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From Health Law Daily, August 5, 2015

Court interprets FCA overpayment provision, finds it intentionally ‘stringent’

By Mary Damitio, J.D.

The United States government sufficiently stated a claim against a health system for retaining Medicaid overpayments after they were “identified” by an employee to be in violation of the False Claims Act (FCA) (31 U.S.C. §§ 3729 et seq.), a district court ruled in denying a motion to dismiss the complaint. In interpreting the statute, the court found that the amendments to the FCA by Fraud Enforcement and Recovery Act (FERA) (P.L. 111-21) and the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) were intended to strengthen the government’s ability to combat fraud through the FCA and intentionally imposed a heavy burden on providers to quickly report and return any overpayments to the government (U.S. ex rel. Kane v. Healthfirst, Inc., August 3, 2015, Ramos, E.).

Background. 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 (SLR), and Long Island College Hospital are hospitals located in New York City that are operated and coordinated by Continuum Health Partners, Inc. The hospitals are also part of the Healthfirst hospital network and provided care to numerous patients who were enrolled in Healthfirst’s managed care program.

Contract. Healthfirst and the New York State Department of Health (DOH) entered into a “covered services” agreement that provided services to Medicaid enrollees in exchange for a monthly payment. As a result, Healthfirst’s reimbursement was limited to the monthly payment, and it could not otherwise bill the DOH based on a fee-for-service basis. As a result of a software glitch, Healthfirst erroneously notified participating providers that they could seek additional reimbursement from Medicaid and other secondary payors for services rendered to enrollees and DOH paid the improper claims.

Relator. Robert P. Kane, a Continuum employee, was tasked with determining which claims had been improperly billed to Medicaid. In February 2011, Kane sent an email to Continuum’s management attaching a spreadsheet that contained more than 900 claims that he identified as containing the erroneous billing code. He indicated in his email that the data would need to be further analyzed to confirm his findings. Kane’s spreadsheet was overly inclusive, with half of the claims not being actually overpaid, but the spreadsheet did correctly identify the “vast majority” of the improper claims. Four days after sending his email, Kane was terminated and Continuum reimbursed DOH for only five of the improper claims. Continuum fully reimbursed DOH for the remaining improper claims in March 2013.

Lawsuit. Kane filed a qui tam action alleging that various hospitals and health care organizations violated the FCA and related state laws. The U.S. government and the State of New York intervened in the action as plaintiffs against Continuum, Beth Israel, and SLR (Continuum) and alleged that they violated the FCA’s “reverse false claims” provisions (31 U.S.C. § 3729(a)(1)(G)). Continuum moved to dismiss the case.

FCA amendments. FERA and Section 6402(a) of the ACA amended the FCA to require any person who receives an overpayment to “report and return” the overpayment to HHS, the state, or any other appropriate party (42 U.S.C. § 1320a-7k(d)(1)). The statute requires an overpayment to be reported and returned within 60 days of the “date on which the overpayment was identified,” and any payment retained beyond that point carries with it FCA liability (42 U.S.C. § 1320a-7k(d)(2)-(3)). The ACA does not define the term “identified.”

“Identified.” The United States’ complaint sufficiently alleged a cause of action under the FCA. The court rejected the Continuum’s arguments that the Kane email only provided notice of potential overpayments and did not actually identify overpayments so as to start the 60-clock running. The court examined the plain meaning of the ACA and found that while Kane did not claim to conclusively identify overpayments, he did “recognize” 500 claims that turned out to have been overpaid and as “worthy of attention.”

Legislative history. The court also looked to the legislative history of the FCA and found that Congress intended that an overpayment is “identified” when a provider is “put on notice of a potential overpayment,” instead of when the overpayment is, “conclusively ascertained.” Therefore, the complaint sufficiently alleged that Continuum had a duty to report and return the overpayments after it was made aware of the software glitch and after Kane put it on notice as to the claims that likely contained overpayments.

Heavy burden. The court acknowledged that its interpretation of the ACA imposes a “stringent” and “potentially unworkable” burden on providers to identify and return overpayments within 60 days, but the statute does not require the government to give more time for the return of overpayments even if a provider acts with reasonable diligence. However, the court also noted that “prosecutorial discretion would counsel against” enforcement actions taken against well-intentioned providers who are working with “reasonable haste” to uncover and report overpayments. Additionally, the legislative history of FERA and the ACA suggested that Congress intended to reinforce the government’s ability to combat fraud through use of the FCA. The court also concluded that Congress intentionally placed the burden on the providers, rather the government to speedily address overpayments.

Remaining elements. The government sufficiently alleged that Contiuum avoided or decreased an obligation to the government. Continuum was put on notice of a potential issue of which it was legally obligated and did nothing. The complaint also sufficiently alleged that Continuum’s behavior rose above negligence and displayed recklessness or deliberate ignorance.

The case is No. 11 Civ. 2325 (ER).

Attorneys: Peter John Heck (Niedweske Barber) for Robert P. Kane, State of New York and State of New Jersey. Bettina Barasch Plevan (Proskauer Rose LLP) for Beth Israel Medical Center d/b/a Mount Sinai Beth Israel, Continuum Health Partners Inc., St. Luke's-Roosevelt Hospital Center d/b/a Mount Sinai St. Luke's and Mount Sinai, Beth Israel Medical Center and St. Luke's-Roosevelt Hospital Center.

Companies: Healthfirst, Inc.; 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; Long Island College Hospital

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