False Claims Act Penalties | The Complete Guide

Violation to the False Claim Act can have serious and severe repercussions. Whether you are an individual health service provider or a healthcare organization, breaching the Federal Claims Act can result in hefty fines and harsh penalties.It can amount from thousands to millions of dollars and even put you behind bars. So with that in mind, it is important to fully understand the False Claims Act as well as the fines and penalties associated with it.

Given that the False Claims Act can encompass several disciplines, for this article, we would solely look and discuss how it applies to the healthcare industry. We would look at the crevice and nuances of this law, the penalties associated with it, as well as its impact on a case and how it applies to different states.

First and foremost, it is important to note that violations of the False Claims Act are usually dealt with civil action. Only egregious cases are subjected to criminal penalties. Most of the time, violators are just required to pay for the damages and penalties they caused. However, it is worth pointing out that civil penalties related to the False Claims Act can reach from thousands to millions of dollars per violation.

That being said, let us look closely at how these penalties work.

FCA in Action

Over the past few years, the Department of Justice has been trying to curb problems relating to fraud in the healthcare system. In fact, the False Claim Act has undergone several changes, including an increase in damages and a rise in penalties.

Last year alone, in September 2020, the Department of Justice had managed to obtain more than 2.2 billion in settlements and judgments from civil monetary penalty relating to the False Claims Act. Out of these settlements, 1.8 billion were specifically from the healthcare industry. This just goes to show the endemic level of fraud and false claims in government programs.

Federal programs such as Medicare, Medicaid, and TRICARE have been the subject of fraud over the last few years. That being the case, the government has heightened the enforcement of the Federal False Claims Act and is now taking extra measures to shine a light on undetected healthcare fraud.

Now more than ever, it is important that we all understand how the False Claim Acts work in order to prevent problems in the healthcare system as well as to avoid hefty fines in the future.

Application of the Law

According to the Department of Justice, any person who violated the False Claims Act and knowingly submitted false claims to the government is liable to pay double the government’s damages plus a penalty.

Knowingly” means

  • You have actual knowledge that the information is false
  • You deliberately ignore the truth or falsity of the information
  • You recklessly disregard the truth or falsity of the information in context

The information being mentioned above could mean dishonest practices like billing services that are not rendered, submitting inaccurate claims for services, receiving/giving kickbacks for a referral, and so on.

If you did any of these, then by law, you are required to pay monetary damages and penalties to the government.

Default Amount of Penalty

When the False Claims Act was enacted, the initial penalty was only USD 2,000. Aside from paying twice the government’s damages, any person who violated the False Claim Act was also required to pay a USD 2,000 penalty for each claim.

But since the False Claims Act has undergone several changes, the damages and penalties have now increased. Any person who violates the False Claims Act is now required to pay triple the government’s damages and as of January 2021, the penalty under the False Claims Act is

  • $11,803 for the Minimum Penalty
  • $23,607 for the Maximum Penalty

It is worth noting that the civil monetary penalties for the False Claims Act are adjusted every year. As per the Inflation Adjustment Act, all agencies that implement civil monetary penalties are required to adjust them every year.

So before settling any penalties, it is important to check the government’s official website or just simply consult with a legal professional from your state so that you are able to know the exact amount that you need to pay.

Determining the Number of Violation

As we have mentioned before, penalties are applicable for each false claim. So one of the best ways to determine the number of violations is to fully understand what certain acts are held liable.

With that, we have listed some of the violations that can account for false claims.

  • When a person or an entity knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
  • When a person or an entity knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent;
  • When a person or an entity has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;
  • When a person or an entity is 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;
  • When a person or an entity 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 property;
  • When a person or an entity knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government; or
  • When a person or an entity does any or all of the above at the same time.

Department in Charge

Typically, the number of violated False Claims Act Penalties are determined by the jury while the judge decides the penalty per violation.

For settlement cases, the government generally does not seek any penalties.

But since the False Claims Act violations that we are highlighting in this article are mainly with regards to the healthcare industry, the medical provider, as well as the agencies running the healthcare programs, are also involved in the process.

When assessing the amount of penalties, the Department of Justice also has to take into account the amount of false claims received from the government under the Medicare or Medicaid program. That being said, the Centers for Medicare & Medicaid Services and even the state government have a vital role to play in the process.

