issued by a Medicare intermediary, and 

41 days after the notice of overpayment 

if the notice was issued by a Medicare 

carrier unless in both cases, the 

contractor received information from 

the provider about how it intended to 

repay the overpayment. 

The limitation on recoupment 

provision required us to consider more 

consistent system rules for when 

recoupment could begin or resume. For 

consistent application of the limitation 

on recoupment and before a request for 

a redetermination is received, we 

modified our Part A systems to be 

consistent with our Part B systems and 

both will begin recoupment at day 41 

following the notice of overpayment for 

those overpayments subject to the 

limitation on recoupment. This aligns 

itself with interest regulations at 

§ 405.378, that states interest is not due 

if the debt is liquidated within 30 days. 

If a provider or supplier pays the 

overpayment or requests a 

redetermination by the 30th day 

following the notice of overpayment, 

Medicare contractors have an additional 

10 days to ensure posting of payments 

or receipt of a valid request for a 

redetermination. Medicare overpayment 

demand letters will include clear 

language about when recoupment can 

begin. We are also amending the 

regulation at § 405.379(d)(1) to reflect 

the 41 day system modification. 

Comment: Two commenters stated 

that providers who fail to introduce all 

relevant evidence before the QIC are 

precluded from presenting new 

evidence to an ALJ, absent good cause. 

Thus, an appellant may need more than 

30 days to prepare a request for 

reconsideration that contains all 

relevant evidence. 

Response: The requirement in 

§ 405.966 for the early presentation of 

evidence by providers and suppliers is 

based on the statutory requirement 

contained in section 1869(b)(3) of the 

Act, as added by section 933(a) of the 

MMA, which states that a provider or 

supplier may not, in any subsequent 

level of appeal, introduce evidence that 

was not presented at the reconsideration 

conducted by the QIC, unless there is 

good cause that precluded the 

introduction of that evidence at or 

before the reconsideration. While it is in 

the interest of both the Medicare 

provider and supplier community and 

CMS that appellants have the 

opportunity to submit a complete 

appeal request with all relevant 

evidence, we believe it is necessary to 

strike a balance between the need to 

timely recoup Medicare overpayments 

and the need to give providers and 

suppliers a reasonable time to prepare 

an appeal. 

Therefore, after carefully considering 

all comments received, we have decided 

to extend the period before contractors 

may initiate recoupment following a 

redetermination to the 60th calendar 

day rather than the 30th calendar day. 

Providers or suppliers may take the full 

180 days to appeal. However, to avoid 

recoupment starting or resuming 

following a redetermination, a valid 

request for reconsideration must be filed 

with the appropriate QIC by the 60th 

day following the date of the 

redetermination. This change is 

reflected at § 405.379(e)(1)(ii) and 

(e)(1)(iii). 

Comment: One commenter indicated 

that there is no provision to notify the 

provider or supplier that recoupment 

has stopped once the provider or 

supplier submits a request for 

reconsideration to the QIC. The 

commenter recommended that the QIC 

issue to the provider or supplier a 

written notification that recoupment 

efforts have ceased once they file a 

request for reconsideration to the QIC. 

Response: As part of the QICs’ current 

standard operating procedures, QICs 

send an acknowledgement notice within 

14 days of receipt of a request for 

reconsideration to the provider or 


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supplier. However, the Medicare 

contractor, not the QIC, is responsible 

for all overpayment recoupment 

activities, including the cessation of 

recoupments. The provider or supplier 

is notified by the Medicare contractor 

via a payment remittance advice that 

claims are continuing to be paid and are 

not being recouped or offset. We will 

consider whether any additional notice 

is necessary and, if so, we will include 

additional guidance in our manual 

instructions rather than through a 

regulatory issuance. 

Comment: One commenter stated that 

recoupment should cease upon a 

request for reconsideration and should 

not be initiated or resumed until after an 

ALJ or judicial decision was rendered. 

Response: When a valid request for a 

reconsideration is received, recoupment 

ceases. Section 1893(f)(2) of the Act 

only requires CMS to stop recoupment 

when a valid request for reconsideration 

is received. It does not limit CMS’ 

authority to resume recoupment 

following the reconsideration decision 

issued by the QIC. Thus, as stated in 

§ 405.379(d)(4) and (d)(5), recoupment 

can resume following a decision by the 

QIC, whether or not the QIC decision is 

further appealed. Therefore, we are not 

adopting the commenter’s suggestion, as 

we believe the suggestion is contrary to 

section 1893(f)(2) of the Act. However, 

we are making technical changes to 

§ 405.379(d), (f), and (g) of this section 

to remove the word ‘‘final’’ preceding 

‘‘action.’’ We believe that use of the 

word ‘‘final’’ in these provisions is 

confusing because ‘‘final action’’ could 

be incorrectly construed as meaning a 

final administrative action of the 

Secretary which can be appealed 

directly to Federal district court. The 

intent of this regulatory provision is to 

explain the types of actions by the QIC 

that are binding on the parties and 

would enable recoupment to be initiated 

or resumed. As was stated in the 

proposed rule and this final rule, these 

actions are a decision, dismissal order, 

or notice that it cannot complete its 

reconsideration in a timely manner. 

