While medical practices are generally aware that relators and the government pursue allegations of false or duplicative claims to federal health care programs, a recent settlement reflects a growing trend of False Claims Act (FCA) allegations concerning the failure to report and return identified overpayments. On October 13, 2017, the US Department of Justice (DOJ) announced that it had reached a $450,000 settlement with First Coast Cardiovascular Institute, P.A. (FCCI) of Jacksonville, Florida in a qui tam lawsuit alleging that FCCI failed to promptly return identified overpayments from federal health care programs after the overpayments came to the attention of the practice’s leadership. Continue Reading DOJ Settlement with Florida Medical Practice Serves as a Reminder: Delayed Repayment to Federal Programs Can Have Significant Consequences

With health care becoming more consumer-driven, health care providers and health plans are wrestling with how to incentivize patients to participate in health promotion programs and treatment plans. As payments are increasingly being tied to quality outcomes, a provider’s ability to engage and improve patients’ access to care may both improve patient outcomes and increase providers’ payments. In December 2016, the Office of Inspector General of the US Department of Health and Human Services (OIG) issued a final regulation implementing new “safe harbors” for certain patient incentive arrangements and programs, and released its first Advisory Opinion (AO) under the new regulation in March 2017. Together, the new regulation and AO provide guardrails for how patient engagement and access incentives can be structured to avoid penalties under the federal civil monetary penalty statute (CMP) and the anti-kickback statute (AKS).

Read the full article.

On December 7, 2016, the Office of Inspector General of the US Department of Health and Human Services published a final rule containing revisions to both the federal Anti-Kickback Statute safe harbors and the beneficiary inducement prohibition in the civil monetary penalty rules. Effective January 6, 2017, the Final Rule modifies certain existing safe harbors and adds additional safe harbors to the Anti-Kickback Statute and incorporates Affordable Care Act-mandated exceptions into the definition of remuneration under the civil monetary penalty rules.

Read the full article here.

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.

On February 11, 2016, the Center for Medicare and Medicaid Services (CMS) issued the much-anticipated final rule concerning Section 6402(a) of the Affordable Care Act, the so-called “60 Day Rule.” This section requires Medicare and Medicaid providers, suppliers and managed care contractors to report and return an overpayment by the later of “60 days after the date upon which the overpayment was identified or the date any corresponding cost report was due, if applicable.” CMS delayed adopting the rule to address public comments concerning, among other things, (1) the meaning of “identify” (i.e., what starts the 60-day clock); and (2) the length of the “lookback period.” This rule is of critical importance to healthcare providers seeking to avoid liability for reverse false claims under the False Claims Act (FCA).

Under the new regulation, 42 C.F.R. § 401.305, the 60-day clock starts when a provider has identified an overpayment, which is defined as “when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.” Backing off from the proposed 10-year lookback period, CMS finalized a six-year lookback period.

The key element of the final rule clarifies that the 60-day clock does not start to tick while the provider is conducting its “reasonable diligence” into whether the provider has received an overpayment and is quantifying the amount of the overpayment. While this concept was discussed in the proposed rule’s preamble, many commenters expressed concern about the meaning of the proposed rule’s “reckless disregard or deliberate ignorance of the overpayment” standard and whether it allowed time for the provider to take the steps necessary to determine whether it received an overpayment and, if so, its amount. In addition, some viewed the court’s interpretation of the statute in United States ex rel. Kane v. Healthfirst, Inc. (see our prior blog post), as stating that the 60-day clock began as soon as the provider was “put on notice” of a potential overpayment. CMS’ final rule clearly states that this interpretation of Kane is incorrect – providers have the ability to conduct “reasonable diligence” into the fact and amount of the overpayment prior to the 60-day time period starting. However, CMS does not view the reasonable diligence period as never-ending. The preamble discusses a six-month time frame as a “benchmark” for how long the reasonable diligence should take absent “extraordinary circumstances” such as a physician self-referral law (Stark Law) issue. The rule also says that the 60-day clock begins on the day the provider received the information about the potential overpayment and failed to exercise reasonable diligence.

These “should have determined” and “reasonable diligence” concepts have implications for how the government and defendants will interpret the FCA’s reverse false claims provision, which is how the 60-day rule is enforced. Under the FCA, a person can be liable for “knowingly concealing or knowingly or improperly avoiding or decreasing” an obligation to the government. An overpayment that is not reported and returned within 60 days of identification becomes an “obligation.” Thus, we should expect that the government will be interested in examining whether a provider did or did not exercise reasonable diligence in evaluating this claim.

Look for additional forthcoming analysis on this rule on our Health Care Compliance and Defense Resource Center.

