Published today in the Federal Register was a long-awaited Final Rule implementing a requirement from the 2010 Affordable Care Act requiring Medicare Part A and B providers and suppliers to report and return overpayments to Medicare by the later of 60 days after the date an overpayment was identified, or the due date of any corresponding cost report, if applicable (Overpayment Rule). The Proposed Rule was previously published on February 16, 2012. Additionally, the final rule implementing overpayments in Medicare Parts C and D was previously published in May 2014. Case law interpreting the Overpayment Rule has been limited to date.
The Final Rule includes several significant clarifications, including the following:
Earlier this week, a key decision denying defendants’ motion to dismiss was issued in the case, Kane v. Healthfirst Inc., et al. and United States v. Continuum Health Partners Inc., et al. (case no. 1:11-cv-02325, S.D.N.Y.). This is the first court decision to interpret a provision of the Affordable Care Act that requires a person who has received an overpayment of Medicare or Medicaid funds to report and return the overpayment by the later of: (i) 60 days after the date on which the overpayment was “identified”; or (ii) the date any corresponding cost report is due, if applicable. 42 U.S.C. § 1320a-7k(d). Although the Centers for Medicare and Medicaid Services (CMS) issued a Proposed Rule in 2014 related to the process for reporting and returning overpayments, the deadline for issuing the Final Rule has been extended until February 2016.
In Kane, the relator was a former employee of the company who allegedly provided to management a spreadsheet of over 900 potential overpayments caused by a software glitch. The employee was fired four days later and the company failed to return all of the overpayments due until it subsequently received a civil investigative demand in connection with the qui tam lawsuit that had been filed by the former employee under the False Claims Act (FCA). The Court determined that defining “identified”, and thus starting the 60-day clock, when a “provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained”, is consistent with FCA legislative history. The Court further stated that the defendants’ position that its obligation to pay would not be triggered until after it had “done the work necessary to determine conclusively the precise amount owed to the Government”, thereby “relegating the sixty-day period to merely the time within which they would have to cut the check”, would create an “absurd result.”
We will continue to monitor this important case and provide significant updates.
This week, a federal district court denied Cephalon Inc.’s (Cephalon) motion to dismiss a third amended complaint filed under the False Claims Act (FCA) by three qui tam relators in United States ex rel. Boise v. Cephalon, Inc. The motion to dismiss relates to claims made by the whistleblowers under 31 U.S.C.§ 3729(a)(1)(G) (“. . . knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government . . .”). Specifically, the relators allege that Cephalon promoted its drugs Provigil and Nuvigil for off-label purposes and paid unlawful kickbacks to health care professionals, and failed to report this conduct in violation of its 2008 corporate integrity agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (OIG).
Significant recent regulatory and enforcement activity related to laboratory fees and services continues to demonstrate an increased focus on this industry. Government enforcers are active in cases involving both the laboratories and physicians involved in kickback schemes.
The U.S. Department of Justice (DOJ) announced in late March and early April that three New Jersey doctors were sentenced to prison for accepting bribes in exchange for referring patients to a medical-testing laboratory company. The DOJ also announced this month that a New York physician admitted to accepting bribes in the same scheme. According to the DOJ, 26 physicians and 12 other individuals have been convicted to date of participating in the bribery scheme with the laboratory and the government has recovered $10.5 million in forfeitures.
The Department of Justice (DOJ) announced this week that it recovered a record $5.69 billion in civil False Claims Act (FCA) settlements during fiscal year 2014. This recovery included $2.3 billion for FCA cases involving federal health care programs, such as Medicare, Medicaid and TRICARE. Some of the significant health care fraud recoveries included $1.1 billion for Johnson & Johnson’s civil FCA settlement ($2.2 billion total) in November 2013 and $116 million for Omnicare’s civil FCA settlement ($124 million total) in June 2014, as well as cases involving hospitals, home health service providers, and medical device companies. This was the 5th consecutive year that the DOJ recovered more than $2 billion in health care fraud cases due, in part, to the HEAT program.
Additionally, the DOJ disclosed that of the $5.69 billion recovered, nearly $3 billion related to lawsuits filed under the FCA’s qui tam whistleblower provisions. Whistleblowers received $435 million in payouts in the last fiscal year. There also are over 700 qui tam cases pending for the second consecutive year.
Pharmaceutical company Organon Inc. agreed to pay $31 million to settle federal and state allegations that it underpaid Medicaid drug rebates, provided kickbacks to nursing home pharmacy companies, promoted its antidepressants for unapproved uses, and misrepresented its drug prices to state Medicaid programs. The settlement resolved two False Claims Act (FCA) qui tam whistleblower suits.