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NY Federal Judge Rules on False Claims Act’s 60-Day Rule

on Friday, 4 September 2015 in Health Law Advisory: Zachary J. Buxton, Editor

The August 3, 2015 ruling in Kane ex rel. United States et al. v. Healthfirst et al. is the first judicial interpretation of the 60-day rule under the federal False Claims Act. Many seminar hours have been spent among health lawyers as they sought to understand what it would take to “identify” an overpayment by the government, thus invoking a duty to report and refund an overpayment under Medicare within 60 days. This new feature of the False Claims Act was enacted as a part of the Affordable Care Act.

Kane is a qui tam relator case under the False Claims Act, in which the whistleblower is the very hospital employee who compiled the e-mail list of 900 claims affected by a software error that, according to the state Comptroller, may have caused claims to be improperly submitted. The e-mail was directed to hospital management and identified the claims that included the erroneous billing code.

From the government’s perspective, the 60-day deadline for hospital reporting and refund began on the date of the e-mail. In contrast, the hospital argued that the lawsuit should be dismissed; the e-mail was a preliminary list of the universe of claims potentially affected by the software error, but the overpayment was not “identified” by the list. In other words, there was no amount attached to the overpayment at that time.

District Judge Edgardo Ramos of the Southern District of New York denied the hospital’s motion to dismiss, allowing the government’s and the whistleblower’s claim to move forward in the court. This ruling represented a finding by Ramos that Kane’s e-mail “identified” overpayments within the meaning of the ACA, and that 60 days later, there was an obligation on the part of the hospital to report and refund the overpayments referenced in the e-mail. Ramos reviewed legislative history with regard to the meaning of “identified,” and concluded that Congress intended FCA liability to attach when there is an established duty to pay, even if the precise amount due and payable has not been determined.

Ramos found an “established duty” after the Comptroller alerted the hospital to the software error and Kane notified the hospital management “of a set of claims likely to contain numerous overpayments.” “To allow Defendants to evade liability because Kane’s e-mail did not conclusively establish each erroneous claim and did not provide the specific amount owed to the Government” would not align with congressional intent, and that a holding consistent with the hospital’s arguments would “make it all but impossible” for the government to enforce the reverse false claims provision in the health care industry. Ramos suggested that health care institutions could, under such an interpretation, avoid repayment by ignoring information on apparent overpayments.

Ramos recognized that the government’s construction of the 60-day rule would impose “a demanding standard of compliance in particular cases,” imposing the burden of FCA penalties despite the defendant’s best, but unsuccessful, efforts to report and refund the overpayment within 60 days. “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 to timely return an overpayment but acts with reasonable diligence in an attempt to do so.” Ramos warned that for those providers who attempt in good faith, but fail, to report and refund within 60 days, “prosecutorial discretion would counsel against the institution of enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments.” He seemed to counsel federal prosecutors that aggressive prosecution of such well-intentioned providers would be inconsistent with the spirit of the law and would be unlikely to succeed.

Barbara E. Person

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