Healthcare providers accused of fraud and certain regulatory violations will soon likely face significantly higher fines because of a little-discussed part of the recent congressional budget deal.
Legal experts say there's probably no need for most providers to panic. But a major trade group representing nursing homes called the provision “outrageous.”
The change in the law could mean an increase in daily penalties imposed on nursing homes for noncompliance with Medicare and Medicaid conditions of participation from a maximum of $10,000 a day to $20,000 a day, said Lyn Bentley, the American Health Care Association's senior director of regulatory services.
“It could potentially have a negative impact on providers who are working on improvement and needing to use dollars to provide high quality care but instead having to pay a penalty,” Bentley said. She said the fines could be “devastating” for nursing homes with large numbers of Medicaid patients.
The Bipartisan Budget Act of 2015, which the president signed into law Nov. 2, means that civil monetary penalties must be raised to account for inflation by August 2016. Some of the increases will be steep because the some of the penalties haven't changed since 1987.
The nursing home group is still investigating its options, Bentley said. The HHS secretary does have the power to issue a rule keeping the penalties below that new maximum if she finds that the social costs outweigh the benefits or the higher penalties would have a “negative economic impact,” according to the law.
Penalties are also going up for providers accused of fraud under the False Claims Act, which makes it a crime to submit tainted claims to government programs such as Medicare and Medicaid.
Those penalties, which now range from $5,500 to $11,000 per false claim, haven't changed since 1999, so the inflation adjustment could mean a 40% leap, said Patrick Burns, a co-executive director of the Taxpayers Against Fraud Education Fund, a not-for-profit supporting whistle-blower incentive programs.
Higher penalties could add up quickly in False Claims Act cases, which often involve hundreds of allegedly tainted claims. Plus, the law allows the government to seek triple the amount of the money it actually lost.
But legal experts say the real impact of the change may be negligible.
“On the one hand it gives the government and (whistle-blowers) potentially a somewhat bigger hammer than what they've got now, but the hammer they've got now is already so big I'm not sure the inflation increase is going to have a lot of practical impact on the frequency of settlements or the size of settlements,” said William Horton, a partner at Jones Walker who serves as chair of the American Bar Association's health law section.
The government might not even want to maximize penalties under the revised law, said Jennifer Weaver, a partner at Waller Lansden Dortch and Davis. Gargantuan penalties—10 or 15 times the value of the disputed claims—could be considered a violation of the Eighth Amendment of the U.S. Constitution, which bars excessive fines.
“I'm not sure they want those constitutional issues tested in court,” Weaver said. Also, False Claims Act cases typically settle for amounts that reflect the government's losses rather than the penalties, she said.
Still, the threat of higher penalties might at least influence a provider's decision to settle.
“The fact that these penalties are available is a frightening prospect for providers who get caught up in False Claims Act investigations and cases, and it does drive cases to settle rather than take the risk that penalties that might be truly astronomical could be imposed,” Weaver said.
In recent months, a number of hospitals and health systems have settled False Claims Act cases for whopping sums. Florida-based Adventist Health System recently agreed to pay $118.7 million. North Broward Hospital District in Fort Lauderdale, Fla., agreed in September to a $69.5 million settlement. Tuomey Healthcare System in Sumter, S.C., agreed last month to pay $72.4 million, dodging a $237 million verdict. All of those cases concerned illegal compensation arrangements with physicians.
Burns agreed the higher penalties may sometimes compel targets of fraud investigations to settle. “It's not a big deal unless you are intending to do fraud and are angry there's going to be accountability,” he said.