Because the underlying QIC actions that 

will allow CMS to initiate or resume 

recoupment have remained unchanged, 

we are making only a non-substantive, 

technical change to clarify the 

ambiguity discussed above by deleting 

the word ‘‘final.’’ 

We also note one further technical 

change we are making to § 405.379(c). In 

this paragraph, we revised incorrect 

cross-references to § 405.940 and 

§ 405.958, and cross references to 

§ 405.974 through § 405.978. 

Specifically, we revised the regulatory 

text of (c)(1) to refer to § 405.940 

through § 405.958 and we revised the 

regulatory text of (c)(2) to refer to 

§ 405.960 through § 405.978. 

Comment: One commenter suggested 

that a provider’s choice to escalate the 

appeal to the ALJ because of a delay at 

the QIC should toll recoupment. 

Response: Notice by the QIC that it is 

unable to meet the mandated response 

timeframe for issuing a decision 

immediately gives the provider or 

supplier control to request an ALJ 

appeal. Practically, this result is no 

different than a decision issued by the 

QIC that affirms the prior decision and 

the provider or supplier requests an 

appeal. In both instances the appeal has 

passed out of the reconsideration level 

and the statutory requirement to limit 

recoupment no longer applies. We note 

that we are not adopting the 

commenter’s suggestion. 

Comment: One commenter stated that 

CMS has not addressed how extended 

repayment plans work in conjunction 

with the limitation on recoupment. The 

commenter stated that a provider might 

want to repay the overpayment by 

seeking an extended repayment plan at 

some point in the appeals process. For 

example, the provider might not have a 

favorable decision at the first level of 

appeal and chooses not to appeal to the 

second level. Also, the commenter 

recommended that CMS revise the rule 

to include language that recoupment 

may not occur for 30 days after the 

redetermination and/or reconsideration 

to give the provider time to request and 

CMS to review and approve an extended 

repayment plan. 

Response: In paragraph (h) of 

§ 405.379, we state that a provider or 

supplier who timely files a 

redetermination of an overpayment but 

such overpayment is under an extended 

repayment plan, a missed payment 

under the plan does not put the 

provider in default of the extended 

repayment plan. This permits the 

provider or supplier to invoke the 

limitation on recoupment provisions to 

stop recoupment when a valid request 

for redetermination is filed. We are 

revising paragraph (h) of § 405.379 to 

permit the provider or supplier to 

similarly invoke the limitation on 

recoupment if a timely and valid request 

for reconsideration is received. 

Additionally, in this final rule, we do 

not prohibit the provider or supplier 

from requesting a repayment plan at any 

time or at any stage of an appeal. 

Payments made by a provider or 

supplier who requested to repay in 

installments under an extended 

repayment plan are not recoupments for 

purposes of this rule. If a provider or 

supplier does not make timely payments 

under its schedule, the provider or 

supplier would be placed on 

recoupment but can invoke the benefit 

of the limitation as stated above. 

Providers or suppliers who wish to 

make repayment arrangements 

following a redetermination can do so 

during the 60 days the provider or 

supplier is also deciding whether to 

appeal to a reconsideration. Providers or 

suppliers who wish to make repayment 

arrangements following a 

reconsideration have the opportunity to 

do that during the rebuttal period 

required under § 405.374. 

We note that we have revised 

paragraph (h) of § 405.379 for clarity. 

Yet these revisions do not make 

substantive changes to the policy. 

Further we corrected an incorrect cross 

reference to § 401.607(c)(2)(iv). 

Specifically we revised the regulations 

text to refer to § 401.607(c)(2)(v). 

Comment: One commenter suggested 

that CMS give the provider the option 

of repaying the overpayment 

immediately, even if the provider 

appeals the overpayment determination. 

The commenter also stated that paying 

the debt immediately allows the 

provider to exercise their appeal rights 

without incurring substantial interest 

charges. The commenter also stated that 

the statute does not preclude the 

provider from voluntarily returning 

funds during the administrative appeals 

process. 

