Important Developments on Overpayment Liability Under the False Claims Act

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On August 3, 2015, the U.S. District Court for the Southern District of New York issued the first judicial opinion interpreting the Affordable Care Act’s “60-day overpayment rule,” which requires providers to “report and return” an overpayment of Medicare or Medicaid funds to the appropriate government body within 60 days “after the date on which the overpayment was identified.” U.S. ex rel. Kane v. Healthfirst, Inc. et al., No. 11 CIV 2325, 2015 U.S. Dist. LEXIS 101778 (S.D.N.Y. Aug. 3, 2015); 42 U.S.C. § 1320a.7k(d)(1)–(3). Under the False Claims Act (FCA), any provider that knowingly fails to report and return an overpayment within the 60-day time period is in violation of the FCA’s reverse false claims act provision and may be liable for a penalty between $5,500 to $11,000 for each false claim. The decision is the first to address what it means to “identify” an overpayment and to define the bounds of the 60-day rule under the FCA. The potential implications of the decision are significant for compliance purposes.

The case involves several New York hospitals, all operated by Continuum Health Partners, Inc., and allegations that each facility submitted erroneous claims for payment to Medicaid due to a glitch in Healthfirst, Inc.’s billing software. Specifically, the relator and the government claim that Continuum violated the FCA by failing to report and repay overpayments within a 60-day period of first identifying them. The relator, a former Continuum employee, identified potential overpayments in February 2011 during an audit of claims for potential billing errors that may have resulted from the software glitch. Within days of submitting his report on the potential overpayments, the relator was terminated. He subsequently filed the qui tam action against Continuum in which the government later intervened.

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