[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR405.378]

[Page 97-99]
 
                         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 accrues from the date of the final determination as 
defined in paragraph (c) of this section, and either is charged on the 
overpayment balance or paid on the underpayment balance for each full 
30-day period that payment is delayed.
    (c) Definition of final determination. (1) For purposes of this 
section, any of the

[[Page 98]]

following constitutes a final determination:
    (i) A Notice of Amount of Program Reimbursement (NPR) is issued, as 
discussed in Sec. Sec. 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 Sec. Sec. 
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 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.

[[Page 99]]

    (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 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 Sec. Sec. 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; 69 FR 45607, 
July 30, 2004]

                   Repayment of Scholarships and Loans