District Court Calls Into Question Scope of CMS Overpayment Rules

The question of when an overpayment becomes “identified” for purposes of False Claims Act liability has generated significant uncertainty, and one district court just added more fodder for debate. See UnitedHealthcare Ins. Co. v. Price, No. 16-cv-157 (D.D.C. Mar. 31, 2017). The Affordable Care Act (“ACA”) requires persons to report and return overpayments from Medicare or Medicaid within 60 days of identification, and the failure to do so can trigger FCA liability. The ACA delegated to CMS the task of defining when an entity has “identified” an overpayment. CMS promulgated two rules (in May 2014 for Medicare Advantage (“MA”) plans and Part D Sponsors and in February 2016 for Medicare Part A/B providers), which equate “identification” to circumstances in which a person “has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment.” The “should have identified” standard generated concerns that CMS was using a simple negligence standard. The FCA, however, requires proof of at least “reckless disregard,” which courts have equated to gross (not merely simple) negligence.