Healthcare Law Blog

The Heat Turns Up: The 60-Day Rule Gets a Facelift but Changes Create Complications for Providers

With the OIG’s May 30, 2025, announcement that they are seeking $454.4 million in funding to fight healthcare fraud, healthcare providers can expect increased governmental scrutiny despite Trump’s budget cutbacks and staff layoffs.  The OIG justifies its budget request by pointing out that for every $1 invested, there is an expected return of $11 in government recoveries and receivables, which fuels the Trump administration’s fight on fraud, waste, and abuse in health care. What this means for health care providers is intensified scrutiny and likely use of AI as a tool to evaluate big data to identify potential false claims, fraud, outliers, etc. Considering the OIG’s 90-page new General Compliance Guidance, healthcare providers’ self-policing strategies and internal audits are more important than ever as the heat turns up on alleged fraud and false claims.

Hand in hand with stepping up compliance efforts, providers must understand the 2025 changes to the 60-day Overpayment Rule and the complicated issues and responsibilities that are created when an overpayment is identified.  To the extent an overpayment is not timely refunded – meaning it is retained beyond the Overpayment Statute’s 60-day report and return deadline--a provider may be liable under the False Claims Act for knowingly concealing or knowingly avoiding its refund obligation.    While the rule ‘s changes create breathing room for providers to determine overpayments and amounts to be refunded, it also includes a strict but complicated timeframe to investigate allegations of overpayments and to make refunds. 

Basic Obligation

The basic obligation for the federal overpayment statute is that a person who has received an overpayment must report and return it to the appropriate government agency or contractor (1) within 60 days after the overpayment is “identified” for claims-based overpayment; or (2) at the time of cost report settlement for cost-report based overpayments. An overpayment after the refund deadline may subject an individual to liability as a “reverse false claim” under the False Claims Act (“FCA”).

Identifying Overpayments

An overpayment is any Medicare or Medicaid payment received or retained to which a person or entity is not entitled.  No amount is too small. The 2025 rule clarifies when the duty to report and return overpayments is triggered. Under the rule, overpayments must be reported and returned as soon as they are identified, regardless of whether the precise amount has been calculated. This means the 60-day reporting and return deadline starts running immediately upon identification, even when the full scope of the overpayment remains uncertain. The revised regulation also incorporates the False Claims Act's interpretation of "knowingly," establishing that an overpayment is considered identified when a healthcare provider either has direct knowledge of it, demonstrates reckless disregard for its existence, or deliberately ignores evidence of the overpayment. CMS emphasized in the updated rule that providers can look to existing False Claims Act case law for guidance on what behaviors might constitute "reckless disregard" or "deliberate ignorance." 

The changes in the 60-Day Rule reflect a shift towards alignment with the FCA's standards.  Simultaneously, the rule is more relaxed, but also confusingly more stringent. By adding a timetable for investigation that can stop or toll the 60-day duty to refund an overpayment, CMS seems to still be looking for a way to make the 60-day rule reasonable enough for the day-to-day operation of providers while fulfilling its mission to prevent fraud, waste and abuse. Appyling the rule to the refund period, however, is complicated.

The revised rule emphasizes the importance of prompt and thorough investigations to ensure compliance within the stipulated timeframes. Providers must adapt their compliance strategies to meet these revised requirements, ensuring timely identification and repayment of overpayments to mitigate legal and financial risks as well as keeping documentation of how the timetable for reporting unfolds in their individual circumstances.

Investigation Period

The 2025 rule creates a provision that allows providers up to 180 days to conduct a "timely, good faith" investigation into related overpayments stemming from the same identified overpayment/issue. Effectively, this should help providers quantify overpayments because the new rule starts the 180-day clock at the identification of an overpayment, regardless of quantification. During this period, the 60-day repayment clock is suspended, providing additional time to identify and quantify all related overpayments, but the concern is that 180 days is a very narrow window for such a potentially far-reaching investigation that may mandate looking back six years for similar overpayments. Thus, when a provider identifies an overpayment, the 60-day period is tolled/stopped, and the 180-day investigation period commences.  At the conclusion of the 180 period, the remaining period for the 60-day rule commences and establishes a strict deadline for refund.

It also comes with particularly harsh consequences – if a provider chooses to take advantage of the 180-day investigation window but doesn’t conduct a timely, good-faith investigation, then the 60-day period never tolls/stops and FCA liability consequences may attach.

The Final Rule: What Providers Need to Know:

Starting in 2025, providers must comply with the revised CMS 60-Day Overpayment Rule. Here’s what providers should be aware of to stay compliant:

1. Redefined “Identification” of Overpayments

What’s changed: Overpayments are now "identified" when a provider...

• Has actual knowledge of the overpayment, or
• Acts in reckless disregard or deliberate ignorance of it (same standard as FCA).

Implication: Ignoring warning signs, failing to investigate billing anomalies, or inadequate training of staff may now trigger liability.

Action Steps:

• Train staff to recognize potential overpayments.
• Establish internal alerts for billing anomalies.
• Mandate audits, review and review and address those findings.
• Document all steps taken once an issue is suspected.

2. Start of the 60-Day Clock

The 60-day clock to repay or report begins as soon as the overpayment is identified. Further internal investigation can follow, but should not delay the start of compliance action.

Action Steps:

• Implement workflow protocols that trigger internal compliance review immediately upon potential overpayment detection.
• Use timestamped documentation to prove timely action was taken.

3. New 180-Day “Suspension” Period

CMS now has a 180-day period to investigate and quantify related overpayments stemming from the same issue before the 60-day deadline kicks in. This is meant to give providers time to conduct good-faith investigations.

Action Steps:

• Create formal processes for opening and documenting a good-faith inquiry.
• Track timelines precisely. After 180 days, the 60-day repayment window starts again less the time previously used to identify the overpayment.
• Use audit tools and obtain legal counsel skilled in FCA matters to define the scope of related claims.

4. Document, Document, Document

In the event of CMS audits or FCA investigations, you’ll need clear records of:

• When an issue was detected
• Steps taken to investigate and resolve
• Communication between departments
• When repayment was made (and how it was calculated)

Action Steps:

• Store investigation and repayment records securely.
• Regularly audit your overpayment procedures and documentation.
• Involve compliance and legal teams early.

5. Failure to Comply Leads to False Claims Act Exposure

Failing to return overpayments timely can lead to:

• Treble damages
• Per-claim civil monetary penalties
• Loss of Medicare/Medicaid participation

Action Steps:

• Conduct periodic self-audits.
• Consider internal and state or federal whistleblower protections and encourage internal reporting.
• Consult legal counsel if there's ambiguity about whether an overpayment has been "identified."

Conclusion

Due to the complexity of the requirements and the severity of consequences for noncompliance, the changes to the 60-day rule pose new challenges for providers. With a $1 investment creating a $11 return, providers should make their own investments in compliance and take responsibility for addressing overpayments.   For more information about overpayments and healthcare matters, contact your McBrayer attorney today.

Lisa English Hinkle is a Member of McBrayer and chairs the healthcare law practice. Ms. Hinkle is based in the Lexington office. You can contact her at lhinkle@mcbrayerfirm.com or (859) 551-3668.

Valerie Michael is an Associate at McBrayer's Lexington office. Ms. Michael focuses her area of practice on healthcare law, handling a wide variety of matters, such as healthcare professional licensure defense, compliance, and regulatory issues. Ms. Michael can be reached at vmichael@mcbrayerfirm.com or (859) 551-3624.

Services may be performed by others. This article does not constitute legal advice.