Retention of Overpayment Results in $32 Million False Claims Act Settlement

The Department of Justice (DOJ) recently announced that Oglethorpe Inc., which operates psychiatric hospitals, and several of its senior executives including its founder and owner, CEO, and COO, agreed to pay approximately $32 million to resolve allegations that they violated the False Claims Act (FCA) by knowingly and improperly retaining Medicare overpayments. The settlement is another reminder that the government continues to aggressively pursue healthcare providers and executives not only for affirmative billing misconduct, but also for alleged failures to identify, investigate, and timely return overpayments once discovered.

The “Reverse False Claims Act”

Most FCA cases involve allegations that a provider submitted false claims to the government in the first instance. But the FCA also contains what is referred to as the “reverse false claims” provision, which impose liability for knowingly and improperly avoiding an obligation to pay money to the Government. Under the Affordable Care Act’s so-called “60-day rule,” providers and suppliers that identify Medicare or Medicaid overpayments generally must report and return those funds within 60 days after the overpayment is identified or by the date any corresponding cost report is due, whichever is later. Failure to do so can create potential FCA exposure, civil monetary penalties, exclusion risk, and substantial damages calculations.

Oglethorpe Settlement

According to the DOJ, the Oglethorpe and its senior executives failed to refund Medicare overpayments that their own consultants had identified related to beneficiaries who had been admitted to defendants’ facilities even though they did not qualify for inpatient psychiatric care.

In addition to the $32 million, the defendants also agreed to a 10-year voluntary exclusion. The government’s press release noted that in addition to violating the FCA, the defendants also violated a Corporate Integrity Agreement that Oglethorpe had entered into with HHS-OIG in 2021.

The settlement as the result of a qui tam lawsuit filed in the Middle District of Florida by four individual whistleblowers. They will be entitled to between 15 and 25% of the total settlement, although the final amount had not been determined by the time of the press release.

Key Takeaways

Providers and suppliers that bill to federal healthcare programs such as Medicare or Medicaid must have processes and policies in place to deal with identifying and returning overpayments. Failure to report and refund an overpayment by the applicable deadline could turn a relatively small overpayment into much larger FCA liability. Period audits and compliance reviews are elements of an effective compliance program which the OIG and other federal regulators expect all healthcare providers, no matter their size, to implement.

GWB represents businesses and individuals in connection with government investigations and litigation, including matters involving the False Claims Act. If you need assistance with such a matter, please contact us.