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The Fines Are Doubling For Submitting False Bills. “C” Your Way To Compliance With An Effective Program

Dennis G. Sadler \ 07-18-16

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On June 30th, the Department of Justice passed an interim final rule that can have a great impact on anyone that bills the Federal Government. The interim rule, which increases the penalties for violations of the False Claims Act (the “FCA”), also increases the potential exposure to physicians, contractors, subcontractors, or anyone doing business with or through the Federal Government has effectively more than doubled. Be aware, as with Medicaid payments, if payment involves Federal funds, the penalties may apply, even if the payment does not come directly from the Federal Government.

Here are the key points to consider if you do business with the government:

The FCA prohibits submitting false or fraudulent claims (including Medicare or Medicaid) to the Federal government for payment. The FCA provides for civil penalties and up to three times the amount of the government’s damages. In recent years, The FCA has increasingly become a favored method of the government in recovering large awards and settlements.

Anyone who submits false claims can face severe penalties. The requirement of “knowingly” submitting false claims encompasses “deliberate ignorance” or “reckless disregard” of the truth of the information in the billing. No proof of specific intent to defraud the government is required for liability. In fact, simply failing to have effective compliance measures in place may subject an erroneous biller to the penalties under The FCA.

The current False Claims Act penalties are: $5,500 minimum, to a maximum of $11,000 per claim. HOWEVER, effective August 1, 2016, these penalties almost double to $10,781.40 minimum, up to a maximum of $21,562.80 per claim, plus up to treble damages. The new amounts apply to false claims submitted after November 2, 2015, so the increase is potentially retrospective in its impact, and billers could already by be exposed to increased penalties for past bills.

Because the penalty amounts are “per claim,” billers facing investigations of multiple claims need to multiple these penalty amounts by the number of claims involved to estimate their exposure. It should be noted that each separate false claim constitutes a claim for which a penalty shall be imposed, even if separate claims are combined and submitted together. So, multiple claims, even if included in a single bill, could expose the biller to multiple penalties.

While the increase of the penalties is of tremendous significance on its own, when the potential impact on whistleblowers is considered, the effect is even greater. When whistleblowers prevail in suits under the FCA, they can receive 15 – 30% of the award or settlement. With the increase in the per claim penalties, this provides employees, former employers, clients, and competitors with even more motivation to report alleged erroneous billing.

Therefore, with the doubling of the FCA penalties, an effective compliance program becomes even more important for any business that bills the government. While no program can completely eliminate the risk of falling prey to the multiple governmental regulations, an effective compliance program presents one of the most effective way to avoid or minimize the financial exposure of a FCA.

Because failure to implement an effective program can be interpreted as “willful ignorance” or “reckless disregard,” sufficient to meet the “knowing” standard for liability, the absence of a compliance program (or an ineffective program) may be sufficient to expose a biller to penalties for otherwise honest mistakes. Conversely, the existence of an effective compliance program may provide evidence of the lack of intent to submit false claims, or as a last resort, evidence that the maximum penalties should not be applied.

At minimum, anyone who bills the Federal government on a regular basis (especially physicians, group practices, and clinics), should establish, monitor, and publicize to their staff, a program of compliance that will, at minimum, effectively:

  • Choose an appropriate person to oversee the program;
  • Confirm compliance with proper policies and billing procedures and provide employee education on the policies, procedures, and the compliance program;
  • Create a way to anonymously report any non-compliance internally;
  • Conduct routine audits;
  • Correct any non-compliance in a timely manner; and
  • Consider self-reporting of non-compliance that is detected, to mitigate possible penalties.

Dennis G. Sadler is a Member in our Memphis office. Please email him at dennis.sadler@leitnerfirm.com with any questions regarding the False Claims Act.