On August 3, 2015, the United States District Court for the Southern District of New York issued  an opinion interpreting the Affordable Care Act’s (ACA) so-called “60-day rule.”  In United States of America ex rel. Kane v. Continuum Health Partners, Inc., Case No. 11-2325.  The court denied the defendants’ motion to dismiss the government’s False Claims Act (FCA) complaint alleging failure to timely report and refund overpayments pursuant to the 60-day rule, in violation of the FCA’s “reverse false claims” provision.  In doing so, the district court provided the first guidance on what it means for an overpayment to be “identified” by a provider, thereby triggering the ACA’s 60-day repayment period under 42 U.S.C. § 1320a-7k(d).  The court held that the 60-day clock for an “identified overpayment” starts running “when a provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained.”

Continuum Health became closely-watched after the government decided to intervene—a first for reverse false claims cases based solely on the ACA’s 60-day rule—and after the Center for Medicare & Medicaid Services (CMS) decided in February to delay further guidance on the meaning of “identified” under Medicare Parts A and B for at least another year.  In a previous post, we set out the case’s statutory and factual background, the arguments advanced by the defendants in their motion to dismiss and the government’s responses.

On Monday, the court rejected the defendants’ argument that the relator’s e-mail did not “identify” overpayments within the meaning of the ACA (and thus that they did not mature into an “obligation” under the FCA), because the e-mail only described potential, not actual, overpayments.  In holding that notice of potential overpayments is sufficient to trigger the 60-day clock, the court acknowledged the practical difficulties this interpretation presents:

[I]t is certainly the case that the Government’s interpretation of the ACA can potentially impose a demanding standard of compliance in particular cases, especially in light of the penalties and damages available under the FCA. Under the definition of “identified” proposed by the Government, an overpayment would technically qualify as an “obligation” even where a provider receives an email like Kane’s, struggles to conduct an internal audit, and reports its efforts to the Government within the sixty-day window, but has yet to isolate and return all overpayments sixty-one days after being put on notice of potential overpayments. The ACA itself contains no language to temper or qualify this unforgiving rule; it nowhere requires the Government to grant more leeway or more time to a provider who fails timely to return an overpayment but acts with reasonable diligence in an attempt to do so.

Nonetheless, the court held these concerns were mitigated because merely establishing an overpayment does not itself establish an FCA violation—a relator or the government must also prove knowing concealment or knowing and willful avoidance or decreasing of the repayment obligation under the FCA’s reverse false claims provision, 31 U.S.C. § 3729(a)(1)(G).  “Therefore, prosecutorial discretion would counsel against the institution of enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments.  Such actions would be inconsistent with the spirit of the law and would be unlikely to succeed.”

In addition, the court interpreted “avoidance” as used in § 3729(a)(1)(G) to include both “the act of evading or escaping” and “behavior where an individual is put on notice of a potential issue, is legally obligated to address it, and does nothing.”  Given that the procedural posture of this case was a motion to dismiss, the court did not make a determination about whether the facts supported a conclusion that the defendants “avoided” the obligation.  The court simply found that the government alleged sufficient facts to adequately plead this claim.

This decision—particularly until CMS issues its final rule, which could help to clarify this issue—shows that how providers address and investigate whether they have received an overpayment is coming under increasing scrutiny by the government under the auspices of the FCA.  Furthermore, given the court’s recognition of the practical difficulties with its approach to the meaning of “identified”—and its reliance on the amorphous concept of “prosecutorial discretion” to alleviate such difficulties (discretion which, in any event, does not apply to relators)—this decision is by no means the last word from the courts on this issue, which will continue to be hotly contested in overpayment cases at the district court and, ultimately, appellate level.

Last week, the U.S. Departments of Justice (DOJ) and Health and Human Services (HHS) announced that the Health Care Fraud and Abuse Control (HCFAC) Program has recovered over $27.8 billion since its inception in 1996.  In FY 2014 alone, with a collective budget of $571.7 million, HCFAC efforts recovered $3.3 billion from individuals and companies facing allegations of fraud related to health care.  Jointly directed by the Attorney General and Secretary of HHS, HCFAC seeks to:

  • Coordinate federal, state and local law enforcement efforts relating to health care fraud and abuse with respect to health plans;
  • Conduct investigations, audits, inspections and evaluations relating to the delivery of and payment for health care in the United States;
  • Facilitate enforcement of all applicable remedies for such fraud; and
  • Provide education and guidance regarding compliance with current health care law.

Over the past three years, for each dollar spent on health care-related fraud and abuse investigations the government has recovered $7.70.  In other words, HCFAC efforts since 2012 have given the United States a staggering 770 percent return on investment.

