HOUSTON (Legal Newsline) — A rule recently issued by the Federal Railroad Retirement Board likely points to penalties under the False Claims Act nearly doubling starting on Aug. 1.
The board, which administers retirement and unemployment benefits for railroad workers and their families, is the first agency to release new figures for the penalties, which were called for by Congress in 2015. Other agencies will likely follow suit and use the same or similar figures, according to Darby Allen, an attorney with Baker Hostetler.
In the health care field, where Allen practices, the increase in penalties, which are assessed per false claim submitted to the government, could mean enormous penalties for violations.
“Because of the nature of how health care services that are paid for by the Medicare and Medicaid programs are actually billed to those programs, it gets a lot more complicated,” Allen recently told Legal Newsline. “You might have 10 or 15 services on a single bill, or a hospital stay might generate 15 separate bills.
"So when you apply the per claim penalty to health care claims, the amount of the penalty will become inflated very, very quickly.“
The 2015 Bipartisan Budget Act called for all agencies that have jurisdiction over False Claims Act cases to use the Consumer Price Index to determine the percentage to increase them by.
“What the statute that required these penalties to be updated did was it told the agencies to go back to the last time the penalties had been increased, look at the CPI, see how much the CPI had changed since then, and update the amounts accordingly,” Allen said.
“However, the statute itself basically told agencies to disregard any of the changes that had been made because of the previous version of this law, which I believe was passed in 1990.”
Because of that, the Railroad Retirement Board went back to 1986 and came up with a nearly 215 percent increase. That would raise the minimum penalty from $5,500 to $10,781 and the maximum penalty from $11,000 to $21,563.
False Claims Act cases in the health care field are handled by the Department of Justice, which is also required by the 2015 Bipartisan Budget Act to update its penalties and follow the same formula. Allen said that she expects the DOJ’s calculations to match the Railroad Retirement Board’s.
“Everyone was a little shocked that the estimates were much higher than we expected, because they went all the way back to 1986,” Allen said. “It's a rather difficult thing to challenge. Normally if you're going to challenge these kinds of penalties, you're doing so under the Administrative Procedures Act. This is a little bit different, because what the Railroad Retirement Board did was implement the exact formula that is called for in the statute.”
Allen said that the increase in the penalties could lead some defendants to challenge the penalties as unconstitutionally large, but she isn’t sure if that will happen.
“The problem with that is you'd have to get a case that actually ends up in a judgment rendered against that defendant and then challenge the constitutionality of the penalty amount on appeal," Allen said.
"We have seen that defendants in False Claims Act cases are pretty apt to settle these cases, even those that don't have a whole lot of merit, because the potential exposure is just so extreme that nobody really wants to take the risk of going to trial and having a judgment against them.”