Last week, New York Attorney General Eric T. Schneiderman announced that three hospitals in New York’s Mount Sinai Health System are paying a total of $2.95 million to resolve allegations that the hospitals knowingly retained over $844,000 in overpayments made by Medicaid in violation of the federal and New York False Claims Acts.  The case was predicated on a False Claims Act theory stemming from the hospitals’ violation of the 60-day known overpayment rule. More specifically, in U.S. ex rel. Kane v. Healthfirst (S.D.N.Y.), it was alleged that the hospital system learned of a billing error that caused the submission of incorrect Medicaid claims. The error stemmed from a software glitch, and there was no allegation that the initial claims were false. Instead, the relator alleged a reverse false claim theory on the grounds that the system failed to return the overpayment within 60 days as required by federal law. As background, in 2010, Congress passed the Patient Protection and Affordable Care Act of 2010 (“ACA”), a broad healthcare reform statute that, among other things, included a provision prohibiting retention of Government overpayments in the healthcare context. Specifically, the ACA requires a person who receives an overpayment of Medicare or Medicaid funds to “report and return” the overpayment to HHS, the State, or another party if appropriate.  The statute sets a deadline for such reporting and returning: An overpayment must be reported and returned within sixty days of the “date on which the overpayment was identified” (the “sixty-day rule” or “report and return” provision), and any overpayment retained beyond that point constitutes an “obligation” carrying liability under the False Claims Act.  More simply stated, the ACA provides that any person who has received an overpayment from Medicare or Medicaid and knowingly fails to report and return it within sixty days after the date on which it was identified has violated the False Claims Act.

In denying the hospital’s motion to dismiss, the trial court determined that an overpayment was “identified” for purposes of the 60-day rule when “a provider is put on notice of a potential overpayment,” but also limited its ruling by stating the provider must also have knowingly concealed or knowingly avoided an obligation to repay. This case emphasized the need for swift action when a potential billing error is discovered.  This is also a first-of-its-kind settlement and is likely a harbinger of additional enforcement activity in this space.

Nicholson & Eastin, LLP routinely handles overpayment matters of this nature, and if you need assistance in evaluating a potential overpayment please contact us for a consultation.