False Claims Act revisions mandate immediate returns of overpayments

By David Blanchard and Dari Stuhl

Nacht Roumel Salvatore Blanchard and Walker PC

The passing of the new national healthcare bill has increased the number of Americans with public healthcare plans.

While the legislation will reduce the number of people who are currently uncovered or unsatisfied with their healthcare insurance policy, it will also place greater financial responsibility on the shoulders of the health care providers.

As a measure to better track the flow of funding paid to doctors and medical suppliers, and as a way to both prevent and detect monetary fraud, the new federal law requires that overpayments must be identified and returned to the federal government.

This new provision has significant ramifications for health care providers and the attorneys who advise them. Most significantly, the law converts inadvertent and even good faith Medicare overpayments into "False Claims" with broad civil and criminal penalties for those who delay in returning the money.

Definition of an


A Medicare overpayment is a payment that a doctor or supplier has received in excess of amounts due under Medicare statute and regulations. Once a determination of an overpayment has been made, the amount of the overpayment becomes a debt owed by the debtor to the Federal government. The Centers for Medicare and Medicaid Services (CMS) seek the recovery of all indentified overpayments.

Over payments may be the result of: 1) duplicate submission of the same service or claim; 2) payment to the incorrect payee; 3) payment for excluded or medically unnecessary services; or 4) a pattern of furnishing and billing for excessive or non-covered services.

Overpayment Provision

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (PPACA). Under Section 6402 (a) of the PPACA, Medicare and Medicaid overpayments received by "any provider, supplier, Medicaid managed care organization, Medicare Advantage organization, or PDP sponsor" must be "reported and returned" within 60 days after they are identified, to the "Secretary, state, intermediary, carrier, or contractor."

This requirement is only one of many aspects of the program integrity provision in section 6402 (a). Its purpose is to enhance transparency and improve the integrity of federal health care programs.

Since the Act became effective the day the president signed it into law - March 23, 2010 - overpayments that were identified on or before that date must be reported and returned by May 22, 2010.

The law, however, doesn't clearly define what it means to "identify" overpayments. And at this early stage, it is difficult to predict with certainty how courts will apply this important term in the new law.

Overpayments that are subject to a "reconciliation process" needn't be reported and returned within the 60 days requirement. Instead, they are to be reported and returned by the due date of the "corresponding" cost report.

In addition, when an overpayment is returned, it must be accompanied by a written notification of the reason for the overpayment. And the failure to timely comply with any of the above requirements could result in liability under the False Claims Act, as well as the imposition of civil monetary penalties and exclusion from the Medicare and Medicaid programs.

False Claim Act and Fraud Enforcement and

Recovery Act (FERA)

On May 20, 2009, President Obama signed the Fraud Enforcement and Recovery Act (FERA) into law.

FERA is basically an expansion/amendment of the federal False Claims Act. Before FERA, the False Claims Act had not been amended since 1986. It gives the federal government more power to combat health care and other program fraud.

Specifically, it increases the types of conducts that constitute a federal crime, e.g., there are now more cases which prosecutors and whistleblowers may bring to justice. Among them, it prohibits the knowing concealing or avoiding the return of an overpayment.

The report and return of an overpayment is considered an "obligation" to the government under the FERA. The failure to do so, under FERA, is a now newly created False Claims Act liability.

Prior to FERA, the False Claims Act established liability only for fraudulent statement for the purpose of avoiding or decreasing an obligation to pay money to the government.

This section of the law is generally referred to as the "reverse false claim" provision. The passing of FERA expands the False Claims Act's "reverse false claim" provision, creating liability for persons who knowingly conceal the retention of an overpayment of government money.

In other words, health care providers should familiarize themselves with the long reaching effect of FERA and avoid its powerful enforcement ability.

Under the new law, health care providers can face penalties not only for false or improper claim, but also for mere knowing retention of government overpayments. Moreover, the FERA also enhances whistleblowers' ability to investigate alleged FCA violations (e.g., unreturned overpayments) and provides them enhanced protection.

Whistleblowers who report withheld overpayments may trigger civil and criminal investigations. And the law provides for a finder's fee of 10 to 30 percent of the recovery, providing the whistleblower with a strong incentive to do so.

The overpayment provision and FERA enhance criminal enforcement of federal fraud laws. The crime of fraud against the federal government, which previously only covered fraud in government procurement and contracts for services, now includes a wider range of government involvement, such as various forms of Federal assistance.

Due to the broad scope of the legislation, it is crucial that legal and medical professionals take careful notice of the various requirements placed on providers of healthcare and suppliers.


We will continue to monitor the unfolding impact of this False Claims Act Amendments and related Financial Regulatory Reform.

If you have any questions or would like more information on the issues discussed in this comment, please contact the authors.

Attorney David Blanchard is a principal at the Firm of Nacht, Roumel, Salvatore, Blanchard and Walker PC practicing in the area of whistleblower representation and qui tam law.

Attorney Dari Stuhl practices exclusively in health care law for doctors, medical groups and other health care providers and is of counsel with the Nacht Law Firm.

Additional information about the Medicare overpayment collection process for physicians and suppliers is available in Chapter 34 of the Medicare Claims Processing Manual and Chapters 3 and 4 of the Medicare Financial Management Manual located at http://www.cms.gov/Manuals/IOM/list.asp.

Published: Mon, Nov 7, 2011