OIG Exclusion Case Study: The Impact of a False Claims Act Judgment.

(August 23, 2018): In 2008, after learning that a Texas-based laboratory services company was submitting false claims to the Medicare program, a private citizen filed suit, on behalf of the United States, against the laboratory services company under the qui tam provisions of the civil False Claims Act. The qui tam provisions of the False Claims Act (31 U.S.C. §§ 3729 – 3733) allow private parties, commonly referred to as “whistleblowers” or “relators” to sue individuals and entities on behalf of the government if the defendants have “knowingly” submitted false claims to the government for payment.[1] In this case, the United States intervened in the case against the laboratory services company in 2011. In April 2018, the U.S. District Judge hearing the case ruled against the laboratory and its physician owner and awarded the United States $30.5 million for violations of the False Claims Act. Although there are a number of lessons (especially with respect to individual liability) to be learned from the underlying case, the purpose of this article to examine the collateral administrative actions that were taken against the physician owner and the laboratory services company.

I. Parallel Administrative Action — OIG Exclusion Action Overview:

In a letter dated August 21, 2015, the Department of Health and Human Services, Office of Inspector General (OIG) proposed to exclude the laboratory services company, and its owner, from participation in Medicare, Medicaid, and other Federal health programs under 1128(b)(7)[2] of the Social Security Act, for a period of 15 years. The OIG based its proposed exclusion action on the submission of claims from August 2009 to January 2010, that the laboratory and its owner (referred to as Petitioners in the administrative case), “ knew or should have known were not provided as claims and were false or fraudulent.”

[3]

II. Why Did the OIG Exercise its Exclusion Authority Under 1128(b)(7)?

More often than not, when dealing with allegations of the civil False Claims Act, the OIG will choose to exercise its permissive discretion to exclude an individual or entity under Section 1128(b)(7) of the Social Security Act.[4] In this particular case, the OIG did, in fact, exercise its authority to exclude the Petitioners for 15 years.

III. Petitioners’ Appeal of the OIG’s Exclusion Decision:

In response to the proposed OIG exclusion action, in October 2015, the Petitioners filed a timely request for a hearing before an Administrative Law Judge (ALJ). Additionally, due to the unavailability of the ALJ first assigned to hear the case, a different ALJ was appointed to handle the hearing on June 2017. Throughout this period (from late 2015 to early March 2018), both sides actively engaged in discovery and a lively exchange of motions ensued. Finally, in late March 2018, the substitute ALJ assigned to take over the case conducted an in-person hearing on the exclusion action.

IV. Issues Considered by the Administrative Law Judge:

Simply stated, the ALJ hearing the case was required to consider two issues:

ISSUE #1: Did the OIG have a basis to exclude the Petitioners from participating in Medicare, Medicaid and all other federal care programs for 15 years under 42 U.S.C. §1320a-7(b)(7)? As set out under 42 U.S.C. §1320a-7(b)(7), the Secretary may exclude individuals and entities from participation in any federal health care program (as defined in section 1320a-7(b)(f)[5]) if the Secretary determines that individual or entity has committed fraud, kickbacks and / or other prohibited activities.[6]

As the ALJ’s opinion notes, after conducting the administrative hearing in this case, a U.S. District Court with jurisdiction over the parallel civil qui tam case issued a summary judgment decision against the Petitioners, finding the liable for violations of the False Claims Act. Despite the fact that the elements considered by the U.S. District Court were essentially the same as those to be considered by the ALJ when addressing the exclusion action, the ALJ chose not to broadly apply judicial estoppel in this case. This decision appears to have been primarily based on the fact that the time frames considered by the two forums were different. The ALJ also noted that he was charged to conduct a de novo review of the evidence when assessing the exclusion decision by the OIG. The ALJ therefore ruled that it was more appropriate for him to issue a decision based on the merits. Upon consideration of the evidence in this case, the ALJ found that:

(1) Petitioners presented or caused to be presented to an agency of the United States the claims at issue in this case.
(2) The claims Petitioners presented or caused to be presented to Medicare were false.
(3) Petitioners should have known that the claims for services they presented or caused to be presented to Medicare were false.
(4) Petitioners’ equitable defenses do not serve to undermine the OIG’s basis for excluding them.
(5) The statute of limitations is not implicated by discussion of Petitioners’ conduct preceding the six-year timeframe that forms the basis of the proposed exclusion.[7]

In light of these findings, after conducting a de novo review of the evidence, the ALJ found that the OIG did, in fact, have a basis for excluding the Petitioners based solely on the claims they submitted within the six-year statute of limitations.