Response: We appreciate the 

observations and the suggestion 

submitted by the commenter. Currently, 

providers or suppliers have several 

options at the time of the notice of 

overpayment. For example, they may 

pay the overpayment and not pursue an 

appeal, pay the overpayment and 

proceed with an appeal, or not pay the 

overpayment and proceed with a timely 

appeal. Providers or suppliers who 

choose to pay immediately, as the 

commenter suggests, avoid paying 

interest. Also, as the commenter 

suggested, providers or suppliers can 

voluntarily repay any time during the 

appeal, thereby limiting their interest 

exposure. Because payments made as a 

lump sum or through an extended 

repayment plan are not recoupments 

subject to the limitation, no 

modifications are necessary. 

Accordingly, we are finalizing 

§ 405.379 with modifications as noted 

above. 

III. Provisions of the Final Rule 

• In this final rule, we are adopting 

the provisions as set forth in the 

September 22, 2006 proposed rule with 

the following revisions: 


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• In § 405.370(b), we revised the 

definition of Medicare contractor to 

include a recovery audit contractor. 

• In § 405.378(c), we removed 

paragraphs (c)(1)(ii)(C) and (c)(1)(ii)(D) 

regarding the definition of a final 

determination. 

• In § 405.379(a) we made revisions 

to make clear that we are implementing 

the statutory requirement to limit 

recoupment during reconsideration, as 

well as limiting recoupment during 

redetermination, and the first level of 

appeal. 

• In § 405.379(c) we revised incorrect 

cross-references to § 405.940 and 

§ 405.958, and cross references to 

§ 405.974 through § 405.978. 

Specifically, we revised the regulatory 

text of (c)(1) to refer to § 405.940 

through § 405.958 and we revised the 

regulatory text of (c)(2) to refer to 

§ 405.960 through § 405.978. 

• In § 405.379(d), we added language 

to paragraph (d)(1) to provide that 

recoupment may begin no earlier than 

41 days following the date of the initial 

notice of overpayment. 

• In § 405.379(d), we made a 

technical change to paragraph (d)(4) by 

removing the word ‘‘final’’ to clarify that 

actions of a QIC are not necessarily 

considered final administrative actions 

of the Secretary which can be appealed 

directly to Federal district court. 

• In § 405.379(e), we revised 

paragraphs (e)(1)(ii) and (e)(1)(iii) to 

extend the timeframe for limiting 

recoupment before reconsideration is 

filed from 30 calendar days to 60 

calendar days. 

• In § 405.379(f) and (g), we made 

technical changes. Specifically, we 

revised the heading of paragraph (f) by 

removing the word ‘‘final’’. In 

paragraphs (f)(1) and (2), and (g)(1) and 

(2), we removed the word ‘‘final’’. We 

made these technical changes to clarify 

that actions of a QIC are not necessarily 

considered final actions of the Secretary 

which can be directly appealed to 

Federal district court. 

• In § 405.379(h), we added language 

that permits the provider or supplier 

who might otherwise be found to be in 

default on their extended repayment 

schedule, but submits a valid and timely 

reconsideration not be deemed in 

default. We also revised paragraph (h) 

for clarity. These revisions do not make 

substantive changes to the policy. 

Further we corrected an incorrect cross 

reference to § 401.607(c)(2)(iv). 

Specifically we revised the regulatory 

text to refer to § 401.607(c)(2)(v). 

IV. Collection of Information 

Requirements 

This document does contain 

information collection requirements; 

however, the Paperwork Reduction Act 

of 1995 exempts the information 

collection activities referenced in this 

Final Rule. In particular, 5 CFR 1320.4 

excludes collection activities during the 

conduct of administrative actions such 

as redeterminations, reconsiderations, 

and/or appeals. Specifically, these 

actions are taken after the initial 

determination or a denial of payment. 

See also, 44 USC 3518(c). 

V. Regulatory Impact Statement 

A. Overall Impact 

We have examined the impacts of this 

final rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), the 

Regulatory Flexibility Act (RFA) 

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

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 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 

final rule to have a substantial financial 

impact on beneficiaries, providers, or 

suppliers. Additionally, we anticipate 

that Federal costs to implement this 

final rule will be approximately $1 to 

$10 million per year in additional 

interest payments, which is well under 

the threshold of $100 million in any 1 

year. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses if a rule has a significant 

impact on a substantial number of small 

businesses or other small entities. For 

purposes of the RFA, small entities 

include small businesses, nonprofit 

organizations, and government agencies. 

