Health industry railroaded? Agency’s doubled FCA penalties could be a sign

Civil monetary penalty (CMP) amounts are set to double for False Claims Act (FCA) violations that come under the jurisdiction of the Railroad Retirement Board (Board). The CMP adjustments, which will take effect in August, 2016, raise penalties for Railroad Retirement Board related false claims violations from their current range of between $5,500 and $11,000 up to between $10,781 and $21,563. The Railroad Retirement Board adjustment, set out in an Interim final rule makes it the first agency to comply with a congressional mandate to update FCA penalties for inflation set out in the Bipartisan Budget Act of 2015 (P.L 114-74). The DOJ and other health related agencies are expected to follow the Railroad Retirement Board’s lead when they update their own CMP regulations related to the FCA.

Adjustment

The Bipartisan Budget Act of 2015 mandated that, by July 1, 2016, federal agencies make cost-of-living adjustments to FCA CMP amounts to account for inflation because the rates were, in effect, last adjusted in 1986. The statute sets the formula for computation of the new penalties, requiring that the new penalty is obtained by multiplying the pre-adjustment penalty amount or range by the percent change in the Consumer Price Index for all Urban Consumers (CPI–U) over the relevant time period, and rounding to the nearest dollar. The Railroad Retirement Board determined that between October 1986 and October 2015, the CPI–U has increased by 215.628 percent. Accordingly, the agency concluded that the new minimum and maximum penalties for false claims violations under the FCA are $10,781 and $21,563 respectively.

Health

Because the Railroad Retirement Board’s Interim final rule relied upon the same computational method that other agencies are expected to utilize under the statute, life science companies, the health care industry, and government contractors can expect other agencies to issue comparable regulations. Under the Bipartisan Budget Act of 2015, agencies do have the authority to issue lower penalties if an agency determines that the full penalty increase would have a significant economic impact on a substantial number of small entities. While the Railroad Retirement Board did not conduct an economic impact analysis, some experts suggest that an agency like the DOJ will need to conduct such an analysis, which could result in lower penalties.