According to a recent New York District Court decision, whether providers are subjected to an enforcement action under the False Claims Act for failing to report and return an overpayment within the sixty-day window should turn on whether they have been naughty or nice after learning of the potential of an overpayment. In this case, at least at the motion to dismiss stage, the court concluded that the providers had been naughty, which, based on the factual recitations seemed a pretty easy call. Essentially, the providers were alerted to the potential of substantial overpayments by an employee tasked with examining an overpayment issue. Four days after providing his employer with a spreadsheet detailing the overpayments, the employee was fired and his spreadsheet “filed”. A couple months later, the employee filed his qui tam action in which the United States and the state of New York eventually intervened.
Naughty or nice became important because of the court’s analysis of what constitutes “identification” of an overpayment for purposes of triggering the 60 day report and return obligation. In this regard, according to the decision, at least one thing is certain. The answer is not when the amount of the overpayment is finally calculated with certainty. In response to this argument by the defendants, the court observed this would create ” . . . a perverse incentive to delay learning the amount due . . . relegating the sixty-day period to merely the time within which they would have to cut the check.”
The Government took the position that an overpayment is identified when the recipient is put on notice that a certain claim may have been overpaid. The court agreed that defining “identified” ” . . . such that the sixty day clock begins ticking when a provider is put on notice of a potential overpayment , rather than when the overpayment is conclusively ascertained, is compatible with the legislative history of the FCA and the FERA highlighted by the Government.”
The court characterized the rule derived from a review of legislative history as “unforgiving”, noting that it provides no leeway for the recipient of an overpayment who ” . . . 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.” ” . . .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.” Any relief for the provider that is diligently attempting to determine whether the potential overpayment is factually and legally an actual overpayment and, if so, the amount of the overpayment to be returned rests with prosecutorial discretion, which according to the court, ” . . . would counsel against the institution of enforcement actions aimed at well-intentioned health care providers working with reasonable haste to address erroneous overpayments” because in such a situation the provider would not have acted with reckless disregard, deliberate ignorance or actual knowledge of the overpayment, a requirement of a FCA claim.
In fact, in comments to the court in this case, the Government made clear that this was not a case of a provider working diligently on the claims and on the sixty-first day is still scrambling with its spreadsheets. “You know, the Government wouldn’t be bringing that kind of claim.”
So the moral of the story is if a messenger notifies you of a potential overpayment, be nice, act with diligence to investigate and quantify any overpayment, and for goodness sake don’t shoot the messenger.