Utilizing a two-pronged approach to combat fraud and abuse, ushered in with new authorities granted by the Affordable Care Act (ACA), the United States is increasingly implementing cross-departmental preventative measures to curtail health care fraud and abuse, and reduce “pay and chase” efforts initiated after payments are made on claims that are identified as potentially fraudulent.  For example, the Health Care Fraud Prevention and Enforcement Action Team (HEAT)—a program jointly initiated in 2009 by DOJ and HHS—now investigates cases using real-time data analysis to identify fraudulent claims before payments are made to the provider.  This real-time analysis could replace lengthy subpoena, production and account assessment; correspondingly, investigators are moving much faster from fraud identification, to arrest and prosecution.  The HEAT program is charged with the following:

  • Marshaling significant resources across government to prevent waste, fraud and abuse in the Medicare and Medicaid programs;
  • Reducing “skyrocketing” health care costs and improving the quality of care;
  • Highlighting best practices by providers and public sector employees; and
  • Building upon existing partnerships between DOJ and HHS, like HCFAC’s Medicare Fraud Strike Force.

As a complement to the HEAT program’s efforts on the civil side, the Medicare Fraud Strike Force program utilizes investigative and analytical resources from the HHS Office of the Inspector General (HHS-OIG), the Federal Bureau of Investigation (FBI), and DOJ’s Criminal Division’s Fraud Section.  Initially launched as a pilot program in selection regions, Strike Forces now operates in nine geographic areas—Brooklyn, NY; Chicago, IL; Dallas, TX; Detroit, MI; Houston, TX; Los Angeles, CA; Miami, FL; Southern Louisiana; and Tampa, FL.  Strike Force prosecutors have filed over 963 cases, obtained 1,443 guilty pleas and 191 jury trial convictions, and sent 1,197 defendants to an average imprisonment of 47 months.  In FY 2014, DOJ opened 924 new criminal health care fraud investigations so this trend will continue in years to come.

DOJ Continues to Pursue False Claims Act Litigation to Combat Health Care Fraud

Armed with the False Claims Act (FCA), the United States has pursued criminal and civil investigations implicating nearly every facet of the health care industry, including:

HCFAC’s efforts translated into $2.3 billion in settlements and judgments in FY 2014, generating a total of $15.2 billion in recoveries resulting from health care fraud allegations since January 2009.

HHS-OIG Coordinates with Medicare Strike Force and Other Enforcement Actions

With a FY 2014 budget of approximately $213 million, HHS-OIG investigations resulted in 867 criminal actions against individuals or entities and 529 civil actions, including FCA and unjust-enrichment lawsuits filed in Federal district court, civil monetary penalties settlements, and administrative recoveries resulting from provider self-disclosures.  HHS-OIG also excluded 4,017 individuals and entities from Medicare, Medicaid and other federal programs in California, Louisiana, North Carolina, Pennsylvania and Texas.  Finally, HHS-OIG engaged in audits and evaluations to identify focus areas where there is a high incidence of questionable or improper conduct in Medicare and Medicaid.  In FY 2014, HHS-OIG identified dozens of issues, including:

  • Beneficiaries not lawfully present in the United States;
  • Improper payments for evaluation and management (E&M) services;
  • Ambulatory surgical services payment differential in Medicare; and
  • Electronic Health Record fraud vulnerabilities.

CMS Continues to Promulgate Program Integrity Strategy for Medicare, Medicaid and the Children’s Health Insurance Program

In support of its strategic goal of improving program integrity for Federal health care programs, CMS is guided by four major principles—prevention, detection, transparency and accountability, and recovery.  With just over $250 million in FY 2014 funding, CMS engaged extensively in each focus area.

In support of its prevention efforts, CMS utilized its ACA-established authority to enact moratoria on new home health and ambulance enrollments in fraud “hot spot” areas of the country.  In FY 2014, the moratoria were focused on Broward County, FL and several counties in Michigan and Texas and were extended to ground ambulance suppliers in the Philadelphia area.  CMS also utilized the following prevention tools:

CMS’ detection efforts included strengthened program integrity activities in Medicare Advantage and Medicare Part D.  These efforts were complemented by marketing surveillance activities, including secret shopping and compliance actions.

The Secretary of HHS’ key initiative to improve transparency and accountability, is the Healthcare Fraud Prevention Partnership, which works to bring together public and private, federal and state-level individuals, and organizations combatting health care fraud across all payers.

With regard to recovery efforts, CMS continued to use its authority to suspend payments to providers during investigations of “credible allegations of fraud” and may also suspend payments if “reliable information of an overpayment exists.”  Among several other efforts, CMS has also designated field offices in the HEAT cities of Brooklyn, Los Angeles and Miami to coordinate with law enforcement, facilitate data analysis and expedite suspension requests.

