A federal district court has weighed in on the meaning of “identified” for purposes of determining when Medicare and Medicaid overpayments must be returned to avoid violating the False Claims Act (FCA). In Kane v. Healthfirst, Inc.
and U.S. v. Continuum Health Partners, Inc.
, a New York federal court resolved the debate about when the Affordable Care Act’s 60-day deadline for returning overpayments begins to run, explaining the deadline is triggered when providers are on notice that they may have received overpayments—not after they’ve determined with certainty the precise amount. After a software glitch led to filing of improper Medicaid claims, a health system investigated and developed a list of 900 potential overpayments which required further investigation to confirm they were improperly paid and determine the amount of overpayment to be returned. While a few overpayments were returned shortly after that list was created, the health system didn’t repay hundreds of overpayments until two years after receiving the list and after the government filed a Civil Investigative Demand inquiring about the potential overpayments. Because further investigation was needed, the health system argued the list didn’t “identify” overpayments triggering the 60-day deadline. The court disagreed, explaining that triggering the 60-day deadline only after providers did all they needed to “determine conclusively the precise amount owed to the Government” created “a perverse incentive to delay learning the amount due and relegat[ed] the sixty-day period to merely the time within which they would have to cut the check.” “[W]hile the Government’s interpretation would impose a stringent—and, in certain cases, potentially unworkable—burden on providers, Defendants’ interpretation would produce absurd results,” the court decided. Health care attorney Robert E. Mazer of Ober Kaler in Maryland explains there are two issues—when an overpayment was identified and whether the failure to report and return the overpayment violated the FCA. In interpreting the statutory language regarding the identification of an overpayment, he says the court was “really very harsh and very strict.” But it’s not all bad news, advises Mazer. While it would have been better if the court said “an overpayment is not ‘identified’ until known with certainty and quantified,” he explains, the court’s ruling referenced prosecutorial discretion and suggested the government may not prevail on its FCA claim if it pursued a provider who was trying hard to return the overpayment but was beyond the 60 days. The court specifically acknowledged that investigating large numbers of claims within a 60-day timeline could be difficult and said prosecutors should “avoid enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments.” Thus, Mazer indicates the court “may look at whether [a provider] acted with reasonable diligence, which is a somewhat subjective standard, in determining whether an obligation is knowingly concealed or knowingly and improperly avoided or decreased in violation of the FCA.” Mazer notes that the defendants “made it a little bit easier for the judge” with a twoyear delay and repayment occurring after the government’s CID. Finally, it’s important to note that this ruling responded to the defendant health system’s request that the court dismiss the lawsuit before trial. The court refused to dismiss the lawsuit so this is not the final ruling in the matter. It means the defendant hasn’t successfully argued that the government has no valid claim. In making such a decision, a court has to accept all the factual allegations made in the complaint as if they are true and make reasonable inferences in favor of the government plaintiffs, explains Mazer. To keep its claim alive and defeat such a motion, the government plaintiff has to show its claims are plausible—that there are enough facts to support more than a mere possibility the defendant violated the law. The court noted this in stating that “at a later stage in the proceedings” the defendants would have the opportunity to show they did investigate the potential overpayments but, so far, the government had sufficiently shown the health system “avoided returning the overpayments.” (Kane v. Healthfirst, Inc.
and U.S. v. Continuum Health Partners, Inc.
, No. 11 Civ. 2325(ER), S.D.N.Y. Aug. 3, 2015)
Takeaway: Federal court defines identified overpayments stringently but also raises potential for leniency for providers acting with “reasonable haste” to report and return overpayments