Providers, Medicare Advantage organizations, and others subject to the Patient Protection and Affordable Care Act's (ACA) 60-day "report and return" provision beware – the government has been persistent in using the False Claims Act (FCA) to rectify alleged fraud, particularly in the healthcare context, and now a recent decision from the Southern District of New York may provide yet another theory of FCA liability for the government to pursue.
In Kane v. Healthfirst, Inc. and United States v. Continuum Health Partners, Inc., the district court interpreted the ACA's 60-day rule to impose FCA liability on those who fail to report and return identified overpayments to Medicare or Medicaid within 60 days of being "put on notice of a potential overpayment." Due to a software glitch, Continuum Health Partners submitted improper claims seeking reimbursement for services provided to Healthfirst enrollees.
After state auditors questioned Continuum about the incorrect billing and the glitch was discovered, Continuum tasked its employee (and eventual relator) with investigating the improper claims. After investigating, the relator sent an email in February 2011 to management and attached a spreadsheet containing over 900 claims with an erroneous billing code. The email "indicated that further analysis would be needed to confirm his findings and stated that the spreadsheet gave 'some insight to the magnitude of the issue.'" He was terminated soon thereafter. It was not until the government issued a Civil Investigative Demand in June 2012 that Continuum reimbursed more than 300 of the claims.
The federal government and New York intervened in the relator's qui tam action and sought treble damages plus penalties for each overpayment. Ruling on the defendants' motion to dismiss, the court held that the relator's email and spreadsheet "identified" overpayments under the ACA even though the email only provided "notice of a potential overpayment" and did not "conclusively ascertain" an overpayment or the "specific amount owed to the Government." The overpayments became "obligations" in violation of the FCA when they were not reported and returned within 60 days.
The message is clear. When a provider or others subject to the report and return provision are put on notice of a potential overpayment, the problem cannot be ignored. Providers and others should act diligently to conduct an investigation, report the problem if there is one, and return the overpayment. Particularly given that quantifying the amount of the overpayment can be complex and time consuming, diligence is key and may temper the harsh reality of this case. Although the court noted that an "overpayment" occurs where a provider conducts an audit and reports its efforts to the government within 60 days, yet does not return the full overpayment within 60 days, it acknowledged that a FCA case premised on such facts "would be unlikely to succeed."