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False Claims Act Penalties Have Risen for the Second Time Within the Last Year

March 31, 2017 by  
Filed under False Claims Act, Featured

CB006524(March 30, 2017):  The False Claims Act is the primary civil enforcement tool utilized by the U.S. Department of Justice to address false claims submitted to government programs and contracts by individuals and entities.  The statute was first passed during the Civil War in 1863 in an effort to address the wrongful conduct of was profiteers.  Among its various provisions, the False Claims Act includes specific measures intended to encourage the disclosure of fraud by private persons through the filing of a whistleblower suit. Under these provisions, a private person (often referred to as a “relator”) can may bring a False Claims Act lawsuit on behalf of, and in the name of, the United States.  If a recovery is made, the relator may be eligible to a share of these monies.

I. Recoveries Under the False Claims Act in 2016 Were Substantial:

Most of the False Claims Act cases brought against health care providers are filed by whistleblowers. As set out in a December 2016 DOJ Press Release, during Fiscal Year 2016 the federal government obtained more than $4.7 billion in False Claims Act settlements and judgments. Of this total, $2.5 billion came from individuals and entities in the health care industry.

II. The Penalties That May be Assessed Under the False Claims Act Vary, Depending on the Date a False Claim or Statement to the Government Was Made:

A person found to have violated the False Claims Act may be liable for both civil penalties and treble damages. Under the 1986 amendments to the False Claims Act the range of civil penalties for violations of the False Claims Act from $5,000 to $10,000.  Since that time, the following additional adjustments have been made:

  • For false claims or statement made after October 23, 1996, but before August 1, 2016, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $5,500 and the maximum penalty is $11,000, per false claim or statement.
  • For false claims or statements made on or after August 1, 2016, but before February 3, 2017, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $10,781 and the maximum penalty is $21,563, per false claim or statement.

Although the amount of civil penalties assessed in False Claims Act cases almost doubled in August 2016, additional increases were recently announced.  On February 3, 2017, DOJ issued a Final Rule further adjusting the amount of civil monetary penalties that may be assessed under the False Claims Act to account for inflation.  For false claims or statements made after February 3, 2017, the minimum penalties which may be assessed under 31 U.S.C. 3729 is $10,957 and the maximum penalty is $21,916, per false claim or statement.

III. Health Care Providers Must Ensure that Their Claims to Medicare and / Medicaid Meet Statutory and Regulatory Requirements for Coverage and Payment:

In today’s health care billing environment, where the number of electronic claims submitted to Medicare can be significant, the potential penalties an organization could face for the submission of false claims can add up quickly. In light of the increases in penalty amounts implemented in August 2016 and in February 2017, we should expect to see future challenges under the Eighth Amendment of the Constitution.  As you will recall, the Eighth Amendment prohibits the imposition of “excessive fines,” or fines that are grossly disproportional to the gravity of an offense.

robert_w_lile-150x1501Liles Parker attorneys have extensive experience working on False Claims Act cases.  If your practice or health care organization has questions regarding the False Claims Act, give us a call.  For a free consultation, call Robert W. Liles.  He may be reached at:  (202) 298-8750.

 

Application of the “60-Day Overpayment Rule” Under the False Claims Act

September 14, 2016 by  
Filed under False Claims Act, Featured, Medicare Audits

Gavel and Books(September 14, 2016):  On March 23, 2010, the Affordable Care Act (ACA) was signed into law. Among its various provisions, §6402(a) of the ACA established new requirements under the Social Security Act.  Under §1128J(d)(1) of the Social Security Act if a person[1] receives a Medicare overpayment, it must be reported and returned to the appropriate contractor.  Moreover, the appropriate Medicare contractor must be notified in writing of the reason for the overpayment.  Importantly, an overpayment must be reported and returned by the later of:

 

(A)     the date which is 60 days after the date on which the overpayment was identified; or

(B)     the date any corresponding cost report is due, if applicable.[2] (emphasis added).

