The U.S. Department of Justice (DOJ) and the New York State Attorney General intervened in a federal False Claims Act (FCA) case on June 27, 2014, accusing Mount Sinai Health System of failing to report and return Medicaid overpayments within 60 days of identifying them. SeeU.S. ex rel Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y). This case is one of the first examples of litigation involving “the 60-day repayment provision” under the Affordable Care Act (ACA).

The DOJ asserted that Continuum Health Partners Inc. improperly billed Medicaid beginning in 2009 and continuing to or around late 2010 on behalf of Beth Israel Medical Center and St. Luke’s-Roosevelt Hospital Center, which are also part of Mount Sinai. The hospitals submitted improper claims to New York Medicaid for additional payments for services after being paid in full by Healthfirst, Inc. The hospitals were providers in a Medicaid managed care network operated by Healthfirst. Under the terms of participation, for patients enrolled in  Healthfirst, the hospitals were permitted to receive reimbursement only from Healthfirst or from permitted patient co-payments. State law prohibits the hospitals from billing New York Medicaid as a secondary payor.

According to the complaint, the billing errors were a result of erroneous coding contained in electronic remittances issued by Healthfirst that caused it to inform the hospitals that they could seek the additional payments from a secondary payor. In September 2010, the New York Office of the State Comptroller identified a small number of claims submitted by Continuum on behalf of some of its hospitals and notified Continuum that Medicaid had been wrongly billed as a secondary payor for these claims.

In early February 2011, Continuum and the hospitals became aware of the much larger extent of the overbilling as a result of an internal investigation conducted by a Continuum employee, Relator Robert Kane, which revealed that approximately 900 specific claims totaling more than $1 million may have been wrongly submitted to and paid by Medicaid as a secondary payor. Kane informed hospital administrators of the potential liability and then was subsequently terminated.

Nonetheless, “Continuum failed to take steps to repay all of the affected claims within 60 days after these claims had been identified.” Over the course of the next two years, Continuum gradually repaid the $1 million worth of overpayments, but only in response to outside pressure, such as civil investigative demands.

According to the DOJ, this failure to act promptly violates the ACA’s 60-day repayment provision, which requires providers to return Medicare and Medicaid overpayments within 60 days of identifying them. The ACA further provides that the failure to make a timely refund can serve as the basis for False Claims Act liability. 42 U.S.C. § 1320a-7k(d)(3).

The U.S. is requesting the maximum FCA penalty of $11,000 for every improperly retained overpayment as well as treble damages. The lawsuit appears to be one of the first FCA complaints where the DOJ has intervened that involves the ACA’s 60-day repayment provision. This case may provide insight into how the federal government will enforce “the 60-day repayment provision.”

Organizations should review internal compliance processes to reflect the court’s holding.