False Claims Penalties to Double

False Claims Act (FCA) penalties may be about to double.

On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015 which requires, among other things, that federal agencies significantly increase civil monetary penalties, including those awardable under the FCA.

The Department of Justice (DOJ) published an Interim Final Rule on June 30, 2016 announcing that the government intends to increase the minimum per-claim penalty under the FCA from $5, 500 to $10, 781 and increase the maximum per-claim penalty from $11, 000 to $21, 563.

Impact

The impact of doubling current civil monetary penalty amounts, is “difficult to overstate, ” write Emma R. Cecil and R. Ross Burris, III, of the Polsinelli PC law firm in a National Law Review article on July 7, 2016.

“In health care cases, which frequently involve the submission of thousands and thousands of claims for payment, the effects could be immense. Even if the individual claims for payment are relatively small, FCA penalties, which are assessed on a per-claim basis, can add up, and add up quickly. The result is often a penalty amount that is grossly disproportionate to the amount of actual, proven damages to the government.

“Consequently, these changes to the per-claim penalty ranges should amplify efforts by defense counsel to mount Eighth Amendment challenges to the constitutionality of False Claims Act penalties, particularly where the penalty amounts far surpass actual economic harm and bear little or no relation to the degree of the defendant’s culpability or wrongdoing.”

For non-lawyers, the Eighth Amendment is the prohibition of “cruel and unusual punishment, ” but also addresses “excessive” fines.

Jason Drori, senior counsel in the Boston office of Foley & Lardner LLP, said the added risk “may prompt health care providers to scale back the services provided to beneficiaries of one or more federal health programs, which would have a negative impact on beneficiaries’ access to care.”

The penalties will only apply to civil penalties that are assessed after August 1, 2016 and whose associated violations occurred after November 2, 2015. Violations occurring on or before November 2, 2015, and assessments made prior to this coming August 1, whose associated violations occurred after November 2, 2015, are still subject to the current penalty amounts set forth in DOJ’s existing regulations.

Importantly, write the authors, DOJ and other federal agencies may, after the initial catch-up adjustment, make automatic annual adjustments without any formal rulemaking process evaluating the need for additional increases, opening up the possibility of challenges under the Administrative Procedures Act (APA).

DOJ is providing a 60-day period for public comment on this Interim Final Rule.