Ask healthcare providers if they have an obligation under the law to report and repay overpayments made by a government payor like Medicare or Medicaid, and you almost always will receive an enthusiastic “yes.”  However, many providers are not aware that a lesser-known provision in the Affordable Care Act (“ACA”) creates specific liability under the Federal False Claims Act if a provider fails to disclose or refund Medicare and Medicaid overpayments within 60 days after the date the overpayment is identified.  This requirement means exactly what it says.  Once an overpayment is identified, the clock starts ticking, and the provider has 60 days to repay the funds or face False Claims Act liability.

False Claims Act actions can be very costly because they come with a penalty that ranges between $5,500 and $11,000 on each claim for which the provider failed to return funds.  For example, if you discover that you were overpaid for 25 Medicaid claims and failed to report and repay the funds within 60 days, you could be subject to a penalty of 25 times $11,000 or $275,000.  This is true even if those 25 claims only amounted to $500.00.   Providers also can be subject to treble damages, meaning the actual recoupment could be increased by three times the amount paid.  The government has the authority to enforce the False Claims Act, however unlike most laws, the Federal False Claims Act also allows outsiders, such as current or former employees to file a qui tam action on behalf of the government and receive between 15% and 30% of any recovery or settlement.

A key question that a provider should ask when considering the 60-day repayment and reporting requirement:  what does it mean for an overpayment to be “identified”?  In 2012, CMS clarified its interpretation of “identify.”  The proposed regulation defines “identify” to mean the date a person has actual knowledge of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment.  CMS commented that, when a provider receives information regarding a possible overpayment, it has an obligation to make a reasonable inquiry with “deliberate speed” to determine whether there was an overpayment.  Thus, under CMS’ interpretation of the law, if the provider conducts an investigation of potential overpayments with deliberate speed, the 60-day time period for reporting and returning any overpayment begins at the conclusion of the provider’s investigation determining there was in fact an overpayment.  In contrast, if the provider receives information that an overpayment may have occurred and fails to make a reasonable inquiry, the 60-day repayment/reporting window starts on the date the provider received the information that the possible overpayment existed.

Because the calculation of the 60-day timeframe hinges on conducting an investigation with deliberate speed, providers should make sure that they have a policy in place that requires their employees to document the steps they are taking to investigate the alleged overpayment.  Providers should also have a clear chain of reporting, so that potential overpayments do not sit on an employee’s desk for weeks or months without inquiry.

Although there is little case law interpreting how this provision will be applied, a False Claim Act lawsuit was recently filed in New York against a large provider that had identified an overpayment and repaid the funds to the federal government.  The basis of the lawsuit is that the provider failed to report and repay the identified overpayment within 60 days. Although this case has not been decided by a court, it is telling that federal prosecutors joined the lawsuit.  This indicates that the government believes that the affirmative duty to repay within 60 days is important and will be enforced through the False Claims Act.