DOJ Elaborates on Legal Theories Underlying “Untimely Refund” Overpayments Suit

Posted by Scott Stein and Brenna Jenny

As we previously reported, the Department of Justice (“DOJ”) recently filed its first FCA suit premised solely on the untimely return of overpayments. DOJ’s November 10, 2014 memorandum in opposition to defendants’ (“Continuum’s”) motion to dismiss (which we discussed here), confirms that DOJ seeks to stake out an expansive argument for such claims.

DOJ’s claims arise out of the alleged failure to timely refund certain payments that Continuum received from Medicaid. The Center for Medicare and Medicaid Services (“CMS”) has not issued any guidance concerning refund of overpayments to Medicaid. CMS likewise still has not finalized its 2012 proposed rule implementing the overpayments provision of the Affordable Care Act (“ACA”) for payments to providers and suppliers under Medicare Parts A and B. This remains true despite CMS’ subsequent finalization, earlier this year, of a rule regarding overpayments to Medicare Advantage organizations and Part D Plan Sponsors. Nevertheless, in its recent filing, DOJ takes the position that CMS’s guidance to Medicare Part C and Part D participants should be applied to Medicaid providers. Specifically, DOJ argues that a provider should be deemed to have “identified” an overpayment where it “has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment.” Br. at 5 (quoting 42 C.F.R § 422.326). According to DOJ, the government adequately alleged a violation of the reverse false claims provision by alleging that “Continuum learned that it had received such overpayments, became aware of the scope of these overpayments and nonetheless failed to take remotely reasonable steps to return those funds to Medicaid.” Br. at 18–19. Although Continuum had criticized relator’s admittedly “preliminary” report as being insufficient to identify overpayments, DOJ portrayed Continuum’s “fraudulent[] delay[]” in repaying as an effort to “sidestep” its obligations by “ignoring clear evidence of overpayments.” Br. at 21.

DOJ also advocates an aggressive position as to the meaning of the word “overpayment.” The ACA includes a provision requiring recipients of Medicare and Medicaid payments to report and return overpayments within 60 days of identification. The ACA further states that failure to return overpayments within such time is an “obligation” under the reverse false claims provision of the FCA, which prohibits knowingly concealing, or avoiding or decreasing, an obligation to pay money to the government. FERA amended the FCA by defining “obligation” as “an established duty, whether or not fixed, arising . . . from the retention of any overpayment.” Emphasizing the phrase “whether or not fixed,” and relying on legislative history surrounding the FERA amendments, DOJ maintains that an “obligation” can exist “whether or not the amount owed is yet fixed.” Br. at 11–12 (quoting Brief for United States at 24, United States v. Bourseau, No. 06-56741 (9th Cir. July 14, 2008)). DOJ sidesteps the problematic implications that flow from its interpretation. If an “obligation” to repay can arise even absent a fixed amount owed, it seems unrealistically rigid to expect providers and suppliers to calculate and return such amounts to the government in a mere sixty days. Internal investigation and analysis as to the amount of overpayments owed can be portrayed as ostensible footdragging and “fraudulent delaying,” as DOJ has done in this case.

A copy of DOJ’s memorandum is available here. We will continue to monitor developments in the case.