On August 3, 2015, the Department of Justice (DOJ) announced a $6.88 million settlement with a home health company, noting that this “is the first settlement under the False Claims Act involving a health care provider’s failure to investigate credit balances on its books to determine whether they resulted from overpayments made by a federal health care program.”

DOJ specifically referenced section 6402 of the Affordable Care Act, 42 U.S.C. § 1320a-7k(d), (Section 6402), which requires providers to report and return overpayments within 60 days or on the date any corresponding cost report is due. The settlement resolved two qui tam actions against PSA Healthcare (comprising Pediatric Services of America Healthcare, Pediatric Services of America, Inc., Pediatric Healthcare, Inc., and Pediatric Home Nursing Services) and Portfolio Logic LLC, in which relators alleged that PSA Healthcare failed to disclose and return overpayments received from federal health care programs between 2007 and 2014.

According to the settlement agreement, the Government contended that during periods between 2007 and 2014, PSA Healthcare knowingly submitted claims to state Medicaid programs without the appropriate documentation of required supervisory visits by a registered nurse, and with overstated service time lengths. The service time overstatements were allegedly caused by PSA Healthcare’s payroll system’s double-rounding of the minutes worked. The United States also contended that PSA Healthcare failed to return the resulting overpayments. DOJ’s announcement implies that the credit balances created by the double-rounding should have been investigated as a potential obligation under the False Claims Act to avoid running afoul of the 60-day report-and-return requirement of Section 6402. That section requires providers to report and return overpayments by the later of (1) 60 days after the overpayment was identified or (2) the date any corresponding cost report is due (if applicable). (For additional discussion on Section 6402, see this week’s Health Headlines article, “Federal District Court Interprets 60-Day Overpayment Rule Trigger.”)

The settlement with PSA Healthcare serves as a first example of DOJ’s interpretation of the statutory requirement with respect to credit balances. The settlement also illustrates DOJ’s willingness to rely on Section 6402 to pursue the reporting and return of overpayments that were paid under federal health care programs prior to the enactment of Section 6402 in 2010.

DOJ’s announcement is available here. To view the settlement agreement, click here.

Reporter, Igor Gorlach, Houston, + 1 713 276 7326, igorlach@kslaw.com.