Remember that Peter Pan, after cutting off Captain Hook's hand, fed it to a crocodile who happened to have previously swallowed an alarm clock. The ticking crocodile that wanted to eat the rest of Captain Hook plagued him forevermore. Similarly, ticking sounds have made many providers nervous ever since the Affordable Care Act (ACA) imposed the 60-day repayment rule, which creates a 60-day deadline for providers to repay (or at least report) any overpayment to Medicare or Medicaid. The word "overpayment" means money that providers have been paid by Medicare or Medicaid pursuant to an arrangement that is noncompliant with one or more of the 20 billion regulations governing health care entities. (Author's note: 20 billion may be a slight exaggeration.)
The ACA tells us that the 60-day clock starts ticking on "the date on which the overpayment was identified." Like Captain Hook, many providers have been uncomfortable with ticking sounds or clocks ever since 2010 when this rule was imposed. However, nobody has known exactly how nervous to be, because while there has been a great deal of commentary over the last five years, there has not been any official guidance or judicial interpretation on when an overpayment is "identified" (i.e., when the 60-day clock begins to "tick")—until now. The one case to weigh in on the issue so far holds that "identified" means "put on notice," and while this sounds like a scarily low threshold, the case may not be quite the ticking crocodile that many in the health care industry believe it to be.
The case in question, Kane v. Healthfirst Inc. et al. and U.S. v. Continuum Health Partners, Inc. et al., came out on August 3, 2015. This decision held that "identification" occurs when a health care provider is "put on notice" of a possible overpayment, unequivocally rejecting the defendant provider's argument that the 60-day clock begins only after a specific overpayment is conclusively ascertained (down to the dollar). The decision caused a flurry of somewhat alarming commentary. Boiled down, the common theme of this commentary was, "Every time you hear a clock tick, assume a crocodile is trying to eat you," or, in health care terms, "If you think you might have a compliance problem, be ready to pay the government back." Such a low threshold for when the clock starts to tick is alarming to providers because, as we all know, there are times when the circumstances causing a potential overpayment are so complex that that it is virtually impossible to pull everything together within two short months of when it first crossed our minds that something might be amiss.
How worried should you be? Your authors, while often alarmists themselves, do not think that the clock starts to tick with the mere utterance of the word "overpayment."
In evaluating whether any given ticking crocodile is trying to eat you, it is important to know the specifics of the situation. In Kane, the government alleged that Continuum Health Partners Inc. ("Continuum")—a network of nonprofit hospitals now part of Mount Sinai Health System—violated the False Claims Act (FCA) by waiting more than two years to repay Medicaid claims for which it was aware that overpayments had been made by a Medicaid managed care plan ("Healthfirst.") Continuum was not supposed to bill Medicaid directly under the terms of the payor-provider agreement with Healthfirst but did anyway, pursuant to a software glitch, and Medicaid paid many of those improperly billed claims.
Continuum was alerted to the potential problem by auditors from the New York State Comptroller’s office in September 2010. (How is that for bad timing? The ACA came out in 2010.) Continuum instructed its then-employee (Kane, who later was the one to blow the whistle) to look into the problem.
Now here is where you need to pay close attention—no doubt needless advice, given that we know you hang on our every word. On February 4, 2011, Kane sent an email of his analysis to members of Continuum’s management attaching a spreadsheet enumerating more than 900 claims—totaling more than $1 million—that Kane had identified as containing the wrong billing code. Then, in another somewhat unusual turn of events, Continuum began to reimburse Medicaid in April 2011, but did not complete the repayment process until March 2013. The government alleged that although Continuum began to reimburse Medicaid for overpaid claims in April 2011, Continuum violated the FCA's 60-day repayment provision by “fraudulently delaying its repayments for up to two years after Continuum knew of the extent of the overpayments.”
The court concluded that the 60-day clock began to tick (Readers: insert Alfred Hitchcock-like ominous creepy background music with loud ticking sounds superimposed) when a "provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained." Lesson: If one of your employees sends you a detailed spreadsheet of specific claims with dollar amounts of Medicaid remittances that were paid erroneously, you are probably on notice and should either pay the government back or self-disclose through the appropriate protocol WITHIN 60 DAYS. But do you walk the plank every time you become aware of a potential compliance problem? We do not think this is what the Kane case holds, and here are three reasons why:
- Every Ticking Crocodile Is A Little Bit Different. In this case, the government argued (and the court agreed) that Continuum was "put on notice" on February 4, 2011—the date on which Kane sent a rather detailed email to members of Continuum's management estimating more than 900 improperly billed claims totaling more than $1 million in overpayments. This date was approximately five months AFTER the Comptroller first contacted Continuum about a possible overpayment issue. So, while this case makes it clear that a provider need not know the EXACT number of claims and the EXACT dollar amount in order to be "put on notice," it does not go so far as to say that the mere suggestion of an overpayment issue is sufficient to start the 60-day clock. The Kane crocodile appeared to have swallowed a grandfather clock, not a wristwatch.
- Keep Flying Straight On 'Til Morning. The Kane court actually specifically recognizes that providers working diligently on a potential compliance problem are not acting improperly, noting that just because an "obligation" to repay has attached under the ACA (i.e., the provider has "identified" the overpayment), FCA liability only exists when the obligation "is knowingly concealed or knowingly and improperly avoided or decreased that a provider has violated the FCA." The judge, endearing himself forever to your authors and others, went on to state 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. Such actions would be inconsistent with the spirit of the law and would be unlikely to succeed."
- One Girl Is Worth 20 Boys. Okay, while that is a valid Peter Pan reference (Peter said it to Wendy after she proved more useful than the Lost Boys), it has nothing to do with our third point, but one of your authors really wanted to use it anyway. We leave it to you to guess which one. Our real point is that this decision was issued on Continuum's motion to dismiss, which means the court was required to accept all factual allegations in the government's argument as true and draw all reasonable inferences in the government's favor. Continuum still has the opportunity to present facts that may make a difference in the outcome.
In summary, we think this pirate ship is still in largely uncharted waters, and some crocodiles might have no appetite for you in particular. Also, we promise that our next health law update will not bang you over the head with a theme quite as vigorously as this one does.