Health care providers, drug and medical-device manufacturers and others doing business with the federal government face a doubling of penalties on Aug. 1 if they violate the False Claims Act—the government’s chief and most lucrative fraud-fighting tool.
The U.S. Department of Justice, in a July 1 interim final rule, increased the law’s minimum penalty from $5,500 to $10,781 per claim, and the maximum from $11,000 to $21,563 per claim, plus the act’s trebling of actual damages.
“These types of penalties easily can add up, particularly in the health care context where you may have lots of claims but the actual damages may be small,” said Matthew Turetzky of Sheppard, Mullin, Richter & Hampton. Turetzky predicted “plenty of cases where you will see substantial penalties.”
Turetzky, who practices government contracts, investigations and international trade, gave as an example a hospital that falsely certifies that it is giving the best possible price on a drug. The price certified is $2 but the going price is $1.98.
“If you take those 2 cents per treatment and they sold 10,000, actual damages are $200, and even if trebled under the act, you get to $600,” he said. “But if you’re talking about 10,000 claims at $10,000 per claim, now you’re into the millions of dollars even though the government was cheated of $600.”
The Justice Department issued its interim rule as its “catch-up adjustment” under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The act requires federal agencies to adjust the level of civil monetary penalties with an initial “catch-up” adjustment through an interim final rulemaking, and to make subsequent annual adjustments for inflation. Adjustments previously were made every four years.
The act defines a civil monetary penalty as any monetary assessment levied for a violation of a federal civil statute or regulation, assessed or enforceable through a civil action in federal court or an administrative proceeding.
Although the department’s rule is effective Aug. 1, it is taking public comments until Aug. 29.
Turetzky expects the department to be “inundated” with industry comments. Agencies regularly acknowledge comments in a final rule and have some response to them. “So even if the rule doesn’t change, folks will see the agency’s rationale for why it’s doing what it has done,” he said.
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