Interest Accruals

30.3 - Interest Accruals (Rev. 41, 04-30-04) NOTE: Effective October 1, 2004, 42 CFR 405.378 was amended to change how interest is calculated on Medicare overpayments and underpayments to providers, suppliers, and other health care entities. This change also applies to Medicare Secondary Payer (MSP) recoveries. Under the new rule, interest is assessed for each full 30-day period that payment is not made on time. This change applies to Medicare overpayments and underpayments determined (and MSP debts established) on or after October 1, 2004 (the effective date of the final rule). Unliquidated debts determined prior to October 1, 2004 will continue to use the former interest calculation method (a period of less than 30 days is considered to be a full 30-day period) until paid in full. Reminder: The date of the demand letter (not the day after) is the first day of the first 30-day period. A. Accrual of Interest; Timely filed Cost Report/Part B Overpayment Determination Interest will accrue from the date of the final determination and will either be charged on the overpayment balance or paid on the underpayment balance for each full 30-day period that complete liquidation is delayed. Generally, interest charges on an overpayment begin to accrue on the date the FI issued an NPR and/or the date the FI or carrier issued a notice of final determination of an overpayment, along with a written demand for payment. If the overpayment is paid in full within 30 days from the date of determination the interest accruals are normally waived. NOTE: The standard systems generally post interest on a monthly basis. Interest is assessed at the end of 30-day periods. If the payment is postmarked on or before the 30th day any interest accrual is waived or zero-balanced in the system. Cost Report Overpayment-Example of Interest Accrual- The provider with a FYE 08/31/04 submits a cost report on 01/28/05, showing $10,000 due the program, payment in full accompanies the cost report. On 02/15/05, the intermediary completes the desk review and determines an additional $25,000 overpayment. On 02/15/05 the first demand letter is sent. The provider does not pay the $25,000 additional overpayment until 04/03/05 (45 days after the date of the initial demand letter). Interest, therefore, accrues on the $25,000 for one full 30-day period. Physician/Supplier Overpayment-Example of Interest Accrual- The carrier discovers that an overpayment for $795.45 exists and sends a demand letter on 12/01/04. The physician/supplier does not remit payment on the overpayment until 01/15/05 (45 days after the date of the initial demand letter). Therefore, interest accrues on the $795.45 for one full 30-day period. Physician/Supplier Overpayment – Example of Interest Accrual Prior to 10/01/2004 – The carrier discovers that an overpayment for $795.45 exists and sends a demand letter on 09/30/04. (The determination date of this overpayment is prior to the effective date of the revision to 42 CFR 405.378). The provider does not remit payment on the overpayment until 11/14/2004 (45 days after the date of the initial demand letter). Therefore, interest accrues on the $795.45 for two full 30-day periods. Example of Waiver of Interest- Overpayment Paid in Full within 30 days from the date of determination- The FI/carrier determines and demands an overpayment on 11/03/04 for $1500.00. The provider remits payment of $1500.00. The postmark date on the payment is 11/30/04. Any interest accrual is waived since the overpayment was paid in full within 30 days of the date of determination. B. Accrual of Interest; Untimely Filed Cost Reports, Regarding Final Determinations at §30.1. Interest always accrues for any overpayment on a late filed cost report for the period of delinquency when an overpayment is declared or determined by CMS. The overpayment may appear on the cost report, or may be determined later (including increases to overpayment, see example 2 below) through desk review or audit. Interest accrues during the period a cost report remains unfiled beyond the due date. Interest is assessed for the period of time the cost report was unfiled even if the overpayment is satisfied at the time of the delayed filing of the cost report. This interest assessment is due and payable following the notice of a final determination. The interest rate will be the rate in effect as of the day following the due date of the cost report. On any subsequent determination that increases the overpayment on a cost report filed untimely, the additional overpayment is also subject to accrued interest charges for the period the cost report was due until the date filed. The interest rate will be the rate in effect as of the day following the due date of the cost report. Where desk review, audit or reopening determinations increase the originally filed and declared overpayment, the revised overpayment also is subject to the general provisions governing interest on overpayments from the date of the new or revised notice of final determination. These interest charges will be in addition to the interest charges due for the period of time the cost report remained unfiled. Examples of Application when cost report not filed on time 1. The provider submits its cost report 70 days late and pays the declared overpayment of $50,000 when filing. Interest at the prevailing rate accrues from the due date until the date filed, or, in this case, two 30- day periods as only two full 30-day periods have passed. Interest is assessed during the period of delinquency whether or not payment accompanies the cost report. The intermediary performs a desk review and determines an additional overpayment of $12,000. Interest, at the prevailing rate at the time the cost report became overdue is assessed on the $12,000 for the two 30-day periods of delinquency. In addition, interest accrues at the current prevailing rate on the $12,000 if payment is not made within 30 days of the date of the initial demand letter. 2. A provider with FYE 6/30/04 has a cost report that is due on 11/30/04. The cost report became overdue on 12/01/04. On 01/15/05 the cost report was submitted indicating an amount due the program; payment did not accompany the report. Due to the late submission of the cost report, interest is assessed for one 30-day period. The interest rate assessed is the rate in effect on the day the cost report became overdue, 12/01/04. In addition interest, at the rate in effect on the day the cost report became overdue, will accrue on the declared overpayment from the date the cost report is filed to the date the amount due is paid. On 03/12/05, the intermediary completes a desk review and determines an additional overpayment, issuing a NPR and demand letter. Interest will be assessed on this additional amount at the rate in effect on 3/12/05. In addition interest will be assessed for the period of delinquency at the rate in effect on the day the cost report became overdue, 12/01/04. C. Accrual of Interest; Rejected Cost Report In terms of interest accrual, a rejected cost report is treated like an unfiled cost report. If a cost report is officially rejected by the contractor, (see Audit and Reimbursement section to determine when to reject a cost report) interest accrues on the determined overpayment amount from the date the cost report is due until the date the cost report is resubmitted with payment in full. The determined overpayment amount is the amount due the program on the accepted cost report. If a cost report is submitted with payment in full and is later rejected the accrual of interest depends on the determined overpayment amount on the accepted cost report. If the determined overpayment amount on the accepted cost report was paid in full by the original submission, no interest accrues. If the determined overpayment amount is different than the overpayment amount listed on the original rejected cost report, interest will accrue on the difference. Example of Interest Accrual When the Cost Report is Rejected 1. A provider submits the cost report with payment in full before the due date. Upon review the contractor rejects the cost report. The provider corrects the cost report and resubmits it. The contractor accepts the revised cost report. The amount due the program on the revised cost report is equal to the check that accompanied the original cost report. Since the check fulfilled the determined overpayment on/ before the due date, there is no interest accrual. 2. A provider submits the cost report with payment in full before the due date. Upon review the contractor rejects the cost report. The provider corrects the cost report and resubmits it. The contractor accepts the revised cost report. The amount due the program on the revised cost report is different than the amount of the check that was submitted with the original cost report. The provider sent in a check for the additional amount with the revised cost report. Since the check with the original cost report was not the determined overpayment amount, interest accrues on the difference between the check and the overpayment listed on the revised cost report. The interest rate is the rate that was in effect on the day the cost report was due. D. Underpayments Generally interest charges on an underpayment begin to accrue upon the FI’s or carrier’s issuance of: • An NPR (FI only) and a notice of final determination of an underpayment under §30.1. • A notice of final determination of an underpayment under §30.1 when an NPR is not issued. • An administrative law judge (ALJ) or hearing officer’s decision that reduces the amount of an overpayment below the amount that CMS has already collected. Interest begins to accrue once the underpayment amount has been determined. This may be at the decision time if the ALJ reverses the entire overpayment amount or the ALJ states a principal amount to be paid upon which interest may be calculated. However, if the ALJ does not specify the overpayment amount and recalculations are necessary (not including a full reversal of the overpayment amount) interest will begin to accrue at the time of the recalculations. If the FI/carrier is unsure when interest should accrue for a particular case, the servicing regional office should be contacted. • An Intermediary Hearing or a Provider Reimbursement Review Board (PRRB) decision that reduces the amount of an overpayment below the amount that CMS has already collected. However, no interest will be due and payable to a provider if the FI or carrier pays the underpayment within 30 days from the date of notice of final determination of the underpayment. Interest will accrue each 30-day period on the underpayment balance that has not been satisfied.