Earlier this week, a key decision denying defendants’ motion to dismiss was issued in the case, Kane v. Healthfirst Inc., et al. and United States v. Continuum Health Partners Inc., et al. (case no. 1:11-cv-02325, S.D.N.Y.). This is the first court decision to interpret a provision of the Affordable Care Act that requires a person who has received an overpayment of Medicare or Medicaid funds to report and return the overpayment by the later of: (i) 60 days after the date on which the overpayment was “identified”; or (ii) the date any corresponding cost report is due, if applicable. 42 U.S.C. § 1320a-7k(d). Although the Centers for Medicare and Medicaid Services (CMS) issued a Proposed Rule in 2014 related to the process for reporting and returning overpayments, the deadline for issuing the Final Rule has been extended  until February 2016.

In Kane, the relator was a former employee of the company who allegedly provided to management a spreadsheet of over 900 potential overpayments caused by a software glitch. The employee was fired four days later and the company failed to return all of the overpayments due until it subsequently received a civil investigative demand in connection with the qui tam lawsuit that had been filed by the former employee under the False Claims Act (FCA). The Court determined that defining “identified”, and thus starting the 60-day clock, when a “provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained”, is consistent with FCA legislative history.  The Court further stated that the defendants’ position that its obligation to pay would not be triggered until after it had “done the work necessary to determine conclusively the precise amount owed to the Government”, thereby “relegating the sixty-day period to merely the time within which they would have to cut the check”, would create an “absurd result.”