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November 1, 2012

Section 935 Overpayment Recoupment Process

Section 935 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) provides limitations on the recoupment of Medicare overpayments. The information below describes how you will be notified of an overpayment and the processes available to respond to these notifications.

Results Letter

When an overpayment subject to the limitation on recoupment has been identified, a letter that explains the reason for the overpayment decision is mailed as follows and CGS adjusts the claim:

  • If CGS or the Comprehensive Error Rate Testing (CERT) contractor conducted the review, CGS will send a Teaching and Instruction for Providers (TIP) letter to the correspondence address listed on the provider file (Section 2C of the CMS-855A form)
  • If the Recovery Auditor contractor, CGI, conducted a complex review, CGI will send a review results letter. If CGI conducted an automated review, a review results letter is not sent.
  • If the Zone Program Integrity Contractor (ZPIC) conducted the review, the ZPIC will send a results letter

Remittance Advice (RA)

When CGS adjusts the claim, a 935 overpayment is established and two separate claim numbers are reflected on the RA:

  • The first Internal Control Number (ICN) is the reversal of the originally paid claim and contains a negative net reimbursement
  • The second ICN is the 935 adjustment claim
    • The Type of Bill (TOB) is XXI (for CGS determinations) or XXH (for CERT or Recovery Auditor determinations)
    • The remark code N469 indicates that the claim adjustment is for a 935 limitation of recoupment and signals that the overpayment was not collected
    • CERT and RAC line-level adjustments also contain remark code N432
  • The result of the original claim reversal and the 935 claim may either be an overpayment amount for the full amount of the claim payment or a partial amount
  • On the same RA, the resulting overpayment amount is then added back to the RA total net reimbursement in the Adjust to Balance field. This results in the overpayment recoupment being eliminated. (You will need to choose to see the summary portion on the Electronic Remittance Advice (ERA).)
  • If your automated posting system does not account for this type of activity, the overpayment recoupment amount would then post as if it was collected

Demand Letter

  • When CGS adjusts the claim, a demand letter is automatically generated by the Healthcare Integrated General Ledger Accounting System (HIGLAS)
  • CGS mails this letter to the physical address on the provider file (Section 4A on the CMS-855A form). Demand letters for Recovery Auditor overpayments are mailed in a light blue envelope.
  • The demand letter date and the RA date are not the same date, although they are within a couple of days of one another
  • Interest begins to accrue on the 31st day from the date of the demand letter
  • Providers have 15 days from the date of the demand letter to rebut
  • Recoupment will begin on the 41st day from the date of the demand letter if CGS does not receive one of the following by the 30th day from the date of the demand letter:
    • Payment in full
    • A request for an extended repayment schedule
    • A valid redetermination request

Immediate Offset Request

You may request an immediate offset of any identified claims overpayments. The benefit of immediate offset is that recoupment begins immediately and reduces or eliminates the amount of interest assessed. If recoupment of the overpayment is satisfied within 30 days, no interest is charged. If sufficient funds are not available for recoupment and the overpayment does not collect in full within 30 days of the demand letter, interest will be assessed on the outstanding principal balance.
To request an immediate offset, complete and fax the Immediate Offset Request FormExternal PDF. There are two options:

  1. You may submit a one-time request on the overpayment described in the demand letter and all future overpayments
  2. You may submit the request on the specific overpayment described in the demand letter only

Note: If you plan to submit an immediate offset request and file a redetermination, please wait for the immediate offset to take effect before filing the redetermination.

Rebuttal Process

The rebuttal process allows the opportunity to provide a statement and accompanying evidence indicating why the overpayment action will cause a financial hardship and should not take place. A rebuttal is not intended to review supporting medical documentation or disagreement with the overpayment decision. If you choose to submit a rebuttal statement, it must be sent to CGS within 15 days from the date of the demand letter. CGS will review and consider whether to proceed or discontinue with the recoupment.

Note: A rebuttal statement does not necessarily stop the recoupment process. To stop the recoupment process, providers must submit a valid redetermination request.

Recovery Auditor Discussion Period

CGI offers a discussion period that allows you to provide additional information indicating why recoupment should not take place. The discussion period may be initiated by sending a written request and additional documentation to CGI as soon as you receive the review results letter for complex reviews or within 40 days of the demand letter for automated reviews.

Additional information is available in the Request to Open Written or Oral Discussion FormExternal PDF.

Redetermination Process (Appeals)

If you do not agree with a determination made by CGS, CERT, CGI or the ZPIC, you may dispute the overpayment and stop the recoupment process by submitting a valid redetermination request.

A valid redetermination request:

  • Must be received by the 30th day from the date of the demand letter to stop recoupment of the 935 overpayment
  • May be received within 120 days from the date of the demand letter; recoupment will stop once the redetermination request is received, but any recoupment already taken will not be refunded
  • Includes a completed Redetermination FormExternal PDFand supporting medical record documentation (we encourage you to include a copy of the demand letter and the TIP or review results letter)

Note: Claims adjusted based on a determination made by CERT or CGI (identified as TOB XXH) cannot be adjusted by the provider or CGS. Therefore, even if you do not dispute the overpayment decision but need to make other corrections to the claim (e.g., to correct a clerical error such as add/remove/change a HCPCS code or modifier), you must submit a redetermination request.

If you do not request a redetermination or make payment in full by the 39th day:

  • A withholding is initiated on the RA dated the 40th day from the initial demand letter
  • Interest accrues on the money owed from the date of the initial demand letter
  • The withholding amount will appear in the 935 withholding section of the RA

If you do request a redetermination:

  • The recoupment stops, but not the accrual of interest
  • A notification letter is generated to inform you that the appeal request has been received and the recoupment stopped
  • If the redetermination outcome is a full reversal (the decision reverses the overpayment determination):
    • The 935 claim is adjusted to reflect the full reversal. However, the adjustment is a history only adjustment. The RA will reflect reason code J1 - Nonreimbursable. The reason for the history only adjustment is so the accounts receivable can be updated by the paid amount.
    • If no collections have occurred on the receivable, principal and interest is adjusted to zero on the overpayment
    • If the debt is paid in full or partially collected, outstanding principal and interest are adjusted to zero and a refund is issued and reflected on the RA with reason code 72 - Authorized Return
    • A refund letter is issued to the provider
  • If the redetermination outcome is a partial reversal (the decision reverses a portion of the overpayment determination):
    • You owe the original overpayment plus interest calculated on the difference of the overpayment. The claim is adjusted for the partial reversal and is a history only adjustment. The adjustment is reflected on the RA with reason code J1 - Nonreimbursable. The accounts receivable is adjusted by the partial payment.
    • Interest is recalculated and adjusted on the overpayment to a reduced amount based on the partial reversal
    • If the debt is paid in full, a refund is issued for the partially paid claim amount plus any associated interest
    • If no collections have occurred on the accounts receivable, a balance due letter will be issued stating the current balance
  • If the redetermination outcome is a full affirmation (the decision upholds the overpayment determination):
    • You owe the original overpayment plus interest calculated on the difference of the overpayment
    • A notification/demand letter is mailed, allowing you 60 days from the date on the redetermination notice to submit a reconsideration request to the Qualified Independent Contractor (QIC) to avoid the debt going into offset
    • You have 60 days to file the reconsideration request to cease recoupment. If the reconsideration request is filed after day 60, recoupment will cease; however, any collected funds will not be refunded.

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