United States: When An Overpayment Becomes A False Claims Act Issue: Explaining The First Judicial Interpretation Of The 60-Day Rule

On August 3, 2015, Judge Edgardo Ramos of the United States District Court for the Southern District of New York issued the first judicial opinion addressing when a health care provider has "identified" a Medicare or Medicaid overpayment under the Affordable Care Act's (ACA) requirement that providers return overpayments within sixty days of the date the payment is identified (the "60-Day Rule") or face potential liability under the federal False Claims Act (FCA). In United States ex rel. Kane v. Continuum Health Partners, Inc., No. 11-2325 (S.D.N.Y. Aug. 3, 2015), the court concluded that "the sixty day clock begins ticking when a provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained."1

60-Day Rule

Section 6402(a) of the ACA requires providers, suppliers, Medicare Advantage organizations, prescription drug plan sponsors, and Medicaid managed care organizations to "report and return" an "overpayment" within the later of (a) sixty days after the overpayment is "identified," or (b) the date any corresponding cost report is due, if applicable. The 60-Day Rule defines an "overpayment" as any funds a person receives or retains under Medicare or Medicaid to which the person, after applicable reconciliation, is not entitled. Congress left the term "identified" undefined. On February 16, 2012, the Centers for Medicare and Medicaid Services (CMS) issued a notice of proposed rulemaking to implement the 60-Day Rule for Medicare Parts A and B. In the notice, CMS proposed to define "identified" as the time a person has "actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment."2 It also proposed that, when a provider receives information about a "potential" overpayment, there is an obligation "to make a reasonable inquiry" to determine whether an overpayment exists. Failure to make such an inquiry "with all deliberate speed" could result in the provider knowingly retaining an overpayment. CMS has delayed its deadline to publish the final rule until February 2016, and in the meantime, healthcare providers continue to wrestle with when their sixty days for repayment begin.3

If a provider misses the sixty-day-repayment window, it could face treble damages and statutory penalties under the FCA. Under the ACA, an overpayment retained after the deadline is an "obligation" under the False Claims Act.4 The FCA, as amended by the Fraud Enforcement and Recovery Act (FERA), provides liability for one who "knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government."5 The FCA defines "knowingly" to include both "actual knowledge" and situations where a provider "acts in deliberate ignorance" or "reckless disregard" of the truth or falsity of information.6

Factual Background

In Continuum, whistleblower Robert P. Kane alleged that three New York City hospitals belonging to a network of non-profit hospitals operated by Continuum Health Partners, Inc. (Continuum) violated the FCA by failing to repay identified overpayments within sixty days. Following a civil investigation, both the United States Attorney's Office for the Southern District of New York and the State of New York (collectively the "Government") intervened. The Government's claims arose from services provided by each of the hospitals to Medicaid patients who were members of a managed care program administered by Healthfirst, Inc., a non-profit insurance company. The Continuum hospitals contractually agreed to accept reimbursement only from Healthfirst for certain covered services. A software glitch, however, caused the hospitals mistakenly to seek additional secondary payment from other payors, including Medicaid. As a result, the New York State Department of Health (DOH) incorrectly made secondary payment for claims submitted by the hospitals in 2009.

In September 2010, auditors from the New York State Comptroller's office approached Continuum with questions about the incorrect billings. Between September 2010 and December 2010, the parties uncovered the software glitch and a corrective software patch was implemented. Thereafter, Kane, a Continuum employee, was asked to determine which claims were improperly submitted to Medicaid. Kane reviewed the claims between late 2010 and early 2011, and on February 4, 2011, he sent an email to several members of Continuum's management with a spreadsheet listing more than 900 claims (totaling over $1 million) that Kane believed were incorrectly billed.7 Kane's email also indicated that further analysis would be needed to confirm his findings. Independently, the New York Comptroller alerted Continuum of approximately five additional claims for which Medicaid was incorrectly billed.

