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First Court Opinion on When an Overpayment is “Identified” for Purposes of the 60-Day Repayment Law
Wednesday, August 5, 2015

The court’s interpretation complicates the already difficult task providers face in having sufficient time to assess and quantify potential overpayments.

An August 3 decision in United States v. Continuum Health Partners Inc.[1] by Southern District of New York District Judge Edgardo Ramos marks the first time a court has interpreted the provision of the Affordable Care Act (ACA) that requires providers to return overpayments to government agencies within 60 days of the overpayment being “identified” (60-Day Rule). Rejecting the argument by defendants Continuum Health Partners and three member hospitals that a claim is “identified” when specific overpayments are conclusively pinpointed, the court wrote that such an interpretation would create “a perverse incentive to delay learning the amount due” and instead found that the 60-day clock begins running when the provider is on notice of potential overpayments—even where the exact claims or amounts are not yet known.[2]

As part of the “Medicare and Medicaid program integrity provisions,” the ACA requires that any person who receives an overpayment shall report and return the payment to the appropriate agency or carrier and notify the agency or carrier in writing about the reason for the overpayment.[3] The recipient of the overpayment must do so by the later of (1) “60 days after the date on which the overpayment was identified” or (2) the due date of “any corresponding cost report, if applicable.”[4]

Since its implementation, the 60-Day Rule left open many questions as to how to determine when the “clock” begins to “tick” (for a detailed discussion regarding this topic, read our June 2015 Hospital Industry Viewpoint “Sixty Days of Gray: Medicare and Medicaid Refund Requirements”). The Centers for Medicare and Medicaid Services (CMS) issued a proposed rule on the topic in February 2012 stating that a provider has “identified” an overpayment for purposes of the 60-day clock when it has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.”[5] A final rule still has not been issued with respect to Medicare Part A and B providers, and questions continue to abound.

Continuum marks the first decision to interpret the 60-Day Rule provisions. The government’s complaint essentially alleged that the defendants, as a result of a computer error, double billed for certain services rendered to Medicaid beneficiaries, resulting in the defendants receiving payments from both Health First Inc. and Medicaid. The complaint alleged that after the New York State Comptroller’s Office informed defendants of this billing issue in late 2010 and early 2011, Continuum tasked the relator (Robert Kane, then a Continuum employee) with determining whether and which claims constituted overpayments. Mr. Kane allegedly sent an email to Continuum management on February 4, 2011, that attached a spreadsheet of more than 900 potentially improper claims valued at approximately $1,000,000.[6] Thereafter, the complaint alleged, Continuum did not repay the improper claim amounts within 60 days, but rather paid in “small batches” over the subsequent two years.

Thereafter, Mr. Kane filed a qui tam lawsuit. Both the Department of Justice and the State of New York intervened against three defendant hospitals in the Continuum health network. In their motion to dismiss the government’s complaint, the defendants argued that Mr. Kane’s email was notice only of potential violations and was not sufficient to trigger the 60-day clock.[7] The court described defendants’ argument as urging a definition of “identified” that “means ‘classified with certainty,’ whereas the Government urge[d] a definition of ‘identified’ that would be satisfied where, as here, a person is put on notice that a certain claim may have been overpaid.”[8]

Noting that Congress did not define the term “identified” in the statute and finding that the term “has no plain meaning as it is used in the ACA,”[9] the court looked to legislative history, finding that “Congress intended for FCA liability to attach in circumstances where, as here, there is an established duty to pay money to the government, even if the precise amount due has yet to be determined.”[10] The court focused on its conclusion that Mr. Kane put the defendants “on notice of a set of claims likely to contain numerous overpayments,” which was sufficient to start the 60-day clock running.

Defendants argued that the government’s interpretation would “impose an unworkable burden” on providers to report and return potential overpayments within 60 days.[11] This argument was not persuasive to the court, who commented that “[i]t would be an absurd result to construe this robust anti-fraud scheme as permitting willful ignorance to delay the formation of an obligation to repay the government money that is due.”[12]

However, the court noted that the 60-day window for returning an overpayment is an “obligation” under the ACA that does not, unto itself, establish liability under the False Claims Act (FCA). “Rather, in the reverse false claims context, it is only when an obligation is knowingly concealed or knowingly and improperly avoided or decreased that a provider has violated the FCA.”[13] Thus, the court concluded, “well-intentioned” providers “working with reasonable haste” to address the overpayments identified should be safeguarded by prosecutorial discretion because “[s]uch actions would be inconsistent with the spirit of the law and would be unlikely to succeed.”[14] 

[1]  United States v. Continuum Health Partners Inc. et al., No. 11 CV 02325 (S.D.N.Y. Aug. 3, 2015).

[2] Op. and Order, No. 11 CV 02325 (ECF #63).  

[3] 42 U.S.C. § 1320a–7k(d)(1).

[4] 42 U.S.C. § 1320a–7k(d)(2).

[5] Federal Register, Vol. 77, No. 32, at p. 9182.

[6] The court notes that “there is no dispute that Kane’s spreadsheet was overly inclusive, in that approximately half of the claims listed therein were never actually overpaid; nor is there any dispute that the spreadsheet correctly included the vast majority of the claims that had been erroneously billed.” Op. and Order, No. 11 CV 02325 (ECF #63), at 5.

[7] Defs’ Mem. Law Supp. Mot. to Dismiss Gov’t Compl., No. 11 CV 02325 (ECF  #55) at 9-14. 

[8] Op. and Order, No. 11 CV 02325 (ECF #63).

[9] Id. at 19.

[10] Id. at 24.

[11] Id. at 24.

[12] Id. at 27.

[13] Id. at 26.

[14] Id.

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