The Clock Is Ticking: The 60-Day Repayment Rule

THE CLOCK IS TICKING: THE 60-DAY REPAYMENT RULE

• Providers that fail to repay identified overpayments within 60 days of identifying them may be subject to false claims penalties of triple the overpayment amount, up to $11,000 a claim, and possible exclusion from federal healthcare programs.

• A New York hospital system is facing claims for almost $24,000,000 based on the failure to timely repay approximately one million dollars in overpayments caused by a software glitch.

• A physician group recently agreed to settle a case for almost $7,000,000 (and to enter into a Corporate Integrity Agreement) based on allegations that it retained credit balances on its books related to claims it had submitted to various federal health care programs.

• Healthcare providers must have policies and procedures in place to ensure compliance with the 60-day Repayment Rule.

Health care providers are required to report and return “identified” overpayments within 60 days under the ACA. An overpayment that is retained after the 60-day deadline can be constituted as a “false claim” according to the government. In a recent New York case Kane v. Healthfirst, Inc., et. al., the defendant hospitals were informed by the New York State Comptroller’s office in September 2010 about a “software glitch” that may have caused incorrect billing to New York Medicaid. The plaintiff, Kane, who worked for the hospital system, was tasked to investigate the glitch. On February 4, 2011, Kane sent an email to several members of management identifying 900 claims with erroneous billing codes, stating that further analysis would be necessary to confirm his findings. Four days later, Kane’s employment was terminated. Kane later brought an action under the False Claims Act against the three hospitals and other parties and the United States and the State of New York later intervened in the case based on the hospitals’ failure to repay the overpayments in accordance with the 60-day deadline.

The defendants filed motions to dismiss the complaint, focusing on the meaning of the word “identified,” as it related to the overpaid claims. The defendants argued that Kane’s report did not “identify” the overpayments but only described their potential, and argued that “identified” should mean “classified with certainty,” while the government argued that where a provider is “put on notice that a certain claim may have been overpaid, an overpayment has been ‘identified.’”

Ultimately, the court agreed with the government’s position. The court held that overpayments are “identified” when providers are “put on notice of potential overpayments.” More specifically, the court reasoned that Congress intended for False Claims Act liability to attach where “there is an established duty to pay money to the government,” and such an “obligation” under the False Claims Act exists “even if the precise amount due has yet to be determined.” It should be noted, however, that the Court acknowledged that a violation of the 60-Day Repayment Rule does not automatically trigger False Claims Act liability; in other words, the mere retention of an overpayment for more than 60 days after identification is not a de facto reverse false claim. The Court urged “prosecutorial discretion,” acknowledging that sometimes the 60-day time frame is simply not long enough to quantify the overpayment which is ultimately necessary for repayment.

In addition to Kane, a recentDepartment of Justice (“DOJ”) Press Release announced the DOJ’s first settlement resulting from a provider’s alleged failure to promptly report and return overpayments. Pediatric Services of America (“PSA”) and several related entities agreed to pay $6.88 million and enter into a corporate integrity agreement to resolve allegations that it violated the False Claims Act by retaining credit balances on its books related to claims it had submitted to various federal health care programs, including Medicare and Medicaid. According to the DOJ, some of the credit balances owed to the government had been on PSA’s books for several years, while others were written off or absorbed without any investigation into the reason for the credit balances.

SUMMARY:

In light of Kane and the PSA settlement, healthcare providers should not await final interpretative guidelines from CMS on the definition of “identified” but instead should act immediately whenever there is even a suspicion of overpayments. If it is impossible to quantify the amounts overpaid within the 60 day period, then providers should be prepared to document and defend the fact that they proceeded with their investigation, quantification and repayment with “all due haste.” Healthcare providers should also include within their compliance plans a policy on identification of overpayments and their return within 60 days.

If you have any questions regarding the 60-Day Repayment Rule or believe your entity may have been overpaid, you may contract Carol Rolf (Rolf@ROLFLaw.com) or Aric Martin (Martin@ROLFLaw.com) at 866-495-5608 for additional information.