A closely watched case out of New York concerning the reverse false claims provision of the False Claims Act settled last week. The case was groundbreaking not for its size (it settled for just $2.95 million) but because it was the first involving the Affordable Care Act’s requirement that federal health care fund recipients return overpayments within 60 days of discovering the improperly acquired funds.

The case involved a software error that led to the erroneous submission of claims to Medicaid. After discovering their improper receipt of federal funds, the defendants failed to bring it to the attention of the government and took nearly two years to repay the funds.

As part of the Patient Protection and Affordable Care Act (generally referred to as the Affordable Care Act or Obamacare) enacted in 2010, the United States required health care providers to return overpayments within 60 days of discovering the wrongful payments. If they retain the overpayments for more than sixty days after discovery, it becomes an “obligation” for the purposes of section 3729(a)(1)(G) of the False Claims Act. This is the reverse false claims provision.

In most False Claims Act cases, the government has paid out money due to a false or fraudulent claim or statement by the defendant. In the typical reverse FCA case (customs duty tariffs, for example), the false statement involves avoiding a clear obligation to pay money to the U.S. Government. However, in the case of retained overpayments, there was no clear obligation to return the money by a specific deadline until the Affordable Care Act created a sixty day window.

The New York Law Journal called the 2015 opinion in the lawsuit denying the defendant’s motion to dismiss as “the most significant case interpretation” of the reverse false claims provision” of the federal False Claims Act.

For additional information about this provision, please contact one of our False Claims Act attorneys.

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