ISSUE #2: Was the 15-year exclusion period reasonable? Therefore, when deciding whether the period of exclusion imposed by the OIG was “reasonable,” the ALJ assessed the following five criteria outlined under 42 C.F.R. §1001.901(b)(1)-(5): [8]

(1) The nature and circumstances surrounding the actions that are the basis for liability, including the period of time over which the acts occurred, the number of acts, whether there is evidence of a pattern and the amount claimed; As the ALJ noted when reviewing the conduct at issue, during the period of time examined by the U.S. District Court, the Petitioners submitted more than 26,000 claims that resulted in more than $10 million in losses to the government. Even if the ALJ limited his review to the relevant conduct during the six-year period covered during this administrative hearing, the Petitioners still submitted 571 improper claims to Medicare. Additionally, despite the Petitioners’ assertions to the contrary, the ALJ found that the Petitioners’ conduct did, in fact, represent a pattern of improper behavior.

(2) The degree of culpability; When considering the Petitioners’ degree of culpability, the ALJ found that the physician owner and the lab were “highly culpable.” The ALJ further found that the Petitioners were not victims of careless billing by others. Rather, he ruled that the physician owner was closely involved in the lab’s operations and exercised significant control over the organization’s billing staff. As the ALJ wrote: “There is nothing in the record to suggest Petitioners were simply absentee landlords who had no agency concerning their billing scheme. . . “

(3) Whether the individual or entity has a documented history of criminal, civil or administrative wrongdoing (The lack of any prior record is to be considered neutral); Although the recent U.S. District Court ruling against the Petitioners for more than $30 million squarely fits within this regulatory factor, the judgment could not have been considered at the time of the exclusion action by the OIG because it had not been rendered at that time. As a result, there was no prior history of wrongdoing that the OIG could have considered. Having said that, there is nothing in the regulation that limits the OIG’s consideration of improper wrongdoing to only actions that have resulted in a judgment. Therefore, the ALJ held that it was proper for the OIG to consider the Petitioners documented conduct when it assessed the 15-year period of exclusion.

(4) The individual or entity has been the subject of any other adverse action by any Federal, State or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for the imposition of the exclusion; Although the ALJ in this case declined to consider the U.S. District Court ruling as res judicata, the OIG still argued that the ALJ consider the ruling on the False Claims Act constituted an “adverse action.” After considering the positions advanced by the parties, the ALJ held that the requirements set out under 42 C.F.R. §1001.901(b)(4)[9] had not been met, primarily because the ALJ was not persuaded that a ruling by a Federal U.S. District Court could be considered an adverse action by a “agency or board.” Based on this assessment, the ALJ chose not to consider this factor in his analysis of the reasonableness of a “15-year” exclusion.

(5) Other Matters as Justice May Require. Several points were advanced by the Petitioners when addressing this factor. First, Petitioners argued that the Medicare program need no protection from them. Noting that they had improperly billed the Medicare program for millions of dollars, the ALJ concluded that should not be trusted to access program funds. The Petitioners also argued that if they excluded from participation, it would negatively impact patient access to lab care. The ALJ noted that the Petitioners failed to show that there was lack of laboratory facilities in the Houston area. Therefore, Petitioners absence would not negatively impact patients. In fact, the ALJ concluded that the Medicare “will undoubtedly be better off without them.” After considering the evidence, the ALJ found that an exclusion period of 15 years was reasonable in this case. Notably, the ALJ stated that the “circumstances surrounding Petitioners’ billing scheme indicate Petitioners are highly untrustworthy.” The ALJ further found that the mitigating evidence presented by the Petitioners kept the period of exclusion from be much lengthier than the 15-year period of excluded assessed by the OIG.

