Failure to Reimburse Government for Overpayments Is a Reverse False Claim

Case: A dermapathology lab sent a pair of retraction letters notifying TRICARE about overpayments of nearly $4.2 million in the form of reimbursement on nearly 50,000 “erroneous” claims for toxicology and DNA cancer screening tests. The lab repaid about $900,000 of the money, while it pursued the lab system that actually billed for the tests. The sides reached a settlement agreement to fully repay TRICARE. But when the lab then stopped making payments, whistleblowers filed a qui tam lawsuit contending that the lab’s failure to repay was a reverse false claim under the False Claims Act. The government took over the case and the lab moved to dismiss without a trial

Significance: The Texas federal court denied the lab’s motion. Liability for a reverse false claim arises when an individual or entity violates a duty to pay money due to the government. The lab insisted that failure to repay an overpayment didn’t cross the line because it had no duty to pay the government. But the court begged to differ, noting that the lab acknowledged that it had received the overpayments and that the settlement constituted a duty to pay the government, even though the government wasn’t a party to the agreement [United States v. Cockerell Dermatopathology, P.A., 2021 U.S. Dist. LEXIS 201997, 2021 WL 4894173].