Contractors and providers may face false claims damages when they fail to return overpayments even though no fraud is involved. A recent civil settlement demonstrates that the government is targeting failure to repay, and it can be as costly as fraudulent billing.

Fair Warning Given

A medical practice paid nearly $450,000 to resolve an investigation, 250% more than the contested amount of $175,000. No false billing occurred. In fact, the Department of Justice conceded “credit balances often occur in a medical practice, for example, when two insurers share responsibility for a payment and one pays too much.” The government considered returning an overpayment to be a typical problem that should be resolved during account reconciliation.

The government left no doubt about its ulterior motive in settling the matter.  The acting U.S. Attorney wanted to “send a message that we will aggressively pursue those who seek to unjustly profit” from government programs. Similarly, one investigator predicted the settlement will serve as “a deterrent for others who consider similar practices.”

The Change

The strategy of targeting failure to repay builds on a change to the False Claims Act in 2009. Under the amendment, knowing failure to repay an obligation to the government within 60 days is the same as a false claim. The potential penalty is treble damages. Also, a qui tam relator can file suit in order to recover both part of the settlement and attorney’s fees. That happened to the medical practice in the settlement.

Of course, damages are not due immediately when an overpayment is received. A “knowing” failure requires identifying the overpayment, or failing to exercise reasonable diligence to identify the overpayment. A final rule allows a reasonable amount of time to identify an overpayment. The rule also establishes a six year look back period to find overpayments.

The takeaway: contractors and providers must identify overpayments and return them within 60 days.