V. Points Learned from this Exclusion Case:

Point #1. Impact of a False Claims Act Judgment. The administrative collateral risks associated with violations of the False Claims Act cannot be underestimated. In this case, where the False Claims Act violations went to trial and resulted in a judgment, the OIG had no reason to waive its permissive exclusion authority. How could this have been avoided? It is important to keep in mind that the vast majority of cases brought by whistleblowers / relators under the civil False Claims Act are not intervened by the government and result in the dismissal of the case. Of the False Claims Act cases that are intervened, most result in a settlement with the government. When settling a False Claims Act case, defense counsel will often seek to wrap-up any outstanding administrative risks (such as exclusion) as well. In order to waive its permissive exclusion authority, the OIG typically requires that health care providers and entities enter into a Corporate Integrity Agreement (CIA) as part of the settlement. In this case, for whatever reason, the False Claims Act case was not settled and went to trial, resulting in a significant judgment and the imposition of a 15-year exclusion.

Point #2: Issue Preclusion is a Real Possibility. As you will recall, the U.S. District Court in the associated False Claims Act case granted the OIG’s Motion for Summary Judgment. In asserting its arguments in the administrative hearing, the OIG urged the ALJ to narrowly apply estoppel and rely on the District Court’s finding that the claims submitted by the Petitioners were false. The ALJ cited several reasons for not adopting the District Court’s holding in this regard. Nevertheless, it isn’t much of a stretch to imagine a slightly different set of facts, where issue preclusion may have been granted. For instance, if the judgment was final and the time period of the claims at issue were the same, the ALJ may have been persuaded to apply estoppel in this case.

Point #3: ALJs will Give Broad Deference to the OIG When Assessing the Reasonableness of an Exclusion Action. It is important to remember that when making this type of determination, an ALJ is limited to a significant extent and cannot substitute his judgment for that of the OIG. Instead, the ALJ can only consider whether the period of exclusion was within a “reasonable range.”[10] As discussed in the Federal Register more than 25 years ago:

The OIG’s broad discretion is also reflected in the language of § 1001.2007(a)(2), restricting the ALI’s authority to review the length of an exclusion imposed by the OIG. Under that section, the ALI’s authority is limited to reviewing whether the length is unreasonable. So long as the amount of time chosen by the OIG is within a reasonable range, based on demonstrated criteria, the ALI has no authority to change it under this rule. We believe that the deference § 1001.2007(a)(2) grants to the OIG is appropriate, given the OIG’s vast experience in implementing exclusions under these authorities.[11]

VI. Conclusion:

This case illustrates the collateral impact of a False Claims Act judgment on the participation status of a health care provider. While the judgment itself is serious, being excluded from participation in federal health care programs is as serious, if not more serious, than the judgment. As excluded parties, the physician owner and the lab are effectively out of business. Moreover, the physician owner may find it difficult to obtain employment from another provider due to his exclusion status. Unfortunately, there is a very real chance that these actions are merely the proverbial “tip of the iceberg” in terms of what lies ahead for the physician owner and the lab. The exclusion action qualifies as an adverse action and will be reported to the National Practitioner Databank (if it has not already been reported). Additionally, to the extent that the physician owner and the lab are participating providers in any private payor insurance programs, it is very likely that they have an affirmative obligation to notify the plans of both the False Claims Act judgment and the exclusion action (depending on how their participation agreement is worded). This can result in both private payor audits of similar claims and in termination of a provider’s participation in the payor’s plan.

How should you react if faced with a similar situation? Contact your health lawyer and make sure that you are prepared to address the various collateral administrative adverse actions that may flow from a False Claims Act judgment and / or an being excluded from participation in federal health care programs. Considering your options at the initiation of a False Claims Act investigation may help you avoid some of the consequences discussed above.

Need help conducting your monthly required Exclusion Screening? Call us at 1-800-294-0952 or fill out the form below for a free quote and assessment fo your needs.

Robert W. Liles serves as Managing Partner at the health law firm, Liles Parker, Attorneys and Counselors at Law. Liles Parker attorneys represent health care providers and suppliers around the country in connection with UPIC audits, ZPIC audits, OIG investigations and Medicare exclusion actions. Is your practice facing alleged violations of the False Claims Act? We can help. For a free initial consultation regarding your situation, call Robert at: 1 (800) 475-1906.

[1] Under the qui tam provisions of the False Claims Act, whistleblowers can are entitled to receive 15% to 25% of any recovery if the United States intervenes in the case, or 25% to 30% if the government declines to intervene in the case that the whistleblower has brought. Defendants who violate the civil False Claims Act are liable for three times the government’s damages plus significant civil penalties for each false claim that was improperly submitted for payment.