I.  Penalties Under the False Claims Act:

Under §1128J(d)(3) of the Social Security Act, if a Medicare overpayment were to be retained by a health care provider or supplier after the deadline for reporting and returning an overpayment, it would be considered to be an “obligation”[3] and could give rise to liability under the civil False Claims Act.[4]  A person found to have violated this statute may be liable for both civil penalties and treble damages. The amount of civil penalties that may be imposed for each false claim depends on when each was made:

(a) For claims or statements made after October 23, 1996, but before August 1, 2016, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $5,500 and the maximum penalty is $11,000.

(b) For claims or statements made on or after August 1, 2016, but before January 1, 2017, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $10,781 and the maximum penalty is $21,563.[5]

II.  When is an Overpayment “Identified”?

On February 13, 2012, the Centers for Medicare and Medicare Services (CMS) first published a Proposed Rule outlining how the provisions of §1128J(d)(1) of the Social Security Act would be implemented.[6]  CMS issued its Final Rule on Final Rule on February 12, 2016.[7]  At that time, the agency commented that:

The 60-day time period begins when either the reasonable diligence is completed or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment.” [8]

The Final Rule further notes that a provider can establish that it demonstrated reasonable diligence in assessing a potential overpayment if it conducted a “timely, good faith investigation of credible information, which is at most 6 months from receipt of the credible information, except in extraordinary circumstances.”[9]

III.  Meaning of “Reasonable Diligence”

CMS’ final rule still leaves questions unanswered as to what exactly represents “reasonable diligence” by a provider. The final rule explains that the 60-day window starts while the healthcare provider is executing “reasonable diligence” as to whether the provider has received any overpayments and the total amount of overpayments. Furthermore, the preamble of the final rule discusses a six-month interval as a goal for providers to conduct reasonable diligence into potential overpayments absent extraordinary circumstances.

IV.  Application of the 60-Day Overpayment Rule in a False Claims Act Case:

While it has only been a little more than six months since the Final Rule on the 60-day overpayment rule has been published, the first case dealing directly with this issue, United States ex rel. Kane v. Healthfirst, Inc., et al., recently settled for $2.95 million on August 23, 2016.

The case arose out of a qui tam action, which alleged that the Mount Sinai Health System violated the False Claims Act (FCA) because it did not fulfill its repayment obligation until nearly two years after it was notified about the potential overpayments. One of the main issues in the case was the meaning of “identify” as used in the ACA. In this case, the court held that an overpayment is identified at the moment a provider is put on notice of a potential overpayment; rather then when the full extent of an overpayment is conclusively ascertained.

V.  Conclusion:

The recent Healthfirst settlement is merely the first of what will likely be many cases brought against a health care provider or supplier under the False Claims Act for the failure to report and return an alleged overpayment in a timely fashion.  Now, more than ever, it is imperative that your organization have an effective Compliance Program in place so that any potential overpayments can be promptly identified, investigated, and repaid to the government, as necessary.

robert_w_lilesRobert W. Liles, M.B.A., M.S., J.D., serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law. Liles Parker is a boutique health law firm, with offices in Washington DC, Houston TX, San Antonio TX, McAllen TX and Baton Rouge LA. Robert represents physicians and other health care providers around the country in connection with Medicare revocation actions. Our firm also represents health care providers in connection with federal and state regulatory reviews and investigations. For a free consultation, call Robert at: 1 (800) 475-1906.

[1] The term ‘‘person’’ as a provider (as defined in 42 C.F.R. §400.202) or a supplier (as defined in 42 C.F.R.§400.202).

[2] Section 1128J(d)(2).

[3] As the term “obligation: is defined in 31 U.S.C. §3729(b)(3) for purposes of liability under the False Claims Act.

[4] In addition to liability under the False Claims Act (31 U.S.C. §3729), should a provider or supplier fail to properly report and return an overpayment, the provider could also be subject to civil monetary penalties and / or exclusion from participation in the Medicare program.

[5]   81 Fed. Reg. 26127, 26129 (May 2, 2016).

[6] 77 Fed. Reg. 9179 (February 16, 2012), titled Medicare Program; Reporting and Returning of Overpayments.

[7] 81 Fed. Reg. 7654 (February 12, 2016), titled, Medicare Program; Reporting and Returning of Overpayments.

[8]  81 Fed. Reg. 7654, 7661 (February 12, 2016).

[9] 81 Fed. Reg. 7654, 7662 (February 12, 2016).

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