## Facts

- New York Medicaid beneficiaries were enrolled in a managed-care program under which participating providers generally should not bill Medicaid separately for covered services.
- A software configuration error in an electronic remittance system incorrectly suggested certain services were not covered, leading hospitals to submit improper claims to New York Medicaid and receive overpayments.
- State auditors alerted the hospital system to the improper billing; an internal investigation attributed it to the software error.
- An employee assigned to identify affected claims emailed management a spreadsheet listing over 900 claims he believed were likely overpaid; the list was overinclusive, but the governments alleged most listed claims reflected improper billing.
- The employee was terminated four days after sending the spreadsheet.
- The governments alleged the hospitals did not act with reasonable speed after receiving the spreadsheet and that repayments began months later and were not completed until nearly two years after the spreadsheet was sent.
- The United States and New York intervened and alleged “reverse false claims” liability based on knowingly retaining overpayments beyond the statutory return period.

## Issues

1. When is a Medicaid/Medicare overpayment “identified” for purposes of the Affordable Care Act’s 60-day requirement to report and return overpayments?
2. Whether the complaints plausibly alleged an FCA and NYFCA “obligation” to repay and that defendants “knowingly” avoided or decreased that obligation by delaying investigation and repayment.
3. Whether the reverse false claims allegations were pleaded with sufficient particularity under Rule 9(b) and plausibility under Rule 12(b)(6).

## Decision

- The court denied the defendants’ motions to dismiss the federal and state complaints-in-intervention.
- The court held that “identification” is not limited to overpayments that have been conclusively quantified claim-by-claim; credible information placing a provider on notice can trigger the duty to investigate and timely return overpayments.
- The court held the pleadings adequately alleged an “obligation” to repay under the ACA’s 60-day rule, enforceable through the FCA and NYFCA reverse false claims provisions.
- The court held scienter was plausibly alleged based on notice from auditors and the internal spreadsheet, combined with alleged prolonged inaction and delayed repayment.
- The court held the alleged scheme was described with adequate detail (source of overpayments, mechanism, time period, affected claim universe, and delay), satisfying Rules 8 and 9(b).

## Legal Principles

- The ACA’s 60-day overpayment provision creates an “obligation” to return identified overpayments that can support reverse false claims liability under 31 U.S.C. § 3729(a)(1)(G) and analogous state law.
- An overpayment may be “identified” when a provider is put on notice of credible information suggesting potential overpayments; the 60-day period is not deferred until the provider reaches absolute certainty or final quantification.
- After receiving credible notice, a provider must act with reasonable diligence to investigate, determine the scope of overpayments, and repay; deliberate ignorance or reckless disregard can satisfy the FCA knowledge standard.
- Reverse false claims allegations may satisfy Rule 9(b) without listing each claim individually where the pleadings identify the mechanism of overpayment, the relevant time period, and the manner of knowing retention and delayed repayment.

## Conclusion

The court permitted federal and New York reverse false claims claims to proceed, ruling that credible notice of potential overpayments can trigger the ACA’s repayment obligation and that alleged delays in investigating and returning overpayments may constitute knowing and improper avoidance of that obligation.


Kane ex rel. United States v. Healthfirst, Inc., 120 F. Supp. 3d 370 (S.D.N.Y. 2015)