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ALERT: CMS 60 Day Rule Violation Leads to a Multi-Million Dollar Settlement

By Ronald W. Chapman, LL.M.

St. Luke’s Roosevelt and Mount Sinai Beth Israel hospitals (New York) recently felt the sting of both a disgruntled employee turned qui tam complainant and the CMS 60 day rule. A disgruntled employee became aware that the hospitals did not return overpayments to CMS within the 60-day period. A false claims act qui tam case was filed under federal law and the New York counterpart.

The hospitals immediately reacted with a motion to dismiss. The qui tam relator was able to prove that the computer system used by the defendant routinely withheld repayment. The district judge denied the motion stating enough facts existed to support the allegations of fraud based on the False Claims Act. Eventually, the hospital admitted it took as much as 2 years before the hospital completed the necessary accounting and returned the overpayments. In short, the hospitals used the overpayments to fund operations and only returned the overpayments when they were ready. CMS disagreed with this policy resulting in a whopping $2,950,000 settlement. As part of the settlement, the defendants admitted in writing that they did not fully reimburse Medicaid for erroneous claims for over two years.

CMS regulations require recipients of government funds to repay any overpayment or improper payment to the government within 60 days. Failure to repay funds within 60 days is considered a violation of the False Claims Act (31 U.S.C. §§ 3729-3733) which creates liability for the “knowingly submitting a false claim or failure to repay an over-payment.” Penalties are severe and may be civil or criminal.

The U.S. Department of Health & Human Services, Office of the Inspector General made it clear in the government’s press release that it was attempting to send a message to all health care providers: “Any threat to the financial health of Medicaid is a threat to the vulnerable citizens who depend upon it for critical services. Today’s settlement should send a message to providers that this behavior will not be tolerated, and we will pursue justice in these cases.”

The U.S. District Court Southern District of New York entered the Stipulation and Order of Settlement and Partial Dismissal on August 23, 2016, ending the matter after years of investigation and litigation.

The 60-day rule is enforced by CMS and most often comes to light through a qui tam action filed by a disgruntled employee, former employee or competitor with inside information. These types of mistakes are extremely costly and result in treble damages (three times the claimed loss), attorney fees, and potential corporate integrity agreements and/or exclusion from government payment system.

Chapman Law Group is a full-service health care law firm with offices in Michigan, Florida, and Idaho. Our team of experienced health care attorneys are available to assist in the defense of qui tam cases, false claims, anti-kickback, and other regulatory and criminal violations. We are prepared to assist anywhere in the United States with all types of compliance issues, self-audits, including criminal defense from experienced criminal defense attorneys focusing false claims, Medicare and Medicaid fraud, etc. Chapman Law Group attorneys are highly educated with years of experience, advanced health care law degrees, and former federal prosecutors.