District Court Offers Interpretation of “Identification” in Reverse False Claims Act Cases

As we have discussed in the past on this blog, the concept of “reverse false claims” has become more and more prevalent among False Claims Act cases. In general, a reverse false claim occurs when a government contractor, often a healthcare provider, receives overpayment for an otherwise legitimate invoice. Under the Affordable Care Act, the provider has 60 days to return the overpayment, or the failure to refund the payment could become a False Claims Act issue.

Most recently, parties facing liability have begun to litigate over the issue of “identification,” which refers to the moment in time when the provider actually identified the overpayment – thus triggering possible liability. Under the False Claims Act, a provider cannot be held liable for accidents, negligence, or mere oversight. Rather, intentional or reckless conduct is required. Accordingly, when applied in the reverse false claims context, a plaintiff must successfully assert that the provider knew of the overpayment and did not repay the money to the federal government.

In today’s case,^[1] we discuss a recent holding from the U.S. District Court for the Southern District of New York in which the court considered the identification requirement, which is a vital interpretation for determining when the 60-day refund period begins and ends.

Details of United States ex rel. Kane v. Healthfirst, Inc., et al.

According to the complaint, three New York hospitals submitted requests for reimbursement on behalf of Medicaid patients from the New York state Medicaid program. However, due to an alleged software glitch, these patients’ claims had already been reimbursed through a separate managed care plan, resulting in double payment.

After several months, the state Comptroller informed the hospital’s management team that there was an issue with reimbursement procedures. Management then hired an accountant to review the books, who thereafter submitted a spreadsheet identifying over $1 million in overpayments. This individual – the eventual relator – was terminated four days later. From there, the hospitals eventually refunded the payments, but the process took over two years to complete.

Court’s analysis of “identification”

In this case, the hospital management team asserted that the 60-day rule should not apply until each individual overpayment is positively ascertained. More specifically, the hospital claimed that the time clock should not have started until it had an opportunity to review each claim on the relator’s spreadsheet, which apparently took two years to complete.

By contrast, the relator asserted that the 60-day timeline should commence from the moment the overpayment is identified, with which the court agreed. In its holding, the court opined that overpayments are considered ‘identified’ “when a provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained.” In a practical sense, this distinction means that health care providers have 60 days from the day they were first made aware of a potential billing issue, as opposed to 60 days from the date the billing issue is confirmed through accounting and monthly billing practices. In other words, it is awareness of the problem versus verification that triggers the running of the clock.

The court further examined the legislative history behind the False Claims Act, as well as several other related statutes, to ultimately determine that Congress intended False Claims Act liability to attach “in circumstances where, as here, there is an established duty to pay money to the government, even if the precise amount has yet to be determined.” [2. Kane v. Healthfirst, Inc., No. 1:11-cv-02325 (S.D.N.Y. Aug. 3, 2015), http://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2011cv02325/377919/63/].

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