DOJ Doubles Down on False Claims Act Penalties!
By Robert W. Liles. August 3, 2016. The False Claims Act is the primary civil enforcement tool utilized by the federal government in its fight against fraud generally, and, in particular, Medicare and Medicaid Fraud. Already an extraordinarily useful statute for government prosecutors both in terms of ease of use and in terms of the penalties and damages that may be recovered, the Department of Justice has further raised the stakes by virtually doubling the civil monetary penalties that may be assessed. The action, which was effective August 1, 2016, was taken in accordance with the provisions of the Bipartisan Budget Act of 2015, and this article provides an overview of the False Claims Act and discusses the scope of the increases in penalties that are being implemented.
I. Background of the Federal False Claims Act
Sometimes referred to as “Lincoln’s Law,” the False Claims Act was first passed in 1863 in response to war profiteering. Among its provisions were measures intended to encourage the disclosure of fraud by private persons through the filing of a qui tam suit. The term qui tam is taken from a Latin phrase meaning “he who brings a case on behalf of our lord the King, as well as for himself…” Under the qui tam (also commonly referred to as “whistleblower”) provisions of the statute, a private person (often referred to as a “relator”) may bring a False Claims Act lawsuit on behalf of, and in the name of, the United States, and possibly share in any recovery made by the government.
II. How Are False Claims Act Cases Brought Against Health Care Providers?
Cases brought by whistleblowers make up the vast majority of False Claims Act cases filed against health care providers. Between government-initiated cases and qui tam cases brought by whistleblowers, most Compliance Officers have become well acquainted with the statute and its provisions. As set out in a December 2015 DOJ Press Release, during the previous fiscal year, DOJ secured $3.5 billion in civil settlements and judgments in connection with cases involving fraud against the government. Notably, $1.9 billion of these recoveries were health care related.  Since early 2009, approximately $17 billion has been recovered under the False Claims Act. This amounts to almost one-half of the total recoveries made under the False Claims Act since the statute was amended in 1986. For a copy of the Civil Division Fraud Statistics, click here.
III. Provisions of the False Claims Act.
The False Claims Act  imposes civil monetary penalties and exposes any person to civil liability under the circumstances below:
Sec. 3729. False claims: (a) Liability for Certain Acts—any person who:
(1) Knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;
(2) Knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;
(3) Conspires to defraud the Government by getting a false or fraudulent claim allowed or paid;
(4) Has possession, custody, or control of property or money used, or to be used, by the Government and, intending to defraud the Government or willfully to conceal the property, delivers, or causes to be delivered, less property than the amount for which the person receives a certificate or receipt;
(5) Authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
(6) Knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge the property; or
(7) Knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government
IV. False Claims Act Penalties.
A person found to have violated this statute may be liable for both civil penalties and treble damages.  The amount of civil penalties that may be imposed for each false claim depends on when each was made. For claims or statements made after October 23, 1996, but before August 1, 2016, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $5,500 and the maximum penalty is $11,000.
On June 30, 2016, DOJ published an Interim Final Rule in the Federal Register announcing that it intended to increase the minimum per-claim penalty under Section 3730(a)(1) of the FCA. As the Interim Final Rule reflects, claims made on or after August 1, 2016, the minimum penalty which may be assessed under 31 U.S.C. 3729 is $10,781 and the maximum penalty is $21,563. While DOJ has provided a 60-day period for the filing of public comments, as of August 1st, the government had not reconsidered implementation of these significantly higher penalties.
From a practical standpoint, the existing applicable penalties have proven more than adequate to potentially force a health care provider into bankruptcy if an acceptable settlement is not reached in a False Claims Act that is on track to be litigated. Nevertheless, the imposition of these higher penalties may very well impact the negotiating position taken by DOJ and its client agencies when a health care provider seeks to resolve a case, rather than litigate the claims.
Now, more than ever, compliance is critical and it is essential that organizations have effective Compliance Plans in place. Established efforts to comply with the provisions of an effective Compliance Plan can better ensure an organization’s adherence with applicable statutory and regulatory requirements.
Are you taking the necessary precautions to ensure you are not working with an excluded entity? We know it can be difficult to screen every Federal and State exclusion list. Call Exclusion Screening at 1-800-294-0952 or fill out the form below to hear about our cost-effective solution and for a free quote and assessment of your needs.
Robert W. Liles, Managing Partner of Liles Parker, LLP and Co-Founder of Exclusion Screening is the author of this article. Contact Robert through this link to the Liles Parker website or by phone to (202) 298-8750 if you have any questions or require assistance with drafting and implementing a effective Compliance Plan.
 False Claims Act Cases: Government Intervention in Qui Tam (Whistleblower) Suits, U.S. Department of Justice, available at www.justice.gov/usao/pae/Documents/fcaprocess2.pdf (last accessed May 2016).
 Press Release, Department of Justice, Office of Public Affairs, Department Recovers Over $3.5 Billion from False Claims Act Cases in Fiscal Year 2015 (Dec. 3, 2015), available at https://www.justice.gov/opa/pr/justice-department-recovers-over-35-billion-false-claims-act-cases-fiscal-year-2015.
 See id.
 See id.
 Notably, approximately 37 states, along with the District of Columbia and some municipalities, also have their own False Claims Acts that are similar to the federal .
 For example, if a physician improperly submits a false claim to Medicare for payment in the amount of $100 and is subsequently paid $100, the physician would be liable under the False Claims Act for both damages and penalties. Under the False Claims Act, the government may recover up to three times the amount of damages it suffers, which in this example would be $300, plus penalties of between $5,500 and $11,000 per false claim. Collectively, the physician’s liability would range from $5,800 to $11,300 for a $100 claim.