You may have heard some years ago that the Affordable Care Act established a “60-day overpayment rule” that requires a provider to report and return any overpayment from a federal health care program (such as Medicare or Medicaid) within 60 days of “the date on which the overpayment was identified” by the provider (for certain institutional providers, the overpayment must be returned by the later of 60 days or the date on which a corresponding cost report is due to the applicable federal health care program). Failure to return the overpayment within the required time period (60 days for physician practices) subjects the provider to liability under the False Claims Act and a fine of up to $11,000 per claim plus treble damages.
In an effort to clarify the rule, in 2012, CMS proposed that a provider has “identified” an overpayment when the provider has either “actual knowledge of the existence of the overpayment” or acted in “reckless disregard or deliberate ignorance of the overpayment”. 77 Fed. Reg. 9179, 9182-83. However, CMS received so much negative feedback regarding its proposed interpretation of the rule that it decided to delay final guidance until 2016. In the interim, the first court to review the 60-day overpayment rule has had an opportunity to give its opinion.
The Court’s Decision
In U.S. ex rel. Kane v. Continuum Health Partners, Inc., the U.S. Department of Justice, along with an ex-employee whistleblower, brought suit against Continuum Health Partners, Inc. on the grounds that Continuum failed to report and return over 900 Medicaid overpayments within 60 days of identification. The government argued that Continuum “identified” the overpayments when the ex-employee (who was charged with investigating a software glitch in the billing system) emailed a spreadsheet of over 900 potential Medicaid overpayments to upper management of Continuum. Continuum argued that it should not have been responsible to report or return the overpayments until it determined the precise amounts of the overpayments.
The Court sided with the federal government, denying Continuum’s motion to dismiss the case. The Court held that Continuum “identified” the overpayments for purposes of the 60-day overpayment rule when Continuum was put on notice that the overpayments were likely to exist. The Court explained that the spreadsheet provided by the whistleblower did not need to “conclusively establish each erroneous claim” and it did not need to “provide the specific amount owed” in order to put Continuum on notice of each overpayment, and thereby start the 60-day reporting clock.
What The Case Means for Providers
The Court’s decision in Continuum is not the last word on this issue. The Court left open what it means to be “put on notice” that an overpayment is likely to exist. Also, as noted, CMS may issue new guidance on the rule next year. Nonetheless, the decision can provide useful guidance for providers who have discovered a potential overpayment and want to know how to comply with the rule.
The Court explained that a provider has a duty to investigate and report an overpayment within 60 days after the provider has been put on notice that the overpayment is likely to exist. The Court also noted that a provider should not be liable under the False Claims Act for failing to return an overpayment within 60 days, if the provider (i) has reported the overpayment, (ii) is diligently investigating it, and (iii) does not intend to withhold repayment once the proper amount has been established.
In sum, the main message of the Court’s opinion is to Take Action and Report the Overpayment. If you discover a potential overpayment, begin investigation in a reasonable timeframe. If you are unable to determine whether the claim actually resulted in an overpayment within the 60-day time period, err on the side of caution by reporting and returning the potential overpayment. If the overpayment(s) are substantial in amount, you may consider withholding repayment; however, be sure to report to CMS (or the applicable federal health program administrator) as much information regarding the claim as possible, including your intention to return each overpayment once the amount to be repaid is established.
Finally, before taking any action, be sure to consult your legal counsel regarding the best options for you and your practice.