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. (more…)
Eventually, any health care organization with an effective compliance program is very likely to discover an issue that raises potential liability and requires disclosure to a government entity. While we largely discuss False Claims Act (FCA) litigation and defense issues on this blog, a complementary issue is how to address matters that raise potential liability risks for an organization proactively.
On August 11, 2017, a group of affiliated home health providers in Tennessee (referred to collectively as “Home Health Providers”) entered into an FCA settlement agreement with the US Department of Justice (DOJ) and the US Department of Health and Human Services Office of Inspector General (OIG) for $1.8 million to resolve self-disclosed, potential violations of the Stark Law, the Federal Anti-Kickback Statute, and a failure to meet certain Medicare coverage and payment requirements for home health services. This settlement agreement underscores the strategic considerations that providers must weigh as they face self-disclosing potential violations to the US government. (more…)
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).
The Office of Inspector General (OIG) recently published a final rule regarding its exclusion authorities. The final rule goes into effect March 21, 2017, and expands OIG’s authority to exclude certain individuals and entities from participating in federal health care programs under section 1128 of the Social Security Act.
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 [...]
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). [...]
U.S. Departments of Justice and Health and Human Services Issue FY 2014 Health Care Fraud and Abuse Control Program Report
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 [...]
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” [...]
On February 13, 2015, the Center for Medicare and Medicaid Services (CMS) announced a one-year extension to its normal three-year deadline to finalize the proposed rule explaining the Affordable Care Act’s “60-Day Rule” – leaving providers and their counsel with the same unanswered questions on how to comply and manage potential False Claims Act (FCA) risk.
When Congress passed the Affordable Care Act in 2010, it amended the Social Security Act to add Section 1128J. 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 published a proposed rule applying this provision to Medicare Part A and B overpayments on February 16, 2012. The proposed rule defines when an overpayment is “identified” as when the provider or supplier has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate indifference of the overpayment.” CMS also stated in the preamble that the 60-day clock would not start running until after the provider or supplier had an opportunity to undertake a “reasonable inquiry” into the basis of the alleged overpayment “with all deliberate speed” after receiving information concerning a potential overpayment. The proposed rule also contained a lengthy ten-year “look back” period.
In the extension announcement, CMS explained that both public and internal stakeholder comments raised “significant policy and operational issues that need to be resolved in order to address all of the issues raised … and ensure appropriate coordination with other government agencies.” CMS specifically pointed to the need to collaborate with the U.S. Department of Health and Human Services Office of Inspector General and the U.S. Department of Justice in developing the final rule. These outstanding issues met the Secretary’s standard for showing “extraordinary circumstances” to obtain the rulemaking extension.
This extension indicates that the agencies recognize the far-reaching impact the final rule will have on the healthcare industry and development of the “reverse false claims” theory under the FCA. The deadline for publishing the final rule is February 16, 2016. In the interim, the statutory requirement is in effect in the absence of a final rule.
We will keep watch for further guidance from CMS on this issue.