Buried within a two-year budget agreement, among hundreds of pages of federal spending legislation, are key changes to several federal health care fraud statutes. The Bipartisan Budget Act of 2018 (BBA), enacted on February 9, 2018, increased the criminal and civil penalties that can be imposed for violating certain federal health care laws and clarified liability under another.
These changes to the Anti-Kickback Statute (AKS), Civil Monetary Penalties Law (CMPL), and Stark Law got limited mentions in the statements, debates, and reports from Congress leading up to the passage of the BBA. However, a closer look at the broader Congressional intent driving these changes provides some insight into the motivations for, and reinforces the steady progression of, increasing criminal and civil penalties for health care fraud violations.
Section 50412 of the BBA sends penalties under the AKS and the CPML soaring. The AKS, 42 U.S.C. § 1320a-7b(b), prohibits the willful payment or receipt of remuneration to induce, or in return for, referrals of Federal health care program business. The criminal fine for violating the AKS increased from $25,000 to $100,000, and the maximum jail time for a felony conviction doubled to ten years, bringing it in line with the maximum penalty for violating the Health Care Fraud Statute, 18 U.S.C. § 1347.
The CPML, 42 U.S.C. § 1320a-7a, authorizes the Department of Health and Human Services Office of Inspector General (OIG) to impose civil money penalties, along with other remedies, for certain fraud involving the Medicare and Medicaid programs. The BBA doubled the maximum money penalties related to improper claims to $20,000, $30,000, or $100,000, depending on the violation. Similarly, the maximum money penalty related to payments to induce the reduction or limitation of services increased from $2,000 to $5,000. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 already mandated inflationary adjustments, so the BBA’s statutory doubling only increases what the OIG can seek by about 33 percent. Nevertheless, these changes accelerate the rate at which these fines are growing.
Combatting health care fraud and abuse has long been a priority for members of Congress and the Department of Justice (DOJ). Since the 1980s, a steady stream of changes have similarly stiffened penalties or made it easier for the DOJ to impose liability on companies and individuals, and the pace of these changes has only been increasing. For example, the Affordable Care Act added AKS violations to the definition of criminal "health care offenses" for the first time – opening up more potential criminal exposure to related offenses – and the Sentencing Guidelines were changed to increase the recommended prison time for large-dollar health care fraud offenses. But the BBA’s legislative history provides few clues about Congress’s intent behind these most recent increases. They came, seemingly, out of nowhere.
Digging a little deeper reveals that Section 50412 mirrors legislation proposed by Representative Gus Bilirakis (R), of Florida’s 12th Congressional District, in July 2017 as H.R. 3245, the Medicare Civil and Criminal Penalties Update Act. Rep. Bilirakis introduced H.R. 3245 on the U.S. House of Representatives floor with a nod to both the notion that Medicare is “absolutely critical for the seniors” in his district and the OIG’s takedown the previous week of 412 defendants, charged nationwide, with “Medicare fraud totaling about $1.3 billion in losses.” The DOJ described this takedown as “the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force.” It’s no surprise that these measures to combat health care fraud were proposed by a legislator from Florida, where a large number of that takedown’s cases were prosecuted. Inspired by the DOJ’s enforcement efforts, Rep. Bilirakis introduced H.R. 3245 to “crack down on Medicare fraud and abuse by increasing civil and criminal fines.”
The Committee on Energy and Commerce’s Report on H.R. 3245 notes that increasing these penalties will allow the government to technically recover more from the perpetrators who commit fraud against federal health care programs. But the increase in criminal and civil penalties may not actually change the amount of money that fraudsters like the ones who inspired Rep. Bilirakis are required to pay for their crimes. The Congressional Budget Office (CBO) reported to the Energy and Commerce Committee that H.R. 3245 would not have a significant effect on revenues over the next ten years. Based on discussions with the OIG, the CBO concluded that the previous caps on civil or criminal penalties “almost never impose a constraint on the amount that can be collected through the combination of restitution and monetary penalties.” This is because restitution is the prosecution’s principal tool and imposing the maximum penalty in cases involving many claims can run afoul of the Eighth Amendment.
So what is the purpose then? The Committee on Energy and Commerce’s Report on H.R. 3245 spells it out: deterrence. The Report quotes testimony in 2011 from the Chief Counsel of the OIG that they are “concerned that providers that engage in health care fraud may consider civil penalties and criminal fines a cost of doing business.” The Report further notes that some of the penalties at issue have not been updated in over 20 years, even though penalties for health care fraud have been increasing. The BBA’s revisions to the AKS and CPML appear to be a Congressional vote of confidence for the DOJ’s efforts to aggressively combat health care fraud and to build on prior efforts to create harsher penalties for companies and individuals convicted of it.
These changes, and the Congressional intent behind them, stand in contrast to the BBA’s revisions to the Stark Law, 42 U.S.C. § 1395nn. Section 50404 of the BBA makes it easier for physicians to comply with the Stark Law’s exceptions, but these new provisions largely codify existing regulations (42 C.F.R. § 411.350 et seq.). The only suggestion of Congress’s intent – the Report from the House Committee on Ways and Means about H.R. 3178, the Medicare Part B Improvement Act of 2017 – acknowledges that these changes are nothing new. While certainly a victory for the health care providers that must comply with this very technical law, the BBA’s changes to it merely mirror those made to other existing regulations.
