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False Claims Act: Do You Really Have Just 60 Days to Repay?

One of your employees informs you of a potential overpayment from Medicare. Do you really only have 60 days from that point to determine if it is indeed an overpayment and repay it?

The Patient Protection and Affordable Care Act of 2010 requires that a person who receives an overpayment of Medicare or Medicaid funds report and return the overpayment within 60 days of the "date on which the overpayment was identified,"  and makes the failure to do so a violation of the False Claims Act. 42 U.S.C. 1320a-7k(d)((2)-(3) (emphasis added). However, Congress didn't define what it means to identify a false claim.

On August 3, 2015, the United States District Court for the Southern District of New York issued the first  federal court decision addressing when an overpayment should be considered to be "identified" for purposes of determining whether there has been a False Claims Act violation.

The ruling came in the case of Kane v. Healthfirst, et al. and U.S. v. Continuum Health Partners Inc. et al., in which Continuum Health Partners Inc. “ which operated and coordinated a network of non-profit hospitals “ was accused of failing to make timely repayment of identified overpayments.

The potential false claim was first brought to the defendants' attention in September, 2010 by New York State auditors. An employee of Continuum subsequently provided a preliminary list of potential overpayments to management in February, 2011. He was fired four days later and subsequently filed a whistle-blower action. It wasn't until the government issued a Civil Investigative Demand in June, 2012 that Continuum reimbursed the government for a large number of claims. Continuum did not return all of the overpayments to the government until May, 2013 approximately two years after the initial internal email.

According to the ruling, approximately half of the February, 2011 preliminary list of overpayments did, in fact, constitute overpayments. The Continuum defendants had argued that the 60-day period began only after the overpayment was "classified with certainty." The court, however, sided with the government and found that the 60-day clock starts when a person is "put on notice" that a claim may be overpaid.

The court tempered its ruling, though, by stating that a false claims violation occurs only when the "obligation is knowingly concealed or knowingly and improperly avoided or decreased." Further, the court stated that "prosecutorial discretion would counsel against" an enforcement action in a situation involving "well intentioned" providers working with "reasonable haste" to rectify the issue. In such a case, the healthcare provider wouldn't have acted with the "reckless disregard, deliberate ignorance, or actual knowledge" required to support a false claims case.

While the decision didn't provide bright lines and identify exactly when that 60-day clock starts, one of the key takeaways is that once a potential overpayment is identified, a health care provider must take prompt action and follow through with a thorough internal review process to determine whether an overpayment truly exists. Then, it must make repayments to the extent required.

© Copyright 2020 Armstrong Teasdale LLP. All rights reserved National Law Review, Volume V, Number 222


About this Author

Steve E. Pozaric, Partner, Corporate, Health Care, Armstrong Teasdale Law Firm

Steve Pozaric serves businesses of all sizes in the areas of corporate, mergers and acquisitions, health care, technology, and securities law. Prior experience in corporate finance for companies ranging in size from Fortune 500 to venture capital backed start-ups gives him added perspective in business operations, practices, dynamics, and behaviors.

Diane E. Felix, health care attorney, Armstrong Teasdale, law firm

Diane Felix has focused her practice on representation of health care providers, with a significant portion of that practice involving long-term care facilities. Her representation of providers has included Medicaid and Medicare reimbursement matters, licensure and certification issues, Certificate of Need matters, preparation and negotiation of contracts, (including admission agreements, professional services agreements, leases and purchase agreements) and operational questions (involving issues such as consent to treatment, confidentiality of records and ADA compliance).

Jonathan F. Dalton, Partner, Corporate, Health Care, Armstrong Teasdale Law Firm

Jon Dalton counsels many of Missouri’s most successful organizations and individuals in business transactions and government/regulatory affairs.

Jon concentrates his business law practice on health care transactional, regulatory and litigation matters. He has extensive experience across the entire spectrum of legal issues facing health care providers today. Jon’s work includes the representation of major health systems, multi- and single-specialty medical practices, specialty hospitals, ambulatory surgery centers, pharmacies and pharmaceutical...