Healthcare providers accused of fraud and certain regulatory violations could soon 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 trade group representing nursing homes called the provision “outrageous.”
The Bipartisan Budget Act of 2015, which the president signed into law this month, requires that civil monetary penalties be raised to account for inflation by August 2016. Some penalties haven't changed since 1987.
Daily penalties imposed on nursing homes for noncompliance with Medicare and Medicaid conditions of participation could double from a current maximum of $10,000 a day, said Lyn Bentley, the American Health Care Association's senior director of regulatory services.
The nursing home group is investigating its options to fight the increase, she said. The HHS secretary can issue a rule keeping the penalties below the new maximum rate if the social costs outweigh the benefits, or if 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, 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 can involve hundreds of allegedly tainted claims. Plus, the law allows the government to seek triple the amount of money it actually lost.
But legal experts say the actual impact of the change may be negligible.
The government might not even want to maximize its penalties, said Jennifer Weaver, a partner at Waller Lansden Dortch & Davis. Gargantuan penalties—those that are 10 to 15 times the value of the disputed claims—could be considered a violation of the Constitution, which bars excessive fines.
Also, False Claims Act cases typically settle for amounts that reflect the government's losses rather than the penalties, Weaver said.
Still, the threat of higher penalties might at least influence providers' decisions to settle.
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 to settle its case. 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 allegedly illegal compensation arrangements with physicians.
Burns agreed that higher penalties might 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.