[2] Section 1128(b)(7) of the Social Security Act

[3] ALJ decision, citing Petitioner’s Request for Hearing, Ex. A at 2.

[4] In those cases where the OIG concludes that exclusion is not necessary in order to protect the integrity of the Medicare program, it will typically require that the individual and / or entity enter into a Corporate Integrity Agreement (CIA). The purpose of the CIA is to strengthen the provider’s compliance program and reduce the level of risk to the Medicare program.

[5] Under 42 U.S.C. §1320a-7(b)(f), “Federal health care program” is defined as:

(1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under Chapter 89 of Title 5); or

(2) any State health care program, as defined in section 1320a-7(h).

[6] The Secretary has delegated the authority to impose an exclusion to the OIG, pursuant to: 42 C.F.R. §1001.901(a).

[7] 42 C.F.R. §1001.901(b)(1)-(5).

[8] An abbreviated set of these five criteria were set out in the OIG’s Final Rule, ”Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rule.” See 81 Fed. Reg. 88,334 (Dec. 7, 2016). The full regulatory language of 42 C.F.R. §1001.901(b)(1)-(5) reads as follows:

“(b) Length of exclusion. In determining the length of an exclusion imposed in accordance with this section, the OIG will consider the following factors—

(2) The degree of culpability;

(3) Whether the individual or entity has a documented history of criminal, civil or administrative wrongdoing (The lack of any prior record is to be considered neutral);

(4) The individual or entity has been the subject of any other adverse action by any Federal, State or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for the imposition of the exclusion; or

(5) Other matters as justice may require.”

[9] Under 42 C.F.R. §1001.901(b)(4), an “individual or entity has been the subject of any other adverse action by any Federal, State or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for the imposition of the exclusion.”

[10] Craig Richard Wilder, DAB No. 2416 at 8.

[11] Federal Register Final Rule, “Health Care Programs; Fraud and Abuse; Amendments to OIG Exclusion and CMP Authorities Resulting from Public Law 100-93. 57 Fed. Reg. 3298, 3321 (January 29, 1992).

In-Depth Articles

Pennsylvania Judge Holds that CIA violations May Result in FCA Liability

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In late July, a federal district court in Pennsylvania joined in the flurry of False Claims Act (FCA) decisions. These decisions further interpreted the ACA’s amendments to the law. The court in United States ex rel. Boise v. Cephalon, Inc. considered two important issues. The issues regarded when a party has an obligation to pay the government, and when a failure to do so could result in reverse false claims liability. Providers should be on high alert and ensure that they are in compliance with all requirements. This includes the requirement to screen employees monthly in order to avoid being OIG’s next false claims target.

Background

The defendant in Cephalon failed to comply with its Corporate Integrity Agreement (CIA) and OIG sought repayment. OIG alleged that they failed to comply with the CIA, which caused reverse false claims and produced FCA liability.

Cephalon, a drug manufacturer, argued that it could have only had an obligation to pay penalties under the CIA if HHS-OIG actually demanded payment. The relator argued that Cephalon’s obligation to pay actually arose when it breached the CIA’s reporting requirements. The court disagreed with Cephalon and instead held for the relator. The court found that a CIA imposes contractual obligations through reporting requirements. Furthermore, a breach of these contractual obligations could cause a company to be liable for reverse false claims even if OIG had not yet demanded payment. Finally, the court elaborated that “specific contract remedies” like specific penalties create a “less contingent obligation to pay.”

Takeaways

The federal government is taking advantage of the new false claims recoupment tools made available to it through the ACA. If you are not screening your employees and contractors against state and federal exclusion lists, then now is the time to ensure your practice is complying with the law. Call Exclusion Screening, LLC for a free assessment of your needs and costs at 1-800- 294-0952 or fill out the form below.

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article.

Southern District of New York Provides Clarity on “Identifying” Overpayments

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In early August of 2015, the Southern District of New York (SDNY) provided insight as to when the 60-day clock for returning an overpayment begins to run under the Patient Protection and Affordable Care Act of 2010 (ACA). This decision is particularly relevant to screening for exclusions because the government has started to penalize providers who submit claims for services provided directly or indirectly by an excluded individual or entity for the greater penalty of submitting a false claim. Simply stated, the government now views claims as legally false if an excluded person provided any part of that claim. This makes providers possibly liable pursuant to the false claims act.

