Roughly $2.95 for each $1 overpaid (plus legal costs and the overpayment) based on an August 24, 2016, U.S. Attorney’s Office press release regarding settlement of State of New York, ex rel. Robert P. Kane v. Healthfirst, Inc. et al case in the U.S. District Court for the Southern District of New York. Defendants previously lost a motion to dismiss this case based, in part, on the fact that defendants actually identified and repaid the overpayments. Specifically, about $1 million in overpayments were presented to the defendants in the form of a spreadsheet in February 2011. Subsequently, defendants repaid the overpayments in more than 30 installments from April 2011 to March 2013. Notwithstanding, the government took the position that, under the False Claims Act, repayment should have been made within 60 days of the date of the claims were identified in the spreadsheet. Defendants argued, among other things, that there was ambiguity about the term “identify” as used in the False Claims Act and that the spreadsheet was merely the first component of an investigation into the overpayments that was ongoing through the repayment process. Almost a year after losing the motion to dismiss, defendants settled the case for $2.95 million.
Likely detrimental to defendants in this case were facts that appear problematic – such as firing the person who identified the overpayments (and who later became the relator) several days after the spreadsheet was created. Frighteningly, though, the overall scenario of identifying an overpayment and trying to deal with the situation in a way that achieves the two goals of repaying overpayments and maintaining a financially viable company is a situation that is likely to affect many providers. Because the look-back period for the return of overpaid funds is six years, any overpayment situation involving an institutional or recurring procedural error may result in a significant overpayment amount that could exceed a provider’s ability to repay in 60 days. Although it may seem reasonable to a provider in such a situation to do as was done in this case, namely paying back the overpayment on a self-developed schedule that involves a drawn out investigation, this case shows that liability under the False Claims Act is not eliminated merely by the fact that the provider is paying or has paid the overpayment back (except where repayment is within 60 days).
Unfortunately the formal resolution process for a provider that can’t pay an identified overpayment within 60 or survive an offset – a request for an extended repayment schedule (ERS) – involves providing CMS with significant information and the CMS definition of “hardship” is likely much more austere than a provider’s definition of “hardship.” As a result, many providers that feel that an overpayment situation creates a hardship may not qualify for the ERS process. Due to the significant penalties possible for an untimely repayment, when financial realities make it difficult to fully repay an overpayment within 60 days or absorb an offset against future payments, the best course of action may be to report the overpayment to the applicable government agency or contractor and seek to work out a payment or offset schedule – although this is likely best done with consultation of legal counsel to help ensure that risk to the provider is minimized. Notably, if an overpayment results from fraud or abuse (i.e. kickback or self-referral violations), existing self disclosure protocols may be viable and would toll the deadline for return of overpayment if timely submitted.