Pending Increases for False Claims Act Civil Penalties

The False Claims Act (“FCA”) creates a civil penalty for any person that knowingly submits for payment a false or fraudulent claim to the federal government. This usually includes any government contractor, but will often arise in the healthcare industry. In 2015, for example, the federal government collected over $3.5 billion resulting from these civil penalties, with approximately $1.9 billion from the healthcare industry.

In December of 2015, the Bipartisan Budget Act was enacted and it included a section titled the Federal Civil Penalties Inflation Adjustment Act Improvements Act (“Act”). This Act amends a prior 1990 act, requiring inflation adjustments to the civil penalties in the False Claims Act. Due to the length of time between the last adjustment, the Act requires a catch-up adjustment and annual adjustments thereafter. The Act is slated to be implemented at all federal agencies by July 1st, with the new rates to take effect by August 1st of 2016.

The first federal agency to issue an interim final rule to implement the catch up adjustment was the Railroad Retirement Board, doing so on May 2, 2016. The interim rule changed the minimum FCA civil penalty from $5,500 per violation to $10,781 per violation, nearly doubling the per violation penalty. As the other agencies look to implement this rule, such as the Centers for Medicare and Medicaid, similar increase are expected. For those working on a government contract, especially those submitting claims to the government in the healthcare industry, taking due care in compliance efforts will be magnified because of the pending increases in FCA civil penalties.

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Bill Seeks to Strengthen the False Claims Act

The federal False Claims Act permits a person with knowledge of fraud against the United States Government, referred to as the “qui tam plaintiff,” to file a lawsuit on behalf of the Government against the person or business that committed the fraud.  For example, an employee that learns from a colleague of fraud by his or her employer at work may bring a qui tam action against the employer.  If the action is successful,  the qui tam plaintiff is rewarded with a percentage of the recovery.

The House and Senate have approved a final version of the Fraud Enforcement and Recovery Act, which includes provisions to strengthen the False Claims Act.  President Obama is expected to sign the measure.

The changes to the False Claims Act are due to a perception among some lawmakers that recent federal court decisions may have restrained the law from achieving its intended goals.  False claims lawsuits often target hospitals, physicians and pharmaceutical companies because their businesses receive massive sums of federal dollars.

Under the new legislation, the attorney general would be required to submit an annual report to Congress about settlements made under the FCA.  This would help to assess whether the Department of Justice is using the act as it is intended and ensure that qui tam plaintiffs are protected in bringing an action.

 

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