Four days after Kane sent his email, he was terminated. Sixty-one days after Kane sent his email, he filed a qui tam complaint under seal alleging violations of the FCA. Although Continuum repaid the first five improper claims identified by the Comptroller in February 2011, the Government alleged that Continuum "did nothing further" with Kane's analysis and "never brought Kane's analysis to the attention of the Comptroller despite many communications with the Comptroller concerning additional claims to be repaid." Unrelated to Kane's analysis, the Comptroller independently identified several additional batches of improper claims between March 2011 and February 2012. Although Continuum began to repay those claims identified by the Comptroller in April 2011, the Government alleged that Continuum did not complete its repayment until March 2013. In particular, the district court noted that it was not until the Government issued a civil investigative demand seeking additional information about the overpayments in June 2012 (over a year after Kane's email), that Continuum finally reimbursed the DOH for more than 300 overpayments.

Court's Ruling

In denying the Defendants' motion to dismiss the Government's complaints in intervention, the Southern District of New York agreed with the Government that the whistleblower's email and spreadsheet "identified" overpayments within the meaning of the ACA, and that these overpayments matured into "obligations" in violation of the FCA when they were not reported and returned by Defendants within sixty days. The court employed theories of statutory interpretation and reviewed the legislative history and purpose of the ACA, FCA, and FERA to determine that an overpayment is "identified" when the provider "is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained."8 Judge Ramos reasoned that this duty to repay may arise "even if the precise amount due has yet to be determined.9 Despite Continuum's argument that Kane's email only provided "notice of potential overpayments and did not identify actual overpayments,"10 the court held that such an email must constitute an identification, or otherwise the Government would have no recourse when a provider "simply ignor[es] the analysis altogether and put[s] its head in the sand."11

Recognizing that the court's ruling imposes "a demanding standard of compliance" and "a stringent—and, in certain cases, potentially unworkable—burden on providers," the court noted that even where an "obligation" arises to repay money, a violation of the FCA also requires that the obligation be "knowingly concealed or knowingly and improperly avoided or decreased."12 This suggests that providers may avoid incurring FCA liability even beyond the sixty-day window if they can show that they have not concealed, avoided, or decreased their obligation to repay. The court further noted that "prosecutorial discretion would counsel against the institution of enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments.13 Notably, the court suggested that its reasoning was consistent with CMS's proposed rule even though that rule has yet to be finalized.

Practical Implications

The Continuum decision provides insight into how at least one federal jurisdiction interprets the 60-Day Rule. While this ruling is technically binding only in the Southern District of New York, it is reasonable to expect that other courts will look to its reasoning for guidance. In addition, CMS may consider the case in defining when an overpayment is "identified" in its forthcoming final rule. In the meantime, healthcare providers should consider the following implications of the Continuum decision:

  • Once a healthcare provider is put on notice of a potential overpayment, the government may take the position that a provider must have qualified individuals diligently conduct a timely and good-faith investigation.
  • Healthcare providers should document their investigative efforts to demonstrate that they conducted a timely internal investigation.
  • Given the severe repercussions and swift deadlines of the 60-Day Rule, as interpreted in Continuum, healthcare providers should carefully consider which internal and outside personnel they ask to complete that investigation.
  • Healthcare providers may need to initiate the repayment process before knowing the exact amount of overpayment and should be prepared to explain their repayment analysis to the government when they do so.
  • While certain providers may benefit from prosecutorial discretion if they demonstrate diligent response efforts, such discretion is far from guaranteed and would be limited to those cases initiated by the Government.

A copy of the court's opinion is available here.

Footnotes

[1] Id. at 23 (emphasis added).

[2] 77 Fed. Reg. 9179-9187 (Feb. 16, 2012).

[3] CMS separately issued a final rule implementing the 60-Day Rule with respect to the Medicare Advantage program and the Medicare Part D Prescription Drug program. See 79 Fed. Reg. 29844 (May 23, 2014). In that final rule, CMS indicated that a Medicare Advantage organization or Part D sponsor has identified an overpayment "when the [entity] has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment." 42 C.F.R. §§ 422.326(c), 423.360(c). While this final rule and CMS's commentary thereto were not at issue in the Continuum decision, the court did note that "its logic plainly does [apply]." Continuum at 30.

[4] 42 U.S.C. § 1320a-7k(d)(3).

[5] 31 U.S.C. § 3729(a)(1)(G).

[6] Id. § 3729(b)(1)(A).

[7] Although Kane's email overestimated how many claims were improperly billed to Medicaid, approximately half of the items listed did, in fact, constitute overpayments.

[8] Continuum at 33.

[9] Id. at 24.

[10] Id. at 17.

[11] Id. at 26.

[12] Id.

[13] Id.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions