Virginia Qui Tam Law.com

Overpayments from medicare to providers, part two

This is part two of a two-part post on US ex rel Continuum Health Partners, et al.

Last time around we looked at the backdrop to the Kane opinion.  To sum up the most important points, Kane’s employer obtained Medicare and Medicaid overpayments through no fault of its own.  Instead, the overpayments were received as the result of a software glitch.  So far, Continuum was all in the clear, and this is the kind of thing that could happen to anyone.

Continuum asked Kane to investigate and prepare a spreadsheet showing the scope of the overpayments, and he did just that.  His spreadsheet contained more than 900 entries which in his view were erroneous.  He emailed this spreadsheet to his superiors with an email indicating that the problem may have been more serious than originally thought.  There is no dispute that Kane’s spreadsheet included some claims that had not been improperly billed – in fact approximately half of the claims in Kane’s spreadsheet were never actually overpaid.  At the same time, there was also no dispute that the spreadsheet correctly included a majority of the claims that had been erroneously billed.

Kane sent the email with his spreadsheet attached on February 4, 2011.  His employment was terminated on February 8, 2011.  Shortly thereafter Kane retained counsel and filed a qui tam action on behalf of the United States and the State of New York.  Continuum, meanwhile, did nothing further with Kane’s analysis or with most of the 900 claims he alleged were improperly submitted to and paid by Medicaid.  Beginning in February of 2011, Continuum began a slow trickle of repayments to the government, and when I say a “slow trickle” I mean five claims were repaid that month.

The relator’s qui tam Complaint – as well as the Complaint in Intervention ultimately filed by the United States and the state of New York – alleged that although Continuum began to reimburse the government for improperly billed claims in April 2011, it did not conclude until March 2013, “fraudulently delaying its repayments for up to two years after Continuum knew of the extent of the overpayments.”

In addition, it was not until the Government issued a Civil Investigative Demand in June of 2012, seeking additional information about the overpayments, that Continuum finally reimbursed the government for more than 300 of the affected claims. They further allege that “Continuum never brought Kane’s analysis to the attention of the Comptroller despite many communications with the Comptroller concerning additional claims to be repaid.”

As a result of all of these events, relator and the government alleged that defendants knowingly and recklessly failed to take the steps necessary to timely identify claims affected by the glitch and also knowingly or recklessly failed to reimburse the government for known overpayments.

Thus for the first time one of the most significant changes to the federal False Claims Act since the Civil War was clearly and squarely put before a district court – namely, the extent and reach of the amendments to the “overpayments” provisions of the FCA.

Reverse false claims and recovering overpayments

As discussed over the years on the blog, the federal False Claims Act was originally enacted during the Civil War. The law was more or less brought back to life by the 1986 amendments to the law.

By and large, the 1986 version of the federal FCA worked very well, with a couple of exceptions.  One big exception was collecting overpayments made by the United States.  For the most part, failing to return an overpayment by the government falls under what are known as the “reverse false claims” provisions of the FCA.  The problem was that the reverse false claims provisions of the 1986 FCA proved inadequate for these purposes, and that was one of the chief reasons for the several recent amendments (when I say “recent” I mean from 2009 to 2011.

The reverse false claims provisions of the FCA impose liability for any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).

The word obligation is clearly of primary importance here, but it was not defined until the recent amendments. Without a set definition, much ink was spilled over the word, and various courts reached various conflicting interpretations.

Because of those conflicting court decisions, when Congress amended the FCA it defined an “obligation” as “an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of an overpayment.” 31 U.S.C. § 3729(b)(3).

In addition to these important changes to the FCA, important changes to the overpayments framework were made by the Affordable Care Act.  The ACA requires a person who receives an overpayment of Medicare or Medicaid funds to “report and return” the overpayment to HHS, the state, or another party if appropriate.  The statute sets a deadline of 60 days from the date on which the overpayment was identified.  Any payment retained beyond that point constitutes an “obligation” under the FCA.   42 USC § 1320a-7k(d)(2)-(3).

US ex rel. Kane v. Continuum Health Partners, et al. defines the word “identified”

So, with the term obligation now clearly defined, defendants shifted their focus to the word “identified.”  In other words, they argued that an overpayment could be “identified” such that it becomes an “obligation” only when defendants know with absolute certainty that a payment is an overpayment.

Judge Ramos skillfully dealt with the defendants’ various arguments that “identified” means “known with certainty.” Admittedly, looking at the dictionary will not be is not of much use — definitions for the word “identified” come in all flavors.  Instead, after describing in great detail the  various amendments to the FCA and the ACA, Judge Ramos states: “It would be an absurd result to construe this robust anti-fraud scheme as permitting willful ignorance to delay the formation of an obligation to repay the government money that it is due.”

Chalk one up for common sense also.  If a private individual receives an overpayment from, say, a bank teller, that person has an affirmative obligation to return the amount of the overpayment as soon as he is aware of it.  Defendants argued, as they always do, that their accounting is much more complicated than a private individual conducting a retail banking transaction, and that is undoubtedly true.

But that still does not absolve a defendant from identifying overpayments and returning them to the United States.

Stay tuned for more folks, the overpayment cases are just starting to come to fruition.