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This latest report from HCFAC re-emphasizes the continued and ever-growing threat to providers and other companies involved in the delivery of health care in the United States.  As we first reported last month, DOJ and HHS will continue to obtain high returns on the United States’ investment in prosecutorial resources, so the health care industry should prepare for increasingly innovative investigation and enforcement activity in the coming year.

READ THE FULL HCFAC REPORT

With a motion to dismiss pending in the United States District Court for the Southern District of New York, United States of America ex rel. Kane v. Continuum Health Partners, Inc., Case No. 11-2325, is the False Claims Act (FCA) case to watch in 2015.  It is the first “reverse false claims” case where the United States intervened, and its only allegation involves a failure to timely report and refund overpayments to the government.

In 2010, the Affordable Care Act (ACA) modified the FCA’s reverse false claims provision (31 U.S.C. § 3729(a)(1)(G)), making a party liable for failing to report and return an overpayment within 60 days of the date it is “identified.”  See 42 U.S.C. § 1320a−7k(d).  Five years after the passage of the ACA, however, it remains unclear what it means for an overpayment to be “identified,” thereby triggering the 60-day clock.  The Centers for Medicare and Medicaid Services (CMS) has not issued any guidance concerning refunding overpayments to Medicaid.  In February 2012, CMS issued proposed regulations on this topic for Medicare Parts A and B, which it has yet to finalize.  In fact, CMS just announced, on February 13, 2015, that it will delay its final guidance until at least February 2016—likely well after the district court issues its decision in Continuum Health.

According to the government’s complaint, filed on June 27, 2014, three hospitals in New York City operated by Continuum Health (which is now part of Mount Sinai Health System) submitted improper claims to Medicaid in 2009 and 2010, as a result of a glitch with its billing software. The New York State Comptroller first notified Continuum Health in September 2010 that it had erroneously billed Medicaid for a small number of claims.  Continuum Health then conducted an internal investigation.  On February 4, 2011, the relator e-mailed a spreadsheet to his superiors at Continuum Health with what he believed to be about 900 improperly-submitted claims resulting from the same software issue.  Four days later, Continuum Health terminated the relator.

Over the next two years, Continuum Health refunded the overpayments associated with the initial list of 900 claims.  The government alleges that Continuum Health made these refunds largely in response to continued inquiries from the NYS Comptroller about additional claims. And, it claims that Continuum Health refunded 300 of the overpayments only after it received a Civil Investigative Demand from the U.S. Department of Justice.  Nonetheless, the government did not intervene in the case until a year after Continuum Health refunded all overpayments to Medicaid.

In its motion to dismiss, Continuum Health makes three arguments:

First, it contends that it had no “obligation” to report and refund the overpayments.  The relator’s February 4, 2011, e-mail did not “identify” any overpayments, thereby triggering the 60-day clock.  Rather, the e-mail was a preliminary list of potential overpayments that, by the relator’s own admission, required “further analysis to corroborate his findings.”  According to Continuum Health, the government’s position that “mere notice of a potential but unconfirmed overpayment” will “identify” that overpayment is untenable.  Indeed, 60 days is not enough time to complete the sort of complex factual investigation and legal analysis that is typically required to determine whether there is an actual overpayment.

Second, Continuum Health argues that, even if an “obligation” existed after the relator sent his e-mail, it did not knowingly “conceal[]” or “avoid[]” that obligation.  Continuum Health argues that concealing and avoiding require affirmative action, not the failure to act.

Finally, Continuum Health claims that it does not have an obligation to repay the federal government, because Medicaid is operated at the state level.  Consequently, any alleged failure to report and refund overpayments does not create liability under the FCA.

The government responds to Continuum Health’s arguments in turn.

First, it argues that when construing the term “identified,” the court should look to CMS guidance concerning refunding overpayments to Medicare Advantage and Part D.  Under that guidance, a healthcare provider “has identified an overpayment” when it “has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment.”  According to the government, Continuum Health failed to act with reasonable diligence after it received the relator’s e-mail.  The government rejects Continuum Health’s interpretation of “identified”—claiming that it allows the provider to choose when, or even if, to start the 60-day clock, despite how much information it possesses concerning the overpayment.

Second, the government argues that Continuum Health “knowingly avoid[ed]” its repayment obligation because, after it learned that it received overpayments, it “failed to take remotely reasonable steps to return those funds to Medicaid.”

Finally, the government contends that the FCA has always reached Medicaid claims.  Indeed, according to the government, the ACA defines “overpayment” to specifically include overpayments to Medicaid.

Although briefing closed with Continuum Health’s reply on December 8, 2014, for healthcare providers throughout the United States, many issues remain open.  With further CMS guidance on the meaning of “identified” delayed for another year, the decision in Continuum Health will likely provide the first guidance about what the law requires.  We will continue to monitor this case and keep you updated.