Medicare Compliance & Reimbursement

Could your diligent and faithful actions bail you out on day 61?

You must start preparing to pay back overpayments as soon as you catch wind of them — even if you don’t yet know exactly how much the overpayment totals. So says a game-changing court case that will change the way you track overpayments from Medicare and Medicaid.

Whistleblower Case Highlights Overpayment Rule

Background: In the case, Kane v. Healthfirst, Inc. et al. (and U.S. v. Continuum Health Partners Inc. et al.), the defendants included Continuum Health Partners Inc., Beth Israel Medical Center d/b/a Mount Sinai Beth Israel, St. Luke’s-Roosevelt Hospital Center d/b/a Mount Sinai St. Luke’s, and Mount Sinai Roosevelt. (See “What Delay in 60-Day Overpayment Final Rule Means for You” and “Keep a Close Watch on These Overpayment-Related Court Cases,” Medicare Compliance & Reimbursement Alert, Vol. 41, No. 8, pages 59 and 60.)

The case came about from a False Claims Act (FCA) whistleblower claim by a former employee, who had been tasked with examining an overpayment issue, according to an Aug. 12 analysis by Greg Montgomery of Ogden Murphy Wallace Attorneys in Seattle. After providing his employer with a spreadsheet detailing the overpayments, his employer fired him and “filed” the spreadsheet.

The U.S. District Court for the Southern District of New York heard the case. The case is still in the pretrial stages, but on Aug. 3 the judge denied the defendants’ motion to dismiss the case.

Why This Case is So Important

A key provision in the Affordable Care Act (ACA) is the 60-day repayment rule, which requires providers to refund overpayments to Medicare and Medicaid within the strict timeframe. In this case, the defendants argued that simply knowing about a potential overpayment was not enough to trigger the 60-day repayment provision.

Significance: “This case … is important because it is the first time there has been a court opinion addressing the meaning of the term ‘identified’ as used in the law,” explains Susan Kayser, a New York City-based partner attorney with Duane Morris LLP’s Health Law Practice Group. “Draft regulations published in 2012 have not been finalized.”

The court found that the word “identified” means the date on which a provider is “put on notice” that Medicare or Medicaid may have overpaid a claim, Kayser says. “The court said that providers cannot delay commencement of the 60-day period until the overpayment amount has been definitively determined.”

The government argued that the former employee’s email and spreadsheet properly “identified” the overpayments within the ACA’s meaning, according to an Aug. 5 analysis by attorneys Thomas Ferrante Jr. and Rhada Bachman of Carlton Fields Jorden Burt. But the providers argued that the email “only provided notice of ‘potential’ overpayments and did not identify actual overpayments so as to trigger the ACA’s 60-day report and return clock.”

The court also looked to past opinions by Congress on the FCA’s purpose and meaning, particularly in its measures aimed at combating fraud against the federal government, Ferrante and Bachman wrote. “According to the court, by requiring providers to self-report overpayments and imposing a relatively short deadline for repayments, violation of which risks the severe liability of the FCA, Congress intentionally placed the onus on providers, rather than on the government, to quickly address overpayments and return any wrongly collected money.”

FCA is ‘Unforgiving,’ Court Says

Caveat? The court acknowledged the “demanding standard of compliance” and the burden the law places on providers to investigate and refund potential overpayments within 60 days, Kayser notes. “However, there was a suggestion that prosecutorial discretion could act to assist a provider that did not comply with the letter of the law but acted diligently to attempt to determine an overpayment amount within the required timeframe.”

This could mean that whether you’re subject to enforcement action under the FCA for failing to report and return an overpayment within the 60-day window may depend on how you behave after learning of the potential overpayment, Montgomery said. The court characterized the FCA’s legislative history as “unforgiving” in that it provides no leeway for providers who are struggling to isolate and return all overpayments within 60 days.

The FCA “nowhere requires the government to grant more leeway or more time to a provider who fails to timely return an overpayment but acts with reasonable diligence in an attempt to do so,” the court wrote. And the court stated that it “would counsel against the institution of enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments.”

Luckily, the government vocally agreed with the court’s sentiments, stating that it would not bring a case involving a provider that was working diligently on the claims but did not manage to meet the 60-day deadline despite faithful efforts.

Lesson learned: “So the moral of the story is if a messenger notifies you of a potential overpayment, be nice, act with diligence to investigate and quantify any overpayment, and for goodness sake don’t shoot the messenger,” Montgomery stressed.