Hospital System Responds in ‘Reverse False Claims Act’ Overpayment Suit

As discussed in a previous Arent Fox Client Alert, 42 U.S.C. § 1320a-7(k)(d) establishes that anyone who receives an overpayment from Medicare or Medicaid and does not report and return the overpayment within 60 days of “identification” is subject to FCA liability. In this rare instance of DOJ intervention on this issue, the government asserted in its complaint-in-intervention that Continuum and Mount Sinai failed to return over $1 million in overpayments, identified by the Comptroller of New York, in the requisite 60-day period.

Continuum and Mount Sinai disputed the government’s allegations in their motion to dismiss, making three main arguments:

1. The hospital system first argues that the complaint fails to allege that the hospital system had an “obligation” to report or return overpayments at the point in time alleged by the DOJ. Defendants make the argument that both the plain language of the FCA and its associated legislative history differentiate between potentially-identified overpayments and confirmed overpayments. Only when overpayments are confirmed — which the hospital system stresses is a time-consuming, multi-faceted process — does any FCA obligation arise. Accordingly, the hospital system’s obligation was not identified, the hospital system’s duty to report and return overpayments was not triggered, and the 60-day clock for returning overpayments did not begin, as claimed by the DOJ.

2. The hospital system also argues that the complaint fails to allege that the hospital system knowingly concealed, avoided, or decreased an “obligation.” The hospital system analyzes the plain language definitions of conceal, avoid, and decrease, and makes the argument that the government has failed to provide evidence beyond “an alleged failure to act.”

3. Finally, the hospital system argues that the complaint fails to allege that the hospital system had an obligation to pay or transmit money to the federal (as opposed to the state) government. As a result, defendants claim the alleged Medicaid overpayments could not create any obligation under the FCA.

The developments in this case bear watching, and Arent Fox’s Health Care and False Claims Act teams will continue to monitor the Continuum case and other relevant False Claims enforcement actions, court decisions, and guidance. If you have any questions or need assistance, please contact David S. Greenberg or Linda A. Baumann in our Washington, DC office; Connie A. Raffa or Jill A. Steinberg in our New York office; Thomas E. Jeffry Jr. or Mary Carter Andrues in our Los Angeles office; or the Arent Fox professional who normally handles your matters.