HEALTHHEALTHCARE PROVIDERS RISK FCA LIABILITY FOR RETENTION OF OVERPAYMENTS

by Scott R. Grubman[i], Rogers & Hardin, LLP

Healthcare providers are at risk of potential liability through a lesser-known provision of the False Claims Act (“FCA”).  Providers who receive too much money from Medicare or Medicaid, even if through no fault of their own, are at risk of substantial FCA liability, as well as civil penalties and exclusion.

Given the increased prevalence of FCA investigations and litigation, particularly in the healthcare industry,  by now most are familiar with the general provisions of the FCA—the imposition of treble damages and per claim penalties for any individual or entity that knowingly presents false or fraudulent claims for payment or approval to the government or knowingly makes or uses a false record or statement material to a false or fraudulent claim.[ii]  A lesser-known provision of the FCA, but one that is perhaps even more concerning for healthcare providers, is the “reverse false claim” provision.  That provision makes it unlawful to make, use, or cause to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the government, and to “knowingly conceal or knowingly and improperly avoid[] or decrease[] an obligation to pay or transmit money or property” to the government.[iii]  It is the latter part of the provision in particular, making it unlawful to avoid or decrease an obligation to pay or transmit money or property to the government, that healthcare providers must understand in order to avoid the potential for tremendous liability under the FCA.

Two relatively recent statutes—the Fraud Enforcement Recovery Act of 2009 (“FERA”)[iv] and the Patient Protection and Affordable Care Act of 2010 (“PPACA”)[v]—have amended and supplemented the FCA’s reverse false claims provision.  FERA, enacted in 2009, amended the FCA in relevant part by defining the term “obligation” to include, among other things, the retention of any overpayment.  After FERA, the knowing retention of an overpayment can form the basis for FCA liability, even if the provider was not responsible for causing the overpayment in the first place.

Although it was its provisions establishing the individual and employer mandates and health insurance exchanges that made the headlines, the PPACA also contained a provision related to overpayments that, while certainly lesser-known, is no less important.  Under the PPACA, an overpayment (which is defined by the PPACA as “any funds that a person receives or retains . . . to which the person . . . is not entitled”) must be reported and returned within 60 days from the date the overpayment is identified or by the date any corresponding cost report is due, whichever is later.[vi]  The PPACA clarifies that any overpayment retained by a person after the deadline for reporting and returning is an obligation for purposes of the FCA.[vii]  After the PPACA, if a healthcare provider retains an overpayment for more than 60 days after it is identified, that provider is subject to treble damages and per-claim penalties under the FCA.  The PPACA also allows the Department of Health and Human Service’s Office of Inspector General (“OIG”) to exclude the provider from participating in any federal healthcare program (often referred to as the “death penalty” for healthcare providers) and impose a civil penalty of up to $10,000 per day for each overpayment that is not reported and returned.[viii]

Until now, the threat of FCA liability for the retention of an overpayment was just that—a threat.  However, on June 27, 2014, the United States Department of Justice (“DOJ”) intervened in a whistleblower case against several New York City hospitals that, according to the DOJ’s complaint, retained certain overpayments for longer than 60 days.  That case is captioned United States ex rel. Kane v. Healthfirst, Inc.[ix]  Importantly, the DOJ does not allege that the hospitals in Healthfirst were responsible for causing the overpayments in the first place.  Instead, those overpayments were caused by apparently innocent coding errors.  However, according to the government’s complaint, although the hospitals allegedly learned of those errors in February 2011, they failed to make the final refund payments until almost two years later.

While it remains to be seen whether the government will be successful in Healthfirst—the first time the government has intervened in a whistleblower suit based entirely on the PPACA’s 60-day rule—the fact that the case has been brought emphasizes the need for healthcare providers to have procedures in place to identify overpayments, even if those overpayments were made through no fault of the provider’s, and take immediate steps to report and refund the overpayments to the government.  Without these procedures in place, even an otherwise fully-compliant provider might find itself as a defendant in an FCA suit.

 

[i] Scott R. Grubman is an attorney with Rogers & Hardin, LLP in Atlanta, where he represents health care providers in connection with government and internal investigations, False Claims Act (“FCA”) litigation, and other white collar matters.  Mr. Grubman also advises clients on issues related to government billing, Stark, and Anti-kickback compliance.  Prior to joining Rogers & Hardin earlier this year, Mr. Grubman served as an Assistant U.S. Attorney for the Southern District of Georgia, where he investigated and prosecuted cases under the FCA and other federal fraud statutes.  In 2013, Mr. Grubman was recognized by the Department of Health and Human Services, Office of Inspector General (“OIG”) for his work investigating healthcare fraud.  He may be reached at (404) 420-4651 or at sgrubman@rh-law.com.

[ii] 31 U.S.C. §§ 3729(a)(1)(A) and (B).

[iii] Id. § 3729(a)(1)(G).

[iv] Pub. L. No. 111-21, 123 Stat. 1617 (2009).

[v] Pub. L. No. 111-148, 124 Stat. 119 (2010).

[vi] 42 U.S.C. § 1320a-7k(d)(2).

[vii] Id. § 1320a-8k(d)(3).

[viii] 70 Fed. Reg. 27096 (May 12, 2014).

[ix] No. 11-2325 (S.D.N.Y.).

 

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One Responseto “HEALTHHEALTHCARE PROVIDERS RISK FCA LIABILITY FOR RETENTION OF OVERPAYMENTS”

  1. This really is Awesome! Thank you so much.