On August 24, 2016, three New York hospitals agreed to a $2.95 million settlement for alleged violations of the federal False Claims Act and New York’s equivalent false claims statute. The three hospitals, Mount Sinai Beth Israel, Mount Sinai St. Luke’s and Mount Sinai Roosevelt, were accused of failing to remit overpayments to Medicaid within 60 days of identifying the overpayment, as required by the Affordable Care Act (ACA). The government alleged that the hospitals—all part of Continuum Health Partners during the time of the alleged overpayments—began receiving overpayments from secondary payors, including Medicaid, in early 2009 due to a software compatibility issue. The hospitals were first notified of these potential overpayments in September 2010 by the New York State Comptroller. In February 2011, a Continuum employee, who later filed the qui tam suit, notified Continuum’s management of approximately 444 claims—totaling about $1 million—that were improperly billed to Medicaid. The hospitals remitted overpayments on five of these claims in February 2011, and also returned the overpayments that were brought to its attention by the New York State Comptroller between March 2011 and February 2012. In March 2013, more than two years after meeting with the Comptroller and conducting internal investigations, the hospitals finally returned all remaining overpayments. If the hospitals chose not to settle the dispute, the court could have required the hospitals to pay treble damages and subjected them to nearly $5 million dollars in penalties under the False Claims Act ($11,000 for each overpayment held in violation of the 60-day window), all in addition to returning the approximately $1 million in overpayments.
This represents one of the first settlements assessing damages and penalties resulting from a qui tam suit for the failure to return overpayments within the 60-day window since promulgation of the February 2016 final rule by the Centers for Medicare & Medicaid Services, which we discussed earlier this year.
Pursuant to the ACA, the 60-day time frame begins when an overpayment is identified. The final rule, finalized in March 2016, clarifies that an overpayment is “identified” when a person has determined or should have determined through the exercise of reasonable diligence that it has received an overpayment and quantified the overpayment amount. The government or whistleblower must also prove knowing concealment or willful avoidance to prove a false claims case. In August 2015, although all claims had been fully refunded, Federal District Judge Edgardo Ramos rejected the hospitals’ motion to dismiss, setting the stage for settlement negotiations of the penalties for tardy repayment. It is unclear whether the settlement would have been less if the hospital did not sit on the refunds for two years after they were identified. For now the rule is clear, identified overpayments become false claims after 60 days after which all false claims penalties can accrue. The settlement is a wake-up call to hospitals and health systems to have processes in place to timely refund identified payments within the 60 days.
Thank you to Justin Hickerson, Belmont University College of Law, for his help in preparing this article.