New requirements contained in the health care reform legislation
increase the pressure on health care providers, suppliers, Medicare
Advantage and Part D Plan sponsors, and others to return identified
Medicare and Medicaid overpayments in a timely fashion, at risk of
being alleged to have violated the False Claims Act.
In 2009, President Obama signed into law the Fraud Enforcement
and Recovery Act (FERA), containing amendments to the False Claims
Act. Among other things, FERA amended the "reverse false
claim" provision of the False Claims Act to provide that an
entity violates the False Claims Act if it "knowingly and
improperly avoids or decreases an obligation" to pay money to
the United States. 31 U.S.C. § 3729(a)(1)(G). Most notably,
the previously undefined "obligation" necessary for a
violation of the reverse false claim provision is now defined as
"an established duty, whether or not fixed,....arising from
the retention of any overpayment." 31 U.S.C. §
Though the 2009 amendments to the False Claims Act do not define
any new obligations to return overpayments, knowingly and
improperly avoiding an obligation to return an overpayment
(assuming there is an "established duty" to do so) now
forms the basis of reverse false claim liability, subject to treble
damages and penalties. Since the passage of FERA, questions arose
regarding whether there is an established duty to return Medicare
and Medicaid overpayments.
On March 23, 2010, President Obama signed into law H.R. 3590,
the Patient Protection and Affordable Care Act (PPACA). The PPACA
has expressly required health care providers and others to report
and return overpayments. The term overpayment is defined as
"any funds that a person receives or retains under title XVIII
or XIX to which the person, after applicable reconciliation, is not
entitled under such title."
It has also defined the period of time in which an overpayment
must be reported and returned to the government. The PPACA provides
that "[a]n overpayment must be reported and returned"
within "60 days after the date on which the overpayment was
identified," or "the date any corresponding cost report
is due," whichever is later. While the word
"identified" is not defined by the statute, and is likely
to be the subject of considerable litigation in the future, the
provision explicitly states that if the overpayment is retained
beyond the 60-day period, it becomes an "obligation"
sufficient for reverse false claim liability under the False Claims
Act, and is therefore subject to treble damages and penalties if
there is a "knowing and improper" failure to return the
Health industry participants that receive reimbursement from
government payors should implement policies and procedures for the
identification, reporting, and repayment of government overpayments
that address the 60-day time limitation contained in the PPACA.
Save the Date: Webinar on May 26, 2010
Topics critical to addressing Medicare overpayments, including
Stark law violations, will be the subject of an upcoming McDermott
webinar to be held at 1:00 pm EDT on May 26, 2010. Invitations will
be e-mailed shortly. If you are not already on our mailing list and
would like to receive an invitation, please contact Bob
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On September 8, 2014, the U.S. Department of Justice (DOJ) filed a False Claims Act (FCA) case in the Central District of California against Reliance Medical Systems, two related distributors (Apex Medical Technologies and Kronos Spinal Technologies), and several of their physician owners, based on the theory that investment returns from these physician-owned distributors (PODs) were unlawful kickbacks.