The court’s additional clarity on when the 60-day clock begins to run for false claims act liability may be the OIG’s next tool in retrieving Federal dollars from those providers who fail to screen their employees or contractors monthly. Therefore, those providers could be in receipt of overpayments for monies received from services provided by excluded persons or entities.

I. Background – False Claims Act

The Fraud Enforcement and Recovery Act (FERA), enacted in 2009, amended the False Claims Act and added a “reverse false claims” provision. This reverse false claims provision imposes liability of $5,500 to $11,000 per false claim[1] on persons who “knowingly and improperly avoid[] or decrease[] an obligation to pay or transmit money or property to the Government.”[2] The term “knowingly” includes persons who have “actual knowledge of the information,” as well as those who “act in deliberate ignorance” or in “reckless disregard of the truth or falsity of the information.” The term “require[s] no proof of specific intent to defraud.”[3] In addition, FERA further clarified that an “obligation means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.”[4]

The ACA added additional clarification to the overpayment retention provision. Specifically, it required that a person who has received an overpayment must “report[] and return[]” the overpayment “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.” An overpayment is defined as any monies “received or retained” under Medicare or Medicaid to which a person is not entitled.[5] Failure to repay an overpayment by the 60-day deadline constitutes a reverse false claim under the False Claims Act. However, Congress failed to define “identified” in the statute, which caused ambiguity about when the 60-day clock begins to run.

II. United States ex rel. Kane v. Healthfirst, Inc., et al.

The United States ex rel. Kane v. Healthfirst, Inc., et al., case arose after relator Robert Kane, a former Continuum employee, conducted an internal investigation of the company. The investigation revealed that 900 specific claims amounting to over $1 million may have been wrongly submitted and paid by Medicaid as a secondary payor.[6]

According to the Complaint, Continuum was questioned about a “small number of claims” that the Comptroller’s office concluded were improperly submitted for Medicaid reimbursement.[7] After several conversations, the parties discovered that the problem was related to a software glitch that caused certain claims to contain a code which automatically referred the claim for additional payment for covered services. Continuum was sent a corrective software patch by the software vendor that would ensure that Continuum would not improperly bill any other secondary payors.[8]

Once the software problem was identified in December 2010, Continuum asked Kane to determine which claims were improperly submitted due to the software malfunction.[9] After reviewing the claims, Kane sent an email containing a spreadsheet identifying over 900 claims dating back to May 2009 and totaling more than $1 million. All of these claims contained the problematic code that caused the billing error to Continuum’s Vice President for Patient Financial Services, Continuum’s Assistant Vice President for Revenue Cycle Operations- Systems, and other Continuum management. Kane’s email stated that further scrutiny was necessary to confirm his findings, but the Defendants alleged that he had identified a large portion of the claims that were incorrectly billed. Kane was fired four days after sending this email. According to the Complaint, Continuum did nothing with the alleged overpayments Kane identified except for reimbursing five of the 900 erroneously submitted claims.[10]

The Comptroller, however, continued to review Continuum’s billing and found more claims which it promptly brought to Continuum’s attention from March 2011 through February 2012.[11] Continuum reimbursed the claims identified by the Comptroller beginning in April 2013 until March 2013. Continuum never brought Kane’s research to the Comptroller’s attention and only repaid around 300 claims after the Government issued a Civil Investigative Demand in June 2012. Due to its “intentional and reckless”[12] delay in repaying the alleged overpayment more than 60 days after they were identified, the Government, through Relator Kane, alleged that Continuum is liable for reverse false claims. Therefore, Continuum was allegedly liable for treble damages plus an $11,000 penalty for each overpayment illegally retained more than 60 days after identification.[13]

III. SDNY Court Defines “Identifying” Overpayments

Continuum responded to these allegations by filing a Motion to Dismiss arguing that Kane’s email merely “provided notice of potential overpayments and did not identify actual overpayments so as to trigger the ACA’s sixty-day report and return clock.”[14] The term “identified” was left undefined by Congress in the text of the ACA, which gave rise to Continuum’s motion.

