On August 3rd, 2015 a federal Judge in the Southern District of New York ruled that the United States’ and state of New York’s Complaints in Intervention can move forward under the federal False Claims Act (“FCA”) and its New York corollary against a group of hospitals who allegedly failed to report and return Medicaid overpayments that were brought to the hospitals’ general attention over two years before all of the relevant repayments were made.
The judge’s opinion denying the defendants’ motions to dismiss in the cases, Kane v. Health First, et al. and New York and U.S. v. Continuum Health Partners, Inc. et. al., should be of particular note to providers as it contains extensive discussion and guidance as to how at least one federal judge interprets the Affordable Care Act’s (“ACA”) provision requiring any person providers who receives overpayments form Medicare or Medicaid to repay such overpayments within sixty days of the “date on which the overpayment was identified.” Retention of such an overpayment beyond the sixty-day period can result in liability under the FCA.
In these cases, a third party vendor’s software caused the defendant hospitals to improperly bill the New York State Medicaid Program as a secondary payer. In September 2010, the New York State Comptroller’s office identified an issue with the hospitals’ billings. This led to the discovery that the problem resulted from a glitch in the vendor’s software system, and in mid- December 2010, the vendor issued a patch to fix the problem. The hospitals, through their parent organization, then tasked an employee, Robert Kane, who eventually became the relator in the cases, with determining the amount of overpayment as result of the glitch.
On February 4, 2011, in an email to the parent company’s management Kane reported that over 900 claims were involved totaling over $1,000,000, but indicated that “further analysis would be needed to confirm his findings.” The parties to the litigation agree that Kane’s findings were over inclusive. The court noted that “approximately half the claims listed were never actually overpaid,” but the court also noted that the report “correctly included ‘the vast majority of the claims that had been erroneously billed.’” Kane was fired four days after sending his email.
The hospitals reimbursed the State of New York for five improperly billed claims in February 2011. The plaintiffs allege that the hospitals did nothing else with Kane’s analysis. They further allege that repayments by the hospitals began only after the New York Comptroller began to identify “several additional tranches of wrongful claims” in March 2011. In June 2012, the hospitals were also served by the United States with a Civil Investigative Demand. All of the affected claims were not paid until March 2013.
The plaintiffs allege that the hospitals “fraudulently…[delayed]… repayments for up to two years after the [the hospitals] knew the extent of the overpayment” and that they “intentionally or recklessly” failed to timely identify the overpayments in violation of the FCA and its New York corollary. The court rejected the arguments contained in the defendants’ motion as requiring the government to show that the defendants had determined the precise amount of the overpayments at issue in order for the 60 day clock to start ticking.
In rejecting the defendants’ argument the court found that the legislative history of the FCA indicated Congress’ intent for “FCA liability to attach when, as here, there is an established duty to pay money to the government, even if the precise amount is not determined.” To find otherwise, the court reasoned, would create an absurd result and “a perverse incentive to delay learning about the amount due and relegating the sixty-day period to merely the time within which [the hospitals] would have to cut the check.”
The court recognized that its interpretation of the ACA’s 60 day report and repay rule would impose a “stringent – and in certain cases potentially unworkable – burden on providers.” It did note however, “that prosecutorial discretion would counsel against the institution of enforcement actions against well intentioned healthcare providers working with reasonable haste to address erroneous overpayments. Such actions would be inconsistent with the spirit of the law and would be unlikely to succeed.” In further support of this proposition, the court referred to a government lawyers’ statement during a pre-motion conference: “This is not…a case where the hospital is diligently working on the claims and it’s on the sixty-first day and they’re still scrambling to go through their spreadsheets, you know, the government wouldn’t be bringing that kind of claim.”
In light of the timeline in this case and the plaintiff’s position, one could credibly argue that it was the Kane email that identified the substantial nature of the overpayment, but not the precise amount, that set the clock ticking on repayment. One might argue, on the other hand, that, given the facts, the court’s opinion does little to address where the line is between “well intentioned healthcare providers working with reasonable haste to address erroneous overpayments” and providers that intentionally or recklessly fail to precisely identify overpayments of which they are generally on notice. Regardless, the decision makes it absolutely clear that the distinction is a critical one, which courts will no doubt be making more often in the future. In the meantime providers are well advised to move quickly towards repayment when they are alerted to overpayments from Medicare or Medicaid.
