Overcoming Medicare Overpayments With Extended Repayment Schedules

August 27, 2013

Effective September 3, 2013, the Centers for Medicare and Medicaid Services (CMS) revised provisions of the Medicare Financial Management Manual that relate to provider requests for Extended Repayment Schedules (ERS) in connection with Medicare overpayments, including overpayments identified by Recovery Audit Contractors (RACs).

In general, if a Medicare Administrative Contractor or provider determines that an overpayment exists, the provider is required to repay that overpayment within 30 days.

Chapter 4 of the Medicare Financial Management Manual provides a process for a provider to request an ERS (formerly known as an Extended Repayment Plan), if repayment within 30 days would constitute a “hardship.” A hardship is defined to exist “when the total amount of all outstanding overpayments (principal and interest) not included in an approved, existing repayment schedule is ten percent or greater than the total Medicare payments made for the cost reporting period covered by the most recently submitted cost report, or for the previous calendar year for a non-cost report provider.”

A provider that meets the hardship criteria may request a six-month repayment schedule without needing to submit financial documentation to the contractor. If repayment of the overpayment within 30 days would constitute an “extreme hardship,” the provider may request a repayment schedule of 36 – 60 months. Extreme hardship is defined to exist “when a provider qualifies as being in ‘hardship’… and the provider’s request for a 36 to 60-month extended repayment schedule (ERS) is approved by Medicare.” If a provider requests an ERS of more than six months, it must submit financial documentation. The documentation required varies depending on the provider entity.

Contractors are authorized to review, evaluate, and approve a request for a 6 to 36-month ERS. In reviewing and evaluating a request for an ERS that exceeds six months, contractors consider several factors, including:

  • The availability of cash, marketable securities, accounts receivable, restricted and unrestricted endowment funds, or special funds
  • Whether the funds noted above are available for partial or full payment of the overpayment
  • The provider’s 12-month claim history and payment history
  • The status of any outstanding overpayments, cost report settlements, advanced payments, and accelerated payments

A contractor may recommend to the CMS Regional Office (RO) that they approve an ERS that is more than 36 months. However, only the RO is authorized to issue a final determination on such requests.

If an ERS is approved, it is important for the provider to make installment payments in accordance with the approval. If the provider misses two continuous installment payments, 100 percent of the total balance of the overpayment will become due immediately and will be subject to recoupment. However, if the provider requests a reinstatement within a reasonable time frame, the contractor is directed to work with the provider to reinstate an ERS.

Filing a request for an ERS within 15 days of the date of an overpayment demand letter and including the first payment with the request may allow the provider to avoid 100 percent recoupment of the overpayment amount.

Providers also may request Extended Repayment Schedules when RACs identify overpayments. The RAC is required to offer the provider the ability to repay the overpayment through an ERS. If the provider requests an ERS, the RAC is required to forward it to the appropriate contractor for processing.

If you have questions about requests for ERS, Medicare notices of overpayment, or need  assistance in responding to RAC reviews, please contact Rochelle H. Zapol, a partner in Prince Lobel’s Health Care Practice Group and author of this Alert. You can reach Rochelle at 617 456 8036 or

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