Finders keepers, losers weepers.
Except in connection with overpayments by federal health care programs — then it’s a crime. That is, unless you repay the overpaid sum within 60 days.
But when does the 60-day period start to run?
The first court opinion to address that question was released in August 2015.
Computer Glitch Leads To Major Hitch
Continuum Health Partners Inc. operates a nonprofit hospital network, Healthfirst, in New York City.
In 2005, the network entered into a capitated arrangement with the State of New York in connection with Medicaid beneficiaries. Under the arrangement, the hospitals, physicians and other providers in the network were to look to Healthfirst for payment in full, with the exception of co-pays.
However, beginning in 2009 a computer glitch resulted in billings to secondary payors, which led to Continuum hospitals receiving fee for service payments from New York’s Medicaid system.
In September 2010, the New York Comptroller’s office contacted Continuum and the computer glitch was discovered. Continuum assigned one of its employees, Robert Kane, to investigate what had been improperly billed.
Approximately 5 months later, Kane emailed his report and spreadsheet to Continuum’s management. His report indicated more than $1 million of improper billing due to the code glitch but said that further analysis was required to confirm his initial findings. (By the way, there was no dispute that Kane’s analysis was indeed rough and that in the final analysis only about half of the identified claims were indeed overpaid.)
Instead of voluntarily following up, Continuum fired Kane.
Under pressure from the State of New York, Continuum began making a handful of repayments. However, it didn’t finish repaying until after March 2013 following receipt of a Civil Investigative Demand from the U.S. Government.
In 2011, Kane filed a whistleblower action under the False Claims Act as well as under New York’s counterpart state law.
Prosecution of the case was taken over by the United States and by the State of New York. They allege that Continuum fraudulently delayed repayment by up to two years after it knew of the extent of improper billing and that by “intentionally or recklessly” failing to take necessary steps to timely identify claims affected by the software glitch, Continuum violated the “reverse false claims” provision of the False Claims Act and of its New York corollary.
A Bit of Background
You’re undoubtedly familiar with the concept of the federal False Claims Act. It’s a Civil War era statute that makes it a crime to make fraudulent claims for payment to the United States government. Penalties are three times the amount of the improper payment plus up to $11,000 per claim.
Subsequently, the concept of a “reverse false claim” came into being. Essentially, it makes it a false claim to conceal or to knowingly and improperly avoid or decrease an obligation to pay or transmit money or property to the federal Government.
Due to a provision in the Affordable Care Act, overpaid healthcare claims must be paid back to the United States government within 60 days of the “date on which the overpayment was identified.” There is no requirement of a specific intent to defraud.
The Court’s Opinion
As the False Claims Act case against Continuum moved toward trial, Continuum filed a motion to dismiss. The central question was when the 60-day time period began to run. No other court has ever considered this question.
The Government argued that Kane’s email and spreadsheet properly identified the overpayments and that those overpayments matured into obligations in violation of the False Claims Act when they were not reported and returned within 60 days.
Continuum and its co-defendants argued that Kane did not identify overpayments but only raised the potential that overpayments were received. In essence they argued that there must be certainty of overpayment before the 60-day period begins to run.
For a number of reasons, the Court was not impressed with Continuum’s argument. It agreed with the Government’s position that when Kane sent his email and spreadsheet indicating that some claims were improperly billed, it triggered the 60-day period within which Continuum was to conduct its investigation and make repayment. The motion to dismiss was denied and the case is headed toward trial.
Take-Aways For You
Among the many lessons of this case:
1. The 60-day time clock for repayment begins to tick upon receipt of credible information that you’ve received an overpayment.
2. You need to immediately take steps to investigate once you receive that credible information. In order to protect yourself to the fullest extent possible, engage outside legal counsel to coordinate the investigation.
3. Because 60 days means 60 days, it’s prosecutorial discretion that will prevent a longer investigation/delayed payment from triggering prosecution. Therefore, if more than 60 days is required to investigate and repay, it makes sense to have counsel began discussions with the government in order to demonstrate your good faith.
4. Don’t fire the bearers of bad news. That almost guarantees that they will turn into whistleblowers. (By the way, Kane filed suit for wrongful termination, too.)
5. Potential false claims whistleblowers work for you (or for your billing service).
6. It’s not just the federal False Claims Act that you need to worry about. There are state law counterparts including some that deal with payments from any payor, not just governmental payors.
7. A little glitch can turn into an extremely large False Claims Act liability due to the treble damages provision and the $11,000 per claim penalty. For example, 1,000 claims leading to $10 overpayment each can result in $30,000 of damages plus $11,000,000 in penalties.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss