The Rules of the 60-Day Overpayment Rule

October 12th, 2016

A federal court issued its first court opinion on Aug. 3 that interprets the False Claims Act’s requirement that overpayments be made within 60 days. This provision was enacted in 2010 by the Affordable Care Act. Previously, no court had made any rulings on this and CMS had not issued a memo or final regulations that could help hospitals or healthcare facilities interpret the rule.

The rule requires an overpayment by Medicare or Medicaid be returned within 60 days on which payment is identified. But what did “identified” mean? It wasn’t not defined in the statute. That changed with the Kane v. Healthfirst Inc. case, a U.S. District Court decision in the Southern District of New York.

In the case at bar, three hospitals billed Medicaid incorrectly because of a software problem. In 2011, a hospital employee, Robert Kane, prepared a spreadsheet showing more than 900 incorrectly filed claims of more than $1 million. Kane informed hospital administrators of the potential liability and was subsequently terminated. The hospital did not pay this incorrectly billed amount back until two years later. The hospital said this was a list of potential errors and overpayment was not “identified,” which would start the 60-day payment rule into motion.

The court sided with the Department of Justice and the New York State Attorney General. It argued that failure to pay this back in a timely way violated the False Claims Act and requested a penalty of $11,000 for each improperly retained overpayment.

Hospitals and other healthcare facilities should review internal compliance processes to reflect the court’s holding. Overpayments should be paid back when identified within 60 days.

Following this was the first false claims settlement for alleged violations of the 60 day rule was made in the amount of $6.88 million. It was made by a company that specializes in pediatric healthcare. The settlement was made with the U.S. Attorney’s Office for the northern and southern districts of Georgia. (Pediatric Services of America Healthcare, Pediatric Services of America, Inc., Pediatric Healthcare, Inc., Pediatric Home Nursing Services (collectively known as PSA) and Portfolio Logic)

See Kane v. Healthfirst Inc. et al, No. 1:2011cv02325 - Document 63 (S.D.N.Y. 2015) here.