Summary: Organizations that identify potential overpayments should act promptly. While the 60-day repayment rule and False Claims Act exposure often receive the most attention, knowingly retaining an overpayment may also create criminal risk for the organization and, in some cases, individuals involved in the decision-making process.
| Takeaway: Once an organization identifies a potential overpayment, the issue should be treated as a time-sensitive compliance matter. Prompt investigation, documentation, escalation, and repayment decisions can help reduce civil and criminal enforcement risk. |
Key Issue
Healthcare providers and other organizations frequently focus on potential False Claims Act liability when an overpayment is not returned within 60 days after it is identified. That focus is appropriate, but it should not obscure the separate possibility of criminal exposure. In certain circumstances, knowingly retaining an overpayment may be viewed as more than a repayment issue; it may raise questions about whether the organization or responsible individuals failed to disclose or return funds they knew were not owed.
Potential Criminal Exposure Under the Social Security Act
Section 1128B(a)(3) of the Social Security Act, 42 U.S.C. § 1320a-7b(a)(3), makes it a crime to conceal or fail to disclose an event that affects the initial or continued right to a benefit payment. For organizations that receive federal healthcare program payments, this statute can become relevant when an overpayment is identified and the organization does not take appropriate steps to evaluate and address it.
A violation requires proof that the person charged knew about the event affecting the right to payment. The offense is a felony and may carry penalties of up to five years in prison, as well as fines of up to $250,000 for individuals or $500,000 for corporations. The Office of Inspector General has relied on this statute even where the overpayment itself occurred innocently, but the recipient failed to repay after learning of the overpayment. Although the scope of criminal enforcement in this area can involve some uncertainty, prosecutors have asserted the statute in past cases.
Potential Exposure Under the Federal Criminal False Claims Statute
The Federal Criminal False Claims Statute, 18 U.S.C. § 287, may also be implicated. This statute applies when a person makes or presents a claim to a U.S. Government agency knowing that the claim is false, fictitious, or fraudulent. Violations can result in imprisonment of up to five years and criminal penalties. In the overpayment context, the statute may be relevant where an organization continues to retain funds after determining that repayment is required.
What Organizations Should Do
Organizations should treat known or suspected overpayments as time-sensitive compliance matters. Appropriate steps may include promptly investigating the facts, documenting the basis for any repayment determination, escalating significant issues to compliance or legal leadership, and making timely repayment when required. The statutes discussed above are not an exhaustive list of potential criminal exposure, but they reinforce the importance of a disciplined process once an overpayment is identified.
Summary of Key Compliance Steps
- Identify and preserve relevant facts. Determine the source, amount, timing, and scope of the potential overpayment, and preserve records related to the issue.
- Conduct a prompt internal review. Assess whether an overpayment exists, when it was identified, and whether repayment or disclosure obligations have been triggered.
- Escalate significant issues. Involve compliance, legal, finance, and operational leadership as appropriate, particularly where the amount, duration, or cause of the overpayment may present heightened risk.
- Document the decision-making process. Maintain a clear record of the investigation, analysis, repayment determination, and any corrective actions taken.
- Repay or disclose when required. Make timely repayment and consider whether additional reporting or disclosure is appropriate under applicable program rules or enforcement expectations.
- Address root causes. Implement corrective actions to reduce the likelihood of recurrence and demonstrate a good-faith compliance response.
Given the potential civil and criminal implications, organizations should ensure that their overpayment response procedures are clear, well documented, and consistently followed. Prompt involvement of compliance and legal personnel can help preserve the organization’s ability to assess repayment obligations, manage enforcement risk, and demonstrate a good-faith response if the matter is later reviewed by government authorities.
