Three hospitals within Mount Sinai Health System will pay nearly $3 million to settle a whistle-blower suit alleging they held onto Medicare and Medicaid overpayments beyond the 60-day repayment window, marking one of the first settlements over an issue that could affect health systems across the country.
The New York City health system agreed on Wednesday to pay $2.95 million rather than go to trial over $844,000 in retained Medicaid overpayments, where they could have faced treble damages as well as $4.9 million in False Claims Act penalties for the 444 payments in question. Mount Sinai had asked a federal court in 2014 to throw out the case.
The hospitals—Mount Sinai Beth Israel, Mount Sinai St. Luke's and Mount Sinai Roosevelt—were part of Continuum Health Partners at the time of the alleged overpayments in 2009 and 2010, and they have since merged with Mount Sinai.
A New York state comptroller audit in September 2010 alerted Continuum and the hospitals to the potential overpayments—caused by a computer glitch—as well as a whistle-blower email in February 2011. But they didn't refund all of the overpayments until March 2013, according to federal and state prosecutors, well beyond the allotted window to return overpayments to the government.
Under the 2009 Fraud Enforcement Recovery Act and a 2010 provision in the Affordable Care Act, Medicare and Medicaid providers have 60 days to repay overpayments from the time they are identified. After that window, the retained overpayments are subject to the False Claims Act and additional potential liabilities. Hospitals have strongly opposed these rules.
In a statement issued Wednesday, Mount Sinai said the overpayments stemmed from a third-party insurer's computer glitch, and Continuum worked diligently with the insurance company to fix the error after it became aware of the problem.
“The process for identifying the refunds was complicated and time-consuming, but Continuum continued with the process in good faith until all the refunds were finally identified and repaid, well before it became aware of this lawsuit,” Mount Sinai said.
But there have been some questions over when a provider is on notice of potential overpayments, according to David Honig at the law firm Hall, Render, Killian, Heath & Lyman.
“I think that hospitals are becoming aware of the proper way to deal with this and are becoming more vigilant and conscious of their obligations when they identify errors,” he said. “I expect that had this occurred two years later, it would have been handled differently.”
According to U.S. District Judge Eduardo Ramos' decision a year ago in the Mount Sinai case, a provider has identified overpayments if it has “actual knowledge of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.”
In Mount Sinai's case, they had enough knowledge to identify alleged overpayments, and the allegations by the federal government, New York and the whistle-blower were allowed to survive the health system's motion to dismiss.
But the boundaries on these new rules have been unclear. The retained overpayment regulations are both retroactive and proactive, and health systems could potentially become liable under the FCA for overpayments that were decades old if they became aware of a problem, Honig said.
It could be a while before there is binding case law on the subject because the high-risk nature of FCA litigation makes it more likely that cases will be settled earlier rather than adjudicated and taken up to an appeal.
For its part, CMS released its final 60-day overpayment rule in February, virtually adopting Judge Ramos' ruling on the interpretations of “knowledge” and “identified.” The final regulation also said that retained overpayment false claims are limited to those made within six years. However, Honig said that six-year period can be combined with FCA's 10-year statute of limitations, making health systems potentially liable for retained overpayments that are up to 16 years old.
“Overall, what a provider should do is take any allegation related to erroneous payments seriously, be very conscious that there is a clock ticking that didn't used to be and get competent advice much more quickly than they might have previously,” he said.