False Claims Act penalties to double

False Claims Act (FCA) penalties are set to steepen as the Justice Department has revamped the amount healthcare providers must pay for violations.

Sparked by the Bipartisan Budget Act of 2015, which requires government agencies to adjust penalties for inflation, the interim final rule – which took effect August 1 and applies to claims filed after Nov. 2, 2015 – raises minimum penalties for a fraudulent claim from $5,500 to $10,781 and increases maximum penalties from $11,000 to $21,563.

Ripple Effects

According to Fabio Leonardi, JD, an attorney with Pillsbury Winthrop Shaw Pittman LLP, the anticipated spike in penalty amounts is expected to play a significant role in accelerating the resolution of alleged healthcare fraud litigations and prosecutions.

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It will allow individual plaintiffs and enforcement authorities to come to the negotiating table with increased power in the form of larger penalties and punitive damages, he notes. As a result, medical practitioners and healthcare companies faced with accusations of healthcare fraud and the possibility of financial ruin will need to seriously consider settlement demands that would have likely been challenged in open court previously.

Next: Potential side effects of the change + proactive measures to take

One of the potential side effects of the change in penalty amounts could impact Directors and Officers (D&O) or Errors and Omissions (E&O) insurance. Because doctors and clinics often rely on these policies as a source of funding for the defense and settlement of FCA claims, Leonardi predicts an increase in coverage amounts and a related rise in premium amounts in order to provide sufficient coverage for more expensive settlements.

Proactive Measures

While the fines may increase the stakes, Gary Young, JD, PhD, director of the Northeastern University Center for Health Policy and Healthcare Research argues that this development will not significantly impact practices and their compliance efforts.

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“It may make some practices take a closer look at what they’re doing around compliance and maybe some modifications will be made,” he says, “but to me this doesn’t represent a watershed moment here where practices are going to completely retool what they’re doing.”

Even so, Vanessa Best, CCS-P, CPC, CEO of Precision HealthCare Consultants, says the improper billing of services can result in penalties that could potentially close the doors of independent primary care practices. She recommends several steps to help maintain compliance.

According to Best, practices should:

· Review policies for midlevel practitioners such as physician assistants, nurse practitioners and midwives because improper billing for their services can be construed as fraudulent claims.

· Note that The Fraud Enforcement and Recovery Act of 2009 includes not only improper billing but also the retention of overpayments.

· Be aware that claims filed under state Medicaid programs, while not submitted directly to the federal government, are also included under false claims. Physicians should implement an internal compliance plan that includes Medicaid processes.

Next: Considering the bigger picture

· Review Medicare resources for claims review processes.

· Contact a specialist to perform an audit on clinical documentation and billing processes.

Broader Context

These higher fines should be viewed as one element in the bigger picture of healthcare fraud and abuse monitoring, Young says. Some experts indicate that as much as one third of all U.S. healthcare spending is wasted, he points out, and a high proportion of that stems from fraud and abuse.

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Clearly the federal government has been stepping up its enforcement efforts to deal with this issue. Because it has been successful in making increasingly substantial recoveries year to year, the federal government likely views fraud and abuse compliance and enforcement as a high return on its investment, he adds, and part of that investment includes the use of increasingly sophisticated tools such as predictive analytics and data mining approaches.

Courts also are changing how they handle these cases, Young explains. In the past plaintiffs needed to show every claim that was allegedly in violation of the applicable law, but some courts have become more receptive to statistical sampling approaches. In these situations, specific claims are used to indicate a larger pattern.

“Even without bringing in those specific claims, they’re asking for the penalties to be applied to that larger number of claims that are based on a generalization from a sample,” Young says. When considering the big picture, it is apparent that the federal government is taking healthcare fraud and abuse very seriously, he adds.

“It’s going to continue to invest more resources in this area. It’s going to continue to use more sophisticated approaches and tactics to enforce the various fraud and abuse laws. And it will aggressively pursue violations and take advantage of the kinds of penalties that are available,” he says, “including these kinds of monetary penalties, which now are substantial.”

Paul Nicolaus is a Wisconsin-based freelance writer. Send comments, questions, or story ideas to nicolauswriting@gmail.com, or learn more at www.nicolauswriting.com.