Healthcare News & Insights

First-ever ‘reverse false claims’ lawsuit closes: Court says …

A high-profile False Claims Act (FCA) lawsuit has finally come to a close — and the decision will set a higher bar for FCA compliance in the future. 

book and gavelWhen it was implemented, the Affordable Care Act (ACA) created new provisions in the FCA. The ACA made it a violation if providers failed to return Medicare overpayments within 60 days of discovery.

Unfortunately, the specifics about how these “reverse false claims” worked were muddy. Particularly, there were questions about when an overpayment is officially “identified,” starting the countdown clock for providers.

But a decision in U.S. ex rel. Kane v. Healthfirst Inc. offers some guidance on the matter.

Overpayment ‘identification’ issue

The lawsuit began after employees at the New York-based health system, Healthfirst, complained to the Department of Justice (DOJ) that the organization had withheld overpayments beyond the 60-day rule.

David Kane, an employee of the system, was asked to conduct a financial analysis of claims to see if there were any improper payments.

In his first analysis, Kane did find irregularities showing overpayments and erroneous billing, and notified the organizations’ leaders. Due to a software glitch, the system had billed secondary payors, like Medicaid and Medicare, for ineligible services.

However, the system delayed returning the payments to conduct further analysis of other claims and find other overpayments.

The DOJ sued, claiming that Healthfirst had violated the 60-day rule, even though the system had already began returning most of the overpayments. The feds argued that when Kane emailed the board with his results, the 60-day countdown began. Delaying the reimbursement to get the scope of the issue was still a reverse false claim violation.

Healthfirst argued that a notice of a potential overpayment wasn’t the same as officially identifying how much was overpaid.

It also argued that following the DOJ’s definition would be a burden for facilities. They would have to continually audit and review claims and finances for overpayments since small notices or errors, like Kane’s email, could trigger the 60-day window.

The decision

The judge ruled in the government’s favor, though – rejecting Healthfirst’s arguments that the DOJ’s definition of identified was burdensome.

The court acknowledged that the DOJ’s definition did put a lot of pressure on providers to review claims and finances. However, the judge noted, the intention of the law was to ensure that providers were acting quickly to correct billing errors and return overpayments, even if they aren’t completely certain of the scope of the issue.

This is just the first lawsuit dealing with “reverse false claims,” so courts will continue to provide guidance as more gray areas around the matter get hashed out in lawsuits.

However, this decision still sets a heavy precedent for hospital leaders.

It means they’ll have to stay constantly vigilant about detecting and returning Medicare overpayments. Leaders should set specific procedures for these issues and train staff to use the proper channels when errors are located.

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