New York City’s Mt. Sinai Hospital refunded a one million dollar Medicaid overpayment. CMS said thanks for the repayment, but you still owe us a late payment fee: $13 million.

To add insult to injury, the overpayments were inadvertent—the result of electronic coding errors on about 900 Medicaid claims. On top of that, Mt. Sinai itself didn’t make the errors. They were made by two hospitals in the Continuum system that later merged into Mt. Sinai.

The overpayments occurred in 2009 and 2010. In 2011 Bob Kane, Continuum’s revenue-cycle director, discovered the problem and told his bosses about it. Continuum refunded all the money, but not within the 60 days required by the Affordable Care Act. In fact, 300 claims weren’t refunded until March 2013, and by then the government had issued a civil investigative demand.

Remember Bob from revenue-cycle? Bob filed a whistleblower suit, and the federal government joined in. Now the State of New York wants to join, too.

How can a $1 million Medicaid overpayment (which has been repaid) result in a $13 million late payment fee?  Here’s how. The Affordable Care Act says hospitals must repay Medicare and Medicaid within 60 days after learning they’ve overbilled. If they don’t, each overbilled claim violates the False Claims Act. That act carried penalties of treble damages plus up to $11,000 for each overbilled claim.

You do the math. One million dollars trebled is $3 million. Eleven thousand dollars times 900 claims is $9,900,000.  Three million plus $9,900,000 is $12,900,000.  (Okay, I exaggerated by $100,000.) That’s what Bob and the federal government want from Mt. Sinai.