[Code of Federal Regulations] [Title 42, Volume 2] [Revised as of October 1, 2003] From the U.S. Government Printing Office via GPO Access [CITE: 42CFR405.378] [Page 78-80] TITLE 42--PUBLIC HEALTH CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED--Table of Contents Subpart C--Suspension of Payment, Recovery of Overpayments, and Repayment of Scholarships and Loans Sec. 405.378 Interest charges on overpayment and underpayments to providers, suppliers, and other entities. (a) Basis and purpose. This section, which implements sections 1815(d) and 1833(j) of the common law and Act, and authority granted under the Federal Claims Collection Act, provides for the charging and payment of interest on overpayments and underpayments to Medicare providers, suppliers, HMOs, competitive medical plans (CMPs), and health care prepayment plans (HCPPs). (b) Basic rules. (1) CMS will charge interest on overpayments, and pay interest on underpayments, to providers and suppliers of services (including physicians and other practitioners), except as specified in paragraphs (f) and (h) of this section. (2) Interest will accrue from the date of the final determination as defined in paragraph (c) of this section, and will either be charged on the overpayment balance or paid on the underpayment balance for each 30- day period that payment is delayed. (Periods of less than 30 days will be treated as a full 30-day period, and the 30-day interest charge will be applied to any balance.) (c) Definition of final determination. (1) For purposes of this section, any of the following constitutes a final determination: (i) A Notice of Amount of Program Reimbursement (NPR) is issued, as discussed in Secs. 405.1803, 417.576, and 417.810, and either-- (A) A written demand for payment is made; or (B) A written determination of an underpayment is made by the intermediary after a cost report is filed. (ii) In cases in which an NPR is not used as a notice of determination (that is, primarily under part B), one of the following determinations is issued-- (A) A written determination that an overpayment exists and a written demand for payment; (B) A written determination of an underpayment; or (C) An Administrative Law Judge (ALJ) decision that reduces the amount of an overpayment below the amount that CMS has already collected. (iii) Other examples of cases in which an NPR is not used are carrier reasonable charge determinations under subpart E of this part, interim cost settlements made for HMOs, CMPs, and HCPPs under Secs. 417.574 and 417.810(e) of this chapter, and initial retroactive adjustment determinations under Sec. 413.64(f)(2) of this chapter. In the case of interim cost settlements and initial retroactive adjustment determinations, if the debtor does not dispute the adjustment determination within the timeframe designated in the notice of the determination (generally at least 15 days), a final determination is deemed to have been made. If the provider or supplier does dispute portions of the determination, a final determination is deemed to have been made on those portions when the intermediary issues a new determination in response to the dispute. (iv) The due date of a timely-filed cost report that indicates an amount is due CMS, and is not accompanied by payment in full. (If an additional overpayment or underpayment is determined by the carrier or intermediary, a final determination on the additional amount is made in accordance with paragraphs (c)(1)(i), (c)(1)(ii), or (c)(1)(iii), of this section.) (v) With respect to a cost report that is not filed on time, the day following the date the cost report was due (plus a single extension of time not to exceed 30 days if granted for good cause), until the time as a cost report is filed. (When the cost report is subsequently filed, there is an additional determination as [[Page 79]] specified in paragraphs (c)(1) (i), (ii), (iii), or (iv) of this section.) (2) Except as required by any subsequent administrative or judicial reversal, interest accrues from the date of final determination as specified in this subsection. (d) Rate of interest. (1) The interest rate on overpayments and underpayments is the higher of-- (i) The rate as fixed by the Secretary of the Treasury after taking into consideration private consumer rates of interest prevailing on the date of final determination as defined in paragraph (c) of this section (this rate is published quarterly in the Federal Register by the Department under 45 CFR 30.13(a)); or (ii) The current value of funds rate (this rate is published annually in the Federal Register by the Secretary of the Treasury, subject to quarterly revisions). (2) [Reserved] (e) Accrual of interest. (1) If a cost report is filed that does not indicate an amount is due CMS but the intermediary makes a final determination that an overpayment exists, or if a carrier makes a final determination that an overpayment to a physician or supplier exists, interest will accrue beginning with the date of such final determination. Interest will continue to accrue during periods of administrative and judicial appeal and until final disposition of the claim. (2)(i) If a cost report is filed and indicates that an amount is due CMS, interest on the amount due will accrue from the due date of the cost report unless-- (A) Full payment on the amount due accompanies the cost report; or (B) The provider and the intermediary agree in advance to liquidate the overpayment through a reduction in interim payments over the next 30-day period. (ii) If the intermediary determines an additional overpayment during the cost settlement process, interest will accrue from the date of each determination. (iii) The interest rate on each of the final determinations of an overpayment will be the rate of interest in effect on the date the determination is made. (3) In the case of a cost report that is not filed on time, interest also will accrue on a determined overpayment from the day following the due date of the report (plus a single extension of time not to exceed 30 days if granted for good cause, as specified in Sec. 413.24(f)) of this chapter, to the time the cost report is filed. (4) If an intermediary or a carrier makes a final determination that an underpayment exists, interest to the provider or the supplier will accrue from the date of notification of the underpayment. (f) Waiver of interest charges. (1) When an intermediary or a carrier makes a final determination that an overpayment or underpayment exists, as specified in paragraphs (e)(1), (e)(2)(ii), and (e)(4)-- (i) Interest charges will be waived if the overpayment or underpayment is completely liquidated within 30 days from the date of the final determination. (ii) CMS may waive interest charges if it determines that the administrative cost of collecting them exceeds the interest charges. (2) Interest will not be waived for that period of time during which the cost report was due but remained unfiled for more than 30 days, as specified in paragraph (e)(3) of this section. (g) Rules applicable to partial payments. If an overpayment is repaid in installments or recouped by withholding from several payments due the provider or supplier of services-- (1) Each payment or recoupment will be applied first to accrued interest and then to the principal; and (2) After each payment or recoupment, interest will accrue on the remaining unpaid balance. (h) Exceptions to applicability. (1) The provisions of this section do not apply to the time period for which interest is payable under Sec. 413.64(j) of this chapter because the provider seeks judicial review of a decision of the Provider Reimbursement Review Board, or a subsequent reversal, affirmance, or modification of that decision by the Administrator. Prior to that time, until the provider seeks judicial review, interest [[Page 80]] accrues at the rate specified in this section on outstanding unpaid balances resulting from final determinations as defined in paragraph (c) of this section. (2) If an overpayment or an underpayment determination is reversed administratively or judicially, and the reversal is no longer subject to appeal, appropriate adjustments will be made with respect to the overpayment or underpayment and the amount of interest charged. (i) Nonallowable cost. As specified in Secs. 412.113 and 413.153 of this chapter, interest accrued on overpayments and interest on funds borrowed specifically to repay overpayments are not considered allowable costs, up to the amount of the overpayment, unless the provider had made a prior commitment to borrow funds for other purposes (for example, capital improvements). (See Sec. 413.153(a)(2) of this chapter for exceptions based on administrative or judicial reversal.) [47 FR 54814, Dec. 6, 1982, as amended at 49 FR 36102, Sept. 14, 1984; 49 FR 44472, Nov. 7, 1984; 51 FR 34792, Sept. 30, 1986; 56 FR 31336, July 10, 1991. Redesignated at 61 FR 63745, Dec. 2, 1996] Repayment of Scholarships and Loans