Recoupment has started or will soon begin for Medicare providers and suppliers who received funds in 2020 under the Centers for Medicare and Medicaid Services (“CMS”) COVID-19 Accelerated and Advance Payment (“CAAP”) program. CMS provided $106 billion in CAAP funding to mitigate cash-flow problems that healthcare providers faced in the early stages of the COVID-19 pandemic. CMS formally implemented the CAAP funding program on March 28, 2020 and have commenced automatic recoupment through setoffs against Medicare reimbursement.

As recoupment begins, there are several important points which recipients of CAAP funds should keep in mind:

1. Recoupment Will Occur Automatically by Reduced Medicare Payment for 17 Months. MAC’s will automatically offset Medicare payments. Once recoupment begins, until the loan amounts received under the CAAP program is repaid in full, Medicare providers and suppliers will receive reduced Medicare fee-for-service payments. The recoupment rate for the first 11 months is a 25 percent reduction to Medicare payments, increasing to 50 percent for the subsequent six months. After the 17-month recoupment period ends, if the provider or supplier has not fully repaid the CAAP funding it received, the MAC will issue a demand letter for full repayment of any remaining balance. The issuance of the demand letter triggers an interest rate of 4 percent added to the remaining balance until paid in full. Interest will be assessed at the end of each 30-day period until the amount is fully repaid, with payments made by the provider or supplier (either by automatic recoupments or a separate payment) repaying interest first, followed by any other outstanding overpayments and finally the CAAP balance, until paid in full.

2. No Formal Process for Delay, Reduction or Deferment. Citing the October 8, 2020 CMS FAQ, Medicare Administrative Contractors (“MACs”) recently confirmed there is no formal process to further delay, reduce or defer recoupment. Despite the lack of any formal process, however, certain MACs are considering individual requests for an extended repayment schedule (“ERS”) on a case-by-case basis. Providers and suppliers that believe they need or qualify for an ERS should consult their respective MACs to see if they have any ability to slow, extend or delay recoupment (at the contact information below). Providers and suppliers who wish to follow the standard recoupment timeline or who are required to do so, can expect to receive a final demand letter at the end of the 17-month timeline, detailing the remaining balance, if any. Providers and suppliers may apply for an ERS at that time, if they have not repaid in full.

3. Providers May Request an Extended Repayment Schedule. Medicare rules allow providers and suppliers experiencing “hardship” to request making repayments through an ERS, an installment payment process allowing as much as six years (for “extreme hardships”) to repay amounts owed to Medicare, up to 60 months (5 years). All MACs will consider an ERS request at the end of the 17-month recoupment period. “Hardship” exists when the total amount of all outstanding overpayments (principal and interest) not included in an approved, existing repayment schedule is 10 percent or greater than the total Medicare payments made for: (i) the cost reporting period covered by the most recently submitted cost report; or (ii) the previous calendar year for a non-cost report provider or supplier. Providers or suppliers are ineligible for ERS payments if there is reason to suspect they may file for bankruptcy, cease to do business or discontinue Medicare participation, or if there is an indication of fraud or abuse against the Medicare program. In addition to allowing an ERS request at the end of the 17-month repayment period, some MACs may allow providers or suppliers who are unable to repay their CAAP balance based on the standard recoupment timeline to apply to repay in separately negotiated installment payments at any time during the debt collection process.  If a provider or supplier believes it needs additional flexibility, some MACs may allow the provider or supplier to submit a request for an ERS now.

4. Providers and Suppliers Can Contact Their Respective MACs for Outstanding Balance. MACs are sharing with providers and suppliers their outstanding balance of CAAP amounts throughout the recoupment process, upon provider or supplier request. In addition, MACs are accepting repayments in one or more lump sum payments at any time during the recoupment process, which can be guided through similar inquiry. MACs generally request the providers’ and suppliers’ NPI and tax identification numbers, and request to speak with the authorized representatives currently listed on the Medicare enrollment, which can be reviewed on the Medicare PECOS website. For more information, each MAC and its contact information is listed below.

As the first CAAP payments were made in March or April 2020, many providers and suppliers are quickly approaching the one-year anniversary of receiving a CAAP program loan. While the recoupment begins automatically with no action required by the provider or supplier, not all MACs are issuing reminder statements or notifications, relying on CMS issuances on the topic. It is, therefore, in the provider or supplier’s best interests to review its CAAP application and history of related accounting transactions so there are no surprises once automatic recoupment begins. Furthermore, providers and suppliers should notify their billing and financial staff that recovery will begin so they are not surprised with smaller payments. Some providers or suppliers’ recordkeeping systems may need to be reviewed to ensure this reduced payment amount does not create automatic system alerts. A hotline is available for each MAC, if the provider has further questions after such reviews.