A number of important healthcare decisions have come out of the Southern District of New York over the last week. Yesterday, we wrote about the Amarin case, where the court held that a firm may promote truthful and non-misleading off-label information about a drug under the First Amendment. Last week, the court also handed down an important False Claims Act decision related to overpayments from Medicare and Medicaid. The Affordable Care Act provides that any person who has received an overpayment from the government and knowingly fails to report and return it within 60 days after the date on which it was identified has violated the False Claims Act. However, the ACA does not define what it means to “identify” a false claim. Last week, the New York District Court was the first court to attempt to do so, and agreed with the government that the 60 day period begins when a “provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained.”
Read the opinion here
In Kane v. Healthfirst Inc., et al. and United States v. Continuum Health Partners Inc., et al., Mr. Kane, blew the whistle on his former employer, Continuum Health Partners Inc., after he allegedly provided his managers with an emailed spreadsheet of over 900 potential Medicare and Medicaid overpayments caused by a software glitch. He was fired soon after, and the company failed to return all of the overpayments due within 60 days; they instead spread payments out over several years.
Both the Department of Justice and the State of New York intervened, arguing that by “intentionally or recklessly” failing to take necessary steps to timely identify claims affected by the software glitch or timely reimburse the government for the overbilling, the defendants violated the False Claims Act and its New York corollary.
In their motion to dismiss the government’s complaint, the defendants argued that Kane’s email was notice only of potential violations and was not sufficient to trigger the 60-day time. The court disagreed. “Permitting a healthcare provider that requests and receives an analysis showing over 900 likely overpayments to escape FCA liability by simply ignoring the analysis altogether and putting its head in the sand would subvert Congress’s intent," states the opinion.
Despite this conclusion, the court did recognize the challenge imposed by the 60-day limit:
“Under the definition of “identified” proposed by the Government, an overpayment would technically qualify as an “obligation” even where a provider receives an email like Kane’s, struggles to conduct an internal audit, and reports its efforts to the Government within the sixty-day window, but has yet to isolate and return all overpayments sixty-one days after being put on notice of potential overpayments.”
The court went on to say that “while such claims might qualify as 'obligations,' the mere existence of an 'obligation' does not establish a violation of the FCA." In this context, "it is only when an obligation is knowingly concealed or knowingly and improperly avoided or decreased that a provider has violated the FCA." The court added "[t]herefore, prosecutorial discretion would counsel against the institution of enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments. Such actions would be inconsistent with the spirit of the law and would be unlikely to succeed.”