Whistleblower Lawsuit

Apart from the government, private citizens can also file a lawsuit in relation to the False Claim Act. This means that even normal citizens who hold no position in government can help a shed light on undetected crime and fraud made by health care providers or institutions.

Through the qui tam provision, private citizens can file a lawsuit on behalf of the government as well as receive a fair share amount of the civil penalty paid by the violators.

On the one side of the coin, you have violators who are required to pay penalties and triple damages made to the government. While on the other side, you have private individuals who can receive portions of these penalties by simply reporting crime and giving valuable information to the government.

So it is no wonder why many fraud investigations and lawsuits arise from the qui tam provision.

Criminal Penalty

Even though this may not always be the case, there are several people (including physicians) who have gone to prison for submitting false health care claims.

As for health care institutions or corporations, the government is usually on top of the case, investigating and pursuing the individual who is in charge or in control of the whole healthcare facility or organization.

Non-monetary Sanctions

Apart from civil and criminal charges, health care fraud can also result in suspension and exclusion.

Individuals and/or institutions can have their licenses and certification suspended. An example of a case like this is a doctor who got his medical license suspended back in 2016 for improperly monitoring prescriptions of powerful opioids.

On top of that, violators of the False Claims Act may also be excluded from the state and federal health care program. Health care providers or institutions can no longer directly bill Medicare for any items or services. This can also limit a health care provider to give services or contract with parties who are receiving funding through Medicare or any other federal health care programs.

Since the Office of Inspector General publishes the name of the excluded individuals or entities on their website, it would be a lot harder for them to get back to work or provide services again. This being the case, it can end a health care professional’s career and halt an entire health care facility operation.

State False Claims Act

In the case of Health Care Fraud, the False Claims Act may vary from state to state. Given that there are state-sponsored and state-run health care programs, the applicability of the False Claims Act is slightly different.

Federal False Claims Act penalties related to healthcare mostly revolve around Medicare, Medicaid, and Tricare; while State False Claims Act violations also include state-run programs like MassHealth (in Massachusetts), Medi-Cal (in California), and so on.

For example and to illustrate how violations to the False Claims Act can vary from state to state, take the case of California. Violators of the False Claims Act are investigated and prosecuted by the Attorney General’s Bureau of Medi-Cal Fraud & Elder Abuse. The California False Claims Unit also coordinates with other sections of the Attorney General’s Office including those responsible for Consumer Protection, Antitrust & Business Competition, and the supervision of Charities.

And if we are to compare the applicability of the False Claim Act in California to other states, California False Claims Act is narrower in its application. The Federal False Claims Act does not necessarily mention a minimum value but to a state like California, the False Claims Act is not applicable to any controversy valued at less than $500.

Examples of Recent False Claims Act Cases

As we have mentioned before, the government has made continuous efforts to curb health care fraud. Just last year, they made a large sum recovery from a big pharmaceutical company. Novartis Pharmaceuticals Corporation has agreed to pay over $642 million to resolve claims that it had violated the False Claims Act.

Another noteworthy case last year was regarding the SpineFrontier, Inc. The lawsuit was originally filed under the qui tam or whistleblower provisions of the False Claims Act. But since then, the government intervened and filed a complaint as well. If the defendant is found liable, the government may recover three times the amount of damages plus penalties.

It is worth pointing out that out of the $2.2 billion that the government had recovered in 2020, over $1.6 billion of those arose from lawsuits filed under the qui tam provisions.

Conclusion

Overall, it is safe to say that the False Claims Act penalty and the qui tam lawsuit rewards work well together in preventing fraud in our healthcare system.  

To briefly recap, we have discussed

  • FCA in Action
  • Application of the Law
  • Default Amount of Penalty
  • Determining the Number of Violations
  • Department in Charge
  • Whistleblower Lawsuit
  • Criminal Penalty
  • Non-monetary Sanctions
  • State False Claims Acts
  • Examples of Recent False Claims Acts Cases

Keep in mind that the information we have mentioned above is not meant to be comprehensive nor should be construed as legal advice. We still highly recommend you seek guidance from a law professional before settling any fees or penalties.

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