Imagine the following. A system of hospitals learns that an insurer’s mistake caused the hospitals to unwittingly overbill Medicaid. They task an employee with investigating the error. The employee emails management 900-plus claims that “may have been wrongly submitted to and paid by Medicaid.” The list is over-inclusive but circulated simply to give “some insight into the magnitude of the issue.” The employee then leaves the hospitals. No one takes over his project. At the same time, a regulator begins identifying affected claims and seeking repayment from the hospitals. The hospitals cooperate in an iterative process that takes two years. Medicaid is made whole.
Yet the hospitals’ troubles are far from over. The departing employee waited just two months and then filed a sealed federal complaint alleging a violation of the False Claims Act. The United States and the State of New York investigated and intervened, seeking treble damages, plus millions of dollars in penalties. The U.S. Attorney called the hospitals’ two-year delay in fully repaying Medicaid “fraud.” The hospitals moved to dismiss the case, to no avail.
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