Appealing an Overpayment Subject to Limitation on Recoupment

Published 01/04/2021

Section 935 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) provides limitations on the recoupment of Medicare overpayments.

Overpayments Subject to the Limitation on Recoupment

  • Postpayment review determinations made by any of the following claim review programs:
    • Palmetto GBA Medical Review (MR)
    • Unified Program Integrity Contractor (UPIC)
    • Comprehensive Error Rate Testing (CERT) contractor
    • Recovery Auditor (RA)
    • Medicare Secondary Payer (MSP) recovery for a duplicate primary payment to a provider
    • MSP recovery because the provider failed to file a claim with a third-party payer

Overpayments Not Subject to the Limitation on Recoupment

  • Other MSP recoveries not mentioned above
  • Beneficiary overpayments
  • Cost report determinations
  • Hospice CAP overpayments
  • Provider-initiated adjustments
  • Accelerated payments
  • CMS-directed fee schedule adjustments
  • Certain claims adjustments at the contractor’s discretion that require approval from the Centers for Medicare & Medicaid Services (CMS)

The Medicare Appeals Process Has Five Levels

  1. Redetermination by a Medicare Administrative Contractor (MAC) 
  2. Reconsideration by a Qualified Independent Contractor (QIC)
  3. Hearing by an Administrative Law Judge (ALJ) in the Office of Medicare Hearings and Appeals
  4. Review by the Medicare Appeals Council
  5. Judicial Review in Federal District Court

Redetermination Process
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 form and supporting medical record documentation (please 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 the recovery auditor contractor (identified as TOB XXH) cannot be adjusted by the provider or by Palmetto GBA. 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, revised demand 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.

Submit Redetermination Forms via eServices
Providers are strongly encouraged to submit a redetermination form via Palmetto GBA's eServices. Providers can electronically submit the appeal request and PDF attachments online. Once submitted, you will receive a confirmation from Palmetto GBA indicating that the appeal has been received. For more information, please review the Appeals section in the eServices User Manual (PDF, 8.25 MB).

Interest Repayment on 935 Overturned Appeals
Interest accrued and collected is refunded for appeals associated with 935 overpayment appeals only. If the appeal is favorable or partially favorable, the award amount is applied to the overpayment and interest is recomputed based on the new overpayment amount. If the appeal is a complete reversal, any principle and interest collected is refunded. Any collections exceeding the overpayment balance are refunded to the provider.

The 935 limitation on recoupment provisions changed the way interest is to be paid to a provider whose overpayment determination is overturned at the ALJ level and above. This is referred to as 935 interest, which is payable on an underpayment where the reversal occurs at the ALJ and above levels. The 935 interest is based on the period that Medicare recouped the provider‘s funds. Payment of 935 interest is only applicable to overpayments recovered under the limitation on recoupment provisions. Interest is only payable on the principal amount recouped.

The 935 interest is only paid on involuntary payments, i.e., Medicare funds withheld and applied to the overpayment. If the provider elects to pay the overpayment by check, extended repayment schedule or immediate offsets, the 935 special interest does not apply.

935 Special Interest is computed as follows, per IOM 100-6, Chapter 3, 200.6.2 (PDF, 594 KB):

  • Time: Determine the total Julian days starting from the recoupment date to the ALJ decision date or date the revised notice with the new overpayment, if applicable. Divide the number of Julian days by 30 to compute the number of 30-day periods. The interest will not be payable for any periods of less than 30 days in which we had possession of the recouped funds.
  • Rate: Use the annual rate of interest at the time of the ALJ decision date or from the revised New Written Determination date from an effectuation and convert interest rate to a monthly interest rate. (For example: The rate of interest as of April 18, 2008, is 11.375 percent.) Convert annual rate to a monthly rate by dividing by 12.
  • Amount: The amounts that are to be used as the basis on which to compute interest earned by the provider are those amounts that are credited to principal resulting from any involuntary payments from the provider after the elimination and satisfaction of all Medicare debt. Recouped monies applied to interest are not included in determining the 935 interest. Only those principal funds recouped via withholding (e.g., payments recouped under a defaulted ERS or offset) are included. Do not include payments a provider makes under an ERS or other voluntary payments made by the provider. 

To access online forms use the Palmetto GBA's Forms application.

CMS Regulation Reference: Publication 100-06, Chapter 3, Section 200 (PDF, 594 KB).

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