Kusserow on Compliance: Lessons for providers on the 60-day repayment ruling

The U.S. District Court for the Southern District of New York has sent shockwaves through the health law community with its decision on the 60-day rule in the case of Kane v. Healthfirst, Inc. et al. and U.S. v. Continuum Health Partners Inc. et al. The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) requires providers to report, return, and explain overpayments to government agencies within 60 days of the overpayment being identified (60-Day Rule). Under the law, the failure to timely return an overpayment constitutes a “reverse false claim.” Under the False Claims Act (FCA), the government can pursue civil penalties against providers who fail to return an overpayment to the government.

Since the passage of the 60-day rule, providers have had a very difficult time determining when the 60-day overpayment clock starts ticking because the word “identified,” which triggers the report and return clock, was not defined. In 2012, CMS issued a Proposed rule stating that a provider has “identified” an overpayment when it has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” A Final rule on the topic has not been issued. Thus, the rule as to how to determine when the “clock” began remained unclear, until now.

The relator in the case, a Continuum employee, was asked to investigate an error and determine the scope of potential liability. Reporting back to superiors through email, he determined that there were potentially 900 claims representing overpayments exceeding $1 million. He was subsequently terminated and filed a qui tam lawsuit. Both the Department of Justice (DOJ) and the State of New York intervened in the cases against three defendant hospitals in the Continuum health network. The hospitals’ arguments, which were rejected by the court, included that: (1) the definition of “identified” was “classified with certainty;” (b) notice of potential violations alone did not trigger the 60-day clock; and (c) the government’s interpretation would “impose an unworkable burden” on providers.

The court favored the government’s definition of ‘identified,’ which would be satisfied when an entity is simply put on notice that a certain claim may have been overpaid. Finding otherwise would permit willful ignorance to delay the formation of an obligation to repay the government money that is due. The court found that the clock begins ticking when a provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained. The court also noted that the 60-day window for returning an overpayment is an “obligation” that does not establish liability under the FCA. “Rather, in the reverse false claims context, it is only when an obligation is knowingly concealed or knowingly and improperly avoided or decreased that a provider has violated the FCA.” Moreover, “well-intentioned” providers “working with reasonable haste” to address the overpayments identified should be safeguarded by prosecutorial discretion because “many actions would be inconsistent with the spirit of the law and would be unlikely to succeed.” 

Impact of the ruling on providers

  • Potential whistleblowers may be encouraged to report under the new definition of “identified.”
  • CMS may now be forced to issue its Final rule regarding the 60-day rule.
  • Providers face a more difficult challenge of meeting the limited time frame and need to:
    • document working with reasonable haste to avoid violating the 60-day rule;
    • ensure their hotline is operating efficiently in encouraging employees to report problems;
    • take care to monitor complaints that are received;
    • be timely with their internal investigations regarding potential overpayments; and
    • quickly assess the credibility of the source of information indicating potential overpayments.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.