The great majority of hospitals and most 

other providers and suppliers are small 

entities, either by being nonprofit 

organizations or by meeting the Small 

Business Administration definition of a 

small business (having revenues of less 

than 7 million to 34.5 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 604 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 final 

rule as this would depend in part upon 

voluntary actions on the part of the 

provider or supplier. The purpose of 

this 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 final rule to be positive 

although the extent to which it would 

benefit any one provider or supplier 

would depend upon specific facts and 

circumstances and voluntary choices 

made by that provider or supplier. The 

impact on small rural hospitals is 

expected to be similarly positive but 

unpredictable. Therefore, we are 

certifying that this final rule will not 

have a significant impact on a 

substantial number of small rural 

hospitals. 


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Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2009, that threshold is $133 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 final rule 

will not have a substantial effect on 

State or local governments. 

A comment and the CMS response to 

the impact analysis section are 

discussed below: 

Comment: One commenter states that 

CMS should have performed an impact 

analysis because the commenter 

believes that the CMS proposal to 

recoup before the 120 day time period 

for filing a request for redetermination 

has expired may not afford protections 

from recoupment and may have an 

impact on small business. Additionally, 

the commenter believes CMS can 

determine negative impact by looking at 

overpayment data. 

Response: As previously stated CMS 

plans to adopt a process that will give 

providers and suppliers an opportunity 

to stop recoupment if they act decidedly 

by submitting a request for 

redetermination within 30 days of the 

initial notice of overpayment. CMS will 

not begin recoupment until the 41st day 

allowing Medicare contractors time to 

act on information it receives from the 

provider. Also, after reviewing public 

comments concerning the timeframe to 

limit recoupment before reconsideration 

is filed; CMS is expanding the 30 day 

time limit to 60 days. We believe that 

these timeframes afford providers or 

suppliers ample protections to stop 

recoupment. Thus, we are not adopting 

the commenter’s suggestion. 

B. Conclusion 

For these reasons, we did not prepare 

analyses for either the RFA or section 

1102(b) of the Act because we have 

determined that this final 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 amends 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, 

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

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

3711. 

■ 2. Section 405.370 is amended by 

designating the existing text as 

paragraph (a), and adding a new 

paragraph (b) to read as follows: 

§ 405.370 Definitions. 

* * * * * 

(b) For purposes of §§ 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, 

but is not limited to, a fiscal 

intermediary, carrier, recovery audit 

contractor, 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) 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); 

■ E. Revising paragraph (c)(2); 

■ F. Redesignating paragraphs (h) and 

(i) as paragraphs (i) and (h) respectively; 

■ G. 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) * * * 

(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) * * * (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 


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is, primarily under part B), one of the 

following constitutes a final 

determination – 

(A) A written determination that an 

overpayment exists and a written 

demand for payment; or 

(B) A written determination of an 

underpayment. 

* * * * * 

(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 

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 seeks a 

reconsideration until a decision is 

rendered by a Qualified Independent 

Contractor (QIC). This section also 

limits recoupment of Medicare 

overpayments when a provider or 

supplier seeks a redetermination until a 

redetermination decision is rendered. 

(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 paragraphs (b)(1)(i)(C) and 

(D) of this section; 

(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 through § 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 § 405.960 through 

§ 405.978. 

(d) General rules. (1) Medicare 

contractors can begin recoupment no 

earlier than 41 days from the date of the 

initial overpayment demand but shall 

cease recoupment of the overpayment in 

question, upon receipt of a timely and 

valid request for a redetermination of an 

overpayment. 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) The contractor may initiate or 

resume recoupment following action by 

the QIC 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. 


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(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 60th 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 60th 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 

following action by the QIC on the 

reconsideration request. (1) Recoupment 

may be initiated or resumed upon 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 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), 

the 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 

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 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 action by the QIC on 

the reconsideration request. 

(3) If the 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 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 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. Notwithstanding 

§ 401.607 (c)(2)(v) of this chapter 

regarding an extended repayment 

schedule (ERS), a provider or supplier 

will not be deemed in default if 

recoupment of an overpayment is not 

effectuated or stopped in accordance 

with this section, and the following 

conditions are met: 

(1) The provider or supplier has been 

granted an ERS under § 401.607(c) of 

this chapter. 

(2) The ERS has been granted for an 

overpayment that is listed in paragraph 

(b) of this section. 

(3) The provider or supplier has 

submitted a valid and timely request to 

the Medicare contractor for a 

redetermination of the overpayment in 

accordance with §§ 405.940 through 

405.958 or reconsideration of the 

overpayment in accordance with 

§§ 405.960 through 405.978. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: April 29, 2009. 

Charlene Frizzera, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: June 17, 2009. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. E9–22166 Filed 9–15–09; 8:45 am] 

BILLING CODE 4120–01–P 


sroberts on DSKD5P82C1PROD with RULES