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False Claims Act Penalties to Double in 2016

May 9, 2016

On May 2, 2016, the Railroad Retirement Board published an interim final rule that would double penalties under the False Claims Act in 2016. The news from the Railroad Retirement Board resonated with health care providers and their counsel this week, because it signals a coming government-wide update of FCA penalties from $5,500 – 11,000 per claim to $10,781 – 21,563 per claim. This massive increase in FCA penalties stems from a section of the Bipartisan Budget Act of 2015 titled the “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,” which required federal agencies to update the levels of their civil monetary penalties to account for inflation.

In 1986, the False Claims Act was completely rewritten to include a minimum penalty of $5,000 per claim and a maximum penalty of $10,000 per claim. These penalties were increased to $5,500 and $11,000 in 1996 under the Debt Collection Improvement Act of 1996. The Railroad Retirement Board, in reviewing the statutory changes under the Bipartisan Budget Act of 2015, determined that it had to disregard the 1996 adjustment and calculate the new penalty amounts based on the 1986 amounts, adjusted for inflation.

The exponential exposure that can be caused by the FCA’s penalties was already daunting for healthcare providers. In U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc., FCA penalties totaled $119.5 million of the total $239 million judgment. Using the new minimum FCA penalty amount, the penalties in the Toumey case could have been over $234 million.

Other government agencies (including the Department of Justice) are expected to release similar updates to their FCA penalties by July 1. The new FCA penalties will take effect by August 1, 2016.

If you have any questions, please contact a member of HDJN’s Fraud & Abuse or Compliance teams.

The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel, Johnson & Nagle, PC, is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel, Johnson & Nagle, PC be liable for any direct, indirect, or consequential damages resulting from the use of this material.