While there are a number of executive policies that will be affected by the presidential election, there are several reasons to expect modest change in the government’s approach to False Claims Act (FCA) actions. The most significant reason for this expectation is that the vast majority of FCA cases are filed by relators on behalf of the government and the Department of Justice (DOJ) has historically viewed itself as obligated to conduct an investigation into those cases. There is little reason to suspect the financial motivations that encourage relators and relators’ counsel to continue to bring cases under the FCA will diminish. That said, the possibility of repeal of the Affordable Care Act (ACA) could remove or change some of the ACA’s FCA amendments that enhanced the ability of certain individuals to qualify as a relator. The composition of the Supreme Court may have the most significant impact on the FCA given the Court’s increasing interest in this area.
As part of a settlement agreement reached on August 23, three hospitals and their former parent system agreed to pay $2.95 million to resolve state and federal False Claims Act (FCA) allegations that they failed to investigate and repay overpayments from the New York Medicaid program in a timely manner under the so-called “60 Day Rule.” The allegations were originally made by a former employee via a 2011 qui tam suit, United States of America ex rel. Kane v. Continuum Health Partners, Inc.
Under the 60 Day Rule, enacted as part of the Affordable Care Act in 2010, providers are required to report and return overpayments within 60 days of identification. When “identification” happens has been the subject of much debate, and was one of the main issues in the decision issued by the US District Court in the Southern District of New York last year, which denied Continuum’s motion to dismiss the government’s complaint. Despite repaying all of the improper claims, the government alleged in Kane that Continuum and the hospitals “fraudulently delay[ed] repayments” for up to two years after it had identified them. As has become the custom in the Southern District of New York, the settlement agreement contains certain admissions by Continuum concerning the covered conduct, including that beginning in 2009, a software compatibility issue caused them to mistakenly submit improper claims to the New York Medicaid program, the billing errors were brought to their attention over the course of late 2010 and early 2011, and that Continuum began to reimburse Medicaid for the 444 improper claims in February 2011 and concluded repayment in March 2013.
While Kane was the first court to directly grapple with the issue of when a provider had “identified” an overpayment, the Kane court’s interpretation of “identify” has been essentially supplanted by the final rule released by Medicare in February 2016. The final rule makes clear that a provider can conduct “reasonable diligence” into whether it has received an overpayment and can quantify the amount of such overpayment without triggering the 60-day clock. Even with the final rule, there continue to be significant questions about what constitutes “reasonable diligence” and how the rule intersects with the FCA’s reverse false claims cause of action, which only is triggered by knowingly concealing or knowingly and improperly avoiding or decreasing an overpayment retained in violation of the rule.
The Kane case and settlement confirm the interest of the government and relators in examining overpayment and 60 Day Rule issues under the FCA. The potential ramifications can be significant — the settlement amount is more than triple the $844,000 in overpayments Continuum originally received from (and repaid to) Medicaid. It may be advisable for providers to review their policies and procedures for addressing and resolving potential overpayment issues and maintaining documentation of those efforts to defend their actions if questioned by the government.
In many industries, but especially health care, the amount of regulation and guidance issued by the responsible agencies is tremendous and continues to grow. The Centers for Medicare and Medicaid Services (CMS) is no exception. In a recent appeal by a home health agency, the Tenth Circuit examined the “pace [of CMS’] frenetic lawmaking,” finding that CMS applied a homebound status definition and documentation requirement that did not exist at the time the claims were submitted.
In Caring Hearts Personal Home Services., Inc. v. Burwell, No. 14-3243, 2016 BL 171256, (May 31, 2016), CMS litigated an alleged overpayment of about $800,000 for medically unnecessary home health services through the entire administrative process. The services were provided in 2008, but, according to the Tenth Circuit, CMS applied the more restrictive 2010 version instead. CMS took the position in this litigation that the 2010 changes simply clarified the prior rule and made it more consistent with the governing statute. The Administrative Law Judge, the Department Appeals Board and even the United States District Court took the same view. On appeal the Tenth Circuit disagreed.
The Tenth Circuit found that the 2008 version of the regulation applied to the claims, that Caring Hearts home health services and documentation content complied with that regulation, and that the statute did not clearly support CMS’ litigation position. In 2008, CMS’s homebound definition stated that, “[g]enerally speaking, a patient will be considered homebound if they [sic] have a condition due to an illness or injury that restricts their ability to leave the place of residence except with the aid of: supportive devices such as crutches, canes, wheelchairs, and walkers … .” In 2010, CMS added a second, more restrictive requirement – the patient must also “normal[ly]” be unable “to leave home” even with a wheelchair and any attempt to leave home must also “require a considerable and taxing effort.” As for documentation requirements, no requirements existed in 2008. The specific requirements CMS said the agency did not comply with were not created until 2010.
While Caring Hearts was dealt the lemon of defending this case, the opinion yields some potentially valuable lemonade in useful lessons and precedents for the rest of the health care community. First, due to the way the case was argued below, the Tenth Circuit was not presented with a direct Chevron challenge to CMS’ homebound definition or documentation requirements. While the court took some pains to say that it was not opining on whether the current homebound definition or documentation requirements were consistent with the statute, 42 U.S.C. § 1395f(a)(8), the opinion lays out a roadmap to this challenge.
Second, the court had the unusual opportunity to opine on section of the Social Security Act, 42 U.S.C. § 1395pp. This section creates, according to the Tenth Circuit, “a sort of good faith affirmative defense” that permits payment for claims that are not payable for specific reasons, including for patients who do not qualify as homebound, if the provider did not know, and could not reasonably have been expected to know, that payment would not be made for such items or services. In this case, the agency argued that it could not have been expected to know CMS’ interpretation of the 2008 rules, and therefore, CMS should deem the claims payable under 42 U.S.C. § 1395pp. The Tenth Circuit agreed with the agency’s argument in vacating the district court decision.
The 42 U.S.C. § 1395pp defense could be a relevant point to make in many cases involving medical necessity or clinical judgment issues that the government has shown interest in pursuing under the False Claims Act other than homebound status, such as hospice eligibility and the appropriateness of inpatient status for a patient under the current “two midnight” rule. For example, in U.S. ex rel. Paradies v. AseraCare, Inc., the court ruled, in considering hospice eligibility, that the difference of opinion in clinical judgment between medical experts alone cannot support a falsity claim under the False Claims Act (FCA). Similarly, a provider’s good faith reliance on a contemporaneous medical opinion of a physician that the patient was homebound or hospice eligible could support finding the claim payable under 42 U.S.C. § 1395pp. The standard “could not reasonably have been expected to know” appears to be less demanding that the FCA’s “reckless disregard or deliberate ignorance” standard.
However, this case does not lessen the burden the health care industry faces in achieving full compliance with voluminous federal regulatory requirements. The Tenth Circuit noted that “currently about 37,000 separate guidance documents can be found on CMS’s website — and even that doesn’t purport to be a complete inventory.” And this is only one federal program.