The 60-Day Overpayment Rule: Report and Return

What Is the 60-Day Overpayment Rule?

It requires a person who has received a Medicare overpayment to report and return it by the later of 60 days after the date it was identified, or the date any corresponding cost report is due. That is 42 CFR 401.305(b)(1). An overpayment is any funds a person has received or retained under Medicare to which the person, after applicable reconciliation, is not entitled (42 CFR 401.303).

The rule implements section 1128J(d) of the Social Security Act. CMS amended 401.305 in the CY 2025 Physician Fee Schedule final rule, published December 9, 2024 (89 FR 97710), with an effective date of January 1, 2025. The current text is what this page follows.

Who Does the 60-Day Rule Apply To?

It applies to providers and suppliers paid under Medicare Parts A and B. Section 401.301 says the subpart covers reporting and returning overpayments to the Medicare program for providers and suppliers of services under Parts A and B, and 401.303 defines the Medicare contractor as an A/B MAC or a DME MAC.

That includes hospitals, hospitals that bill Medicare, and any physician group. Programs outside Parts A and B have their own rules, so read this subpart only for Medicare fee-for-service money.

When Is an Overpayment Considered Identified?

Under 401.305(a)(2), a person has identified an overpayment when the person knowingly receives or retains it. The regulation points to the False Claims Act definition of knowingly in 31 U.S.C. 3729(b)(1)(A).

That definition covers three states of mind: actual knowledge of the information, deliberate ignorance of its truth or falsity, and reckless disregard of its truth or falsity. It requires no proof of specific intent to defraud. Setting aside a duplicate payment you saw on a remit is not the same as never having seen it, and the reckless disregard prong reaches a pattern you chose not to look into.

The word "retains" is the one to watch. An overpayment you received in good faith becomes a retained overpayment once you know about it and keep it.

Can the 60-Day Clock Be Paused?

Yes, in four situations written into 401.305(b)(2) and (b)(3). The first three are tied to programs; the fourth is the good-faith investigation.

The investigation pause is for related overpayments that arise from the same or similar cause or reason as the first one, such as a payer rule misread across many claims. The 180-day limit is counted from the identification of the first one.

How Far Back Must I Look for Overpayments?

Six years. Section 401.305(f) says an overpayment must be reported and returned if the person identifies it within 6 years of the date the overpayment was received.

The lookback runs from the date you received the payment to the date you identified it, not from the date of service. A payment received on January 15, 2026 and identified before January 15, 2032 is inside the period.

How Do I Report and Return an Overpayment?

Use the claims adjustment, credit balance, self-reported refund or other reporting process of your Medicare contractor. Section 401.305(d)(1) requires this unless you use a protocol disclosure, and if you calculate the amount by statistical sampling you must describe the statistically valid sampling and extrapolation methodology in the report.

A disclosure under the OIG Self-Disclosure Protocol or the CMS Voluntary Self-Referral Disclosure Protocol that results in a settlement agreement satisfies the reporting obligation (401.305(d)(2)). Section 405.980(c)(4) also lets a party ask the contractor to reopen an initial determination for the purpose of reporting and returning an overpayment.

What Happens If I Miss the 60-Day Deadline?

The retained overpayment becomes an obligation under the False Claims Act. Section 401.305(e) says any overpayment retained after the deadline is an obligation for purposes of 31 U.S.C. 3729.

That statute makes a person who knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay money to the Government liable for a civil penalty plus 3 times the damages the Government sustains. The penalty range is adjusted for inflation each year, so look up the current figure with your compliance counsel. This is the reason a documented identification date matters.

How Do Audits Help Meet the Rule?

A routine audit finds the overpayment earlier and gives you a dated record of when you identified it. A billing and coding audit sample, a review of credit balances and a look at the hospital audit readiness guide steps all turn unknown problems into documented ones on your own schedule.

Denials are the other side of the same data. The same denial management records that explain underpayments also show where a payer paid too much. The related documentation rules are in Medicare signature requirements, and a contested overpayment demand follows the Medicare appeal levels. Vendors that touch claim data also carry HIPAA duties.

If this rule is costing you claims, our denial management team can help.