In its motion, Continuum contended that the court should adopt a definition of “identified” as “classified with certainty.” The Government responded that instead “an entity ‘has identified an overpayment’ when it ‘has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment.’” The Government’s definition would essentially define “identified” as when “a person is put on notice that a certain claim may have been overpaid.”[15]

In an effort to ascertain the plain meaning of “identify,” the court consulted dictionary definitions, but it found that the wide range of definitions alone were not particularly helpful. Next, the court utilized canons of construction, reviewed the ACA’s legislative history, and considered the legislative purpose behind including a mandate to return overpayments within the ACA. The court found the legislative history particularly revealing and noted that Congress chose to adopt the Senate’s version of the bill which contained “identified” instead of the House Bill which employed the term “known.” After a thorough evaluation, the court concluded that “identified” should be defined as the moment “when a provider is put on notice of a potential overpayment, rather than when an overpayment is conclusively ascertained, [which] is compatible with the legislative history of the False Claims Act and FERA.”[16]

The court tempered its decision in stating that “the mere existence of an ‘obligation’ does not establish a violation of the False Claims Act.” Instead, the court held that a reverse false claim is only triggered when “an obligation is knowingly concealed or knowingly and improperly avoided or decreased.” Therefore, the court advised that prosecutorial discretion be employed to avoid filing enforcement actions against “well-intentioned providers working with reasonable haste to address overpayments” because this would be “inconsistent with the spirit of the law.”

IV. Takeaways

This decision is significant because it is the first opinion interpreting the term “identify” as it is used in relation to the ACA’s 60-day overpayment reporting requirement. While it is only binding in the Southern District of New York, it will likely guide other court opinions as they arise.

Providers should be aware that they could be liable for overpayments 60 days after they are “put on notice of a potential overpayment.” Therefore, providers should act with “reasonable haste” in reviewing potential overpayments to demonstrate good faith compliance.

Finally, providers must continue to screen their employees and contractors against the Federal and state exclusion lists monthly. The Government has only recently begun to pursue excluded individuals for False Claims Act violations. The new interpretation of “identify” as being “on notice” could provide the Government with a brand new tactic to retrieve federal monies. One of the reasons we strongly advocate that providers check all federal and state exclusion lists monthly is to find potential exclusions and demonstrate maximum compliance before an exclusion problem arises.

V. Conclusion

Failing to screen thoroughly and verify potential matches each month is not a way to avoid liability. It is unlikely that OIG would excuse overpayment liability if a provider claimed he was not “on notice” about an employee’s excluded status if that provider failed to properly screen and verify employees. Further, if a provider has identified a potential match, then he must work diligently to verify this match and return any monies received for services provided by this employee if he is excluded because the initial identification date could potentially start the 60-day clock for false claims act liability. [17]

Are you taking the necessary precautions to ensure you are not working with an excluded entity? We know it can be difficult to screen every Federal and State exclusion list. Call Exclusion Screening at 1-800-294-0952 or fill out the form below to hear about our cost-effective solution and for a free quote and assessment of your needs.

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article. Feel free to contact us at 1-800-294-0952 or online for a free consultation.

[1] Opinion and Order at 9 n.12, United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y Aug. 3, 2015).

[2] 31 U.S.C. § 3729(a)(1)(G) (2011).

[3] Id. § 3729(b)(1).

[4] Id. § 3729(b)(3) (emphasis added).

[5] 42 U.S.C. § 1320a-7k(d)(4)(B) (2010).

[6] Complaint-in-Intervention of the United States of America at 11, United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y. June 27, 2014).

[7] Id. at 10.

[8] Id.

[9] Id.at 11.

[10] Id.

[11] Id.

[12] Opinion and Order at 11, United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y Aug. 3, 2015).

[13] Id. at 8.

[14] Id. at 17.

[15] Id. (emphasis added).

[16] Id. at 23.

[17] Exclusion Screening, LLC is not a law firm and does not provide legal advice. As such, this is not intended, and should not be taken, as legal advice. We strongly recommend that you seek the advice of counsel whenever decisions that may have legal consequences are made.

Recent Developments on the 60-day Rule and the Potential Impact on Exclusion Violations

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The Affordable Care Act (ACA) creates a 60‑day window to report and return overpayments from Medicare or Medicaid after the date on which the overpayments were identified. If the overpayments are not returned within 60 days, then they can become false claims. Though this has been the law since 2010, we are just now seeing how this plays out and how it may have a significant impact on OIG exclusion violations.

