Attention Medicaid and Medicare Providers: US DOJ Sues Providers for Failing to Return Overpayments Within 60 Days

On June 27, 2014, in the case of United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y.), the United States Department of Justice (USDOJ), via the United States Attorney’s Office for the Southern District of New York, sued several Medicaid providers under the federal False Claims Act for failing to return Medicaid overpayments within 60 days of identifying them.

Section 6402(a) of the Patient Protection and Affordable Care Act (ObamaCare), codified at 42 U.S.C. 1320a-7k(d)(2), requires that both Medicaid and Medicare providers report, repay and explain overpayments within 60 days of when the provider identified that they had received overpayments. Pursuant to 42 U.S.C. 1320a-7k(d)(3), the failure to return overpayments within 60 days creates a liability under the federal False Claims Act, which imposes: (1) treble damages (three times the amount of the overpayments); (2) penalties of a minimum of $5,500 and a maximum of $11,000 for each Medicaid claim, regardless of amount; (3) attorneys’ fees; and (4) the costs of the investigation. The failure to return an overpayment of federal health care funds constitutes a reverse false claim actionable under section 3729(a)(1)(G) of the False Claims Act.

Under New York State law (18 NYCRR 518.1(c)), an “overpayment includes any amount not authorized to be paid under the Medicaid program, whether paid as the result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse or mistake.

In United States ex rel. Kane v. Healthfirst, Inc., et al., a Medicaid managed care network operated by Healthfirst allegedly sent remittances to its network hospitals that erroneously authorized the hospitals to seek payment from payors such as Medicaid for services provided by the hospitals when these hospitals had already received payment for such services by the network. The network hospitals allegedly generated bills in excess of $1 million to Medicaid for such services. The alleged errors were discovered as the result of an investigation by the Office of the State Controller, but the hospitals allegedly delayed repaying the overpayments for more than two years.

This case is reportedly the first time that the USDOJ has intervened in a False Claims Act case based solely upon the 60 day report, repay and explain requirement in the Affordable Care Act. The US DOJ complaint in intervention is available here.

This federal lawsuit underscores the importance of the obligation of providers to report and repay Medicaid and Medicare overpayments within 60 days.

For more information, please contact the author, David R. Ross, who served as Acting New York State Medicaid Inspector General under Governors Pataki and Spitzer, as well as General Counsel, Deputy Medicaid Inspector General, and Director of Audits and Investigations for the Office of the Medicaid Inspector General (OMIG). He can be reached at (518) 462-5601 or via e-mail at dross@oalaw.com.