Three hospitals within New York’s Mount Sinai Health System recently agreed to pay $2.95 million to resolve allegations that they knowingly retained Medicaid overpayments, violating both federal and New York False Claims Acts. This case serves as a critical reminder to healthcare providers and facilities of their legal obligations under the 60-day overpayment rule, a key component of the Affordable Care Act (ACA).

Overview of the False Claims Act Case

The case, U.S. ex rel. Kane v. Healthfirst (S.D.N.Y.), alleged that the hospital system failed to timely return more than $844,000 in Medicaid overpayments caused by a billing software error. Although the original claims were not fraudulent, the violation stemmed from the failure to return the overpayments within 60 days of becoming aware of the error—a violation of the ACA’s “report and return” provision.

Understanding the 60-Day Rule for Overpayments

Under the ACA, healthcare providers who receive Medicare or Medicaid overpayments must report and return them within 60 days of identification. Failing to do so creates a legal “obligation,” triggering False Claims Act (FCA) liability.

The trial court clarified that an overpayment is considered “identified” not only when a provider confirms an error but also when the provider is put on notice of a potential overpayment. The court further stated that FCA liability applies only if there is knowing concealment or avoidance of the obligation to repay.

Key Takeaways for Healthcare Providers

• Prompt Investigation is Critical: Once alerted to a potential billing error, providers must act quickly to investigate and, if necessary, return overpayments. 
• Liability Can Arise from Inaction: Even unintentional delays in returning overpayments can trigger FCA penalties if not handled diligently. 
• First-of-Its-Kind Settlement: This case is one of the earliest and most prominent examples of FCA enforcement based on a reverse false claim theory under the ACA. 

How Nicholson & Eastin, LLP Can Help

At Nicholson & Eastin, LLP, we have extensive experience defending healthcare providers in cases involving:

• False Claims Act investigations 
• Medicare and Medicaid overpayment audits 
• CMS enrollment issues and billing privilege revocations 
• Healthcare compliance and internal audits 

If your practice is facing a potential Medicaid or Medicare overpayment issue, it’s essential to act swiftly and consult legal counsel to avoid triggering False Claims Act liability.

• Learn more about our Government Investigations
• Explore our expertise in Health Care Compliance
• View related matters under Health Care Payor Disputes

Contact Us Today

We routinely assist healthcare providers, physicians, and health systems with internal compliance reviews, audit responses, and False Claims Act defense strategies. Don’t wait until it’s too late—proactive legal guidance can make all the difference. Contact us today.