I. Recent DOJ Action

In United States ex rel. Kane v. Healthfirst, Inc., et al., Healthfirst is alleged to have 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. Ruling on Healthfirst’s Motion to Dismiss, the court considered the meaning of “identify” as it is used in the ACA. The ACA left ambiguity regarding when exactly the 60-day clock begins to run. The court held that an overpayment is identified at the moment a provider is “put on notice of a potential overpayment,” and not when the full extent of an overpayment is “conclusively ascertained.” As such, even though the hospital has repaid the money, it is potentially liable under the FCA.

The same day the court issued this important order, the U.S. Attorney’s Office in Georgia announced the first settlement under the FCA for the retention of overpayments in the form of credit balances. In that case, according to the press release, the provider paid $6.88 million because it simply reallocated overpayments it received into its revenue instead of “actively investigat[ing]” and promptly returning them to Medicare and Medicaid.

II. How this Impacts OIG Exclusion Violations

It is clear that DOJ intends to pursue overpayment cases when it can clearly establish a date of “notice,” and a long period of inaction that follows. This adds an additional risk for those who employ or contract with excluded persons because a provider is clearly on notice that they are in receipt of overpayments after determining that they have employed or contracted with an excluded person. Now a provider may not only be liable for Civil Monetary Penalties of up to $10,000 for each item or service provided directly or indirectly by an excluded person and an assessment of up to three times the amount claimed for the exclusion violation, but they may face additional FCA exposure of treble damages and penalties of $5,500 to $11,000 if they have notice of an excluded employee or contractor and don’t take action within 60 days of that notice!

III. Final Thoughts

Our mantra is that all providers should screen all employees and vendors against all Federal and state lists monthly. By conducting monthly screening, providers would likely avoid receiving overpayments related to OIG exclusion violations in the first place. Furthermore, monthly screening will reduce the risk of false claims or overpayment by DOJ on that basis.

Also read more on OIG Exclusion

DC Contractor for Dental Providers Indicted for False Claim

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I. Fraud Found in HHS’ Backyard

A Virginia contractor for dental providers was recently indicted by a grand jury on charges of wire fraud, health care fraud, identity theft and making false statements relating to health care matters. The contractor’s company provided administrative and consulting services to dental practices in and around the Washington, D.C. area. She faces ten years in prison for each count of health care fraud and five years in prison for each count of making a false claim regarding health care matters. The contractor faces several more years for all other charges against her.

The contractor allegedly used her company as a way to gain admission to dental practices in order to steal identities from patients and the dentists themselves. She would then use the stolen identities to create merchant accounts with dental financing programs by sending in several false enrollment applications. With these accounts, the contractor billed patients for inflated and unauthorized charges. The contractor went so far as to submit false charge slips bearing fake patient signatures for services that were never rendered. To support these false claims, the contractor created false patient records.

II. False Claim

This particular provider may be convicted of submitting false claims to Federal or State health care programs. This underscores why screening contractors and vendors is essential to running a fully compliant practice. Any individual or entity that is convicted for submitting a false claim or committing health care fraud can be automatically excluded from receiving funds from any Federal or State health care program. Furthermore, any provider who contracts with an individual or entity that the provider “knew or should have known” was excluded (i.e., was not screening for exclusions on a monthly basis or screening improperly) risks incurring Civil Monetary Penalties (CMPs) of up to $10,000 per item claimed and assessments of up to three times the amount of each item claimed.

III. Final Thoughts

Helping providers avoid hefty fines for exclusion violations is our business. We work to ensure that providers stay compliant with health care regulations by screening employees, contractors and vendors for exclusions monthly through the two Federal and all available State exclusion lists. Our proprietary exclusion database, SAFER (State and Federal Exclusion Registry), incorporates exclusion data from both the OIG-LEIE and GSA-SAM, as well as 41 individual state exclusion lists. Exclusion Screening’s SAFER allows providers to have peace of mind that their practice complies with the many different Federal and State exclusion obligations. Contact the experts at Exclusion Screening, LLC today for a free consultation at 1-800-294-0952 or fill out our form below for a free price quote and assessment of your organization’s needs.

Paul Weidenfeld, Co-Founder and CEO of Exclusion Screening, LLC, is the author of this article. He is a longtime health care lawyer whose practice has focused on False Claims Act cases and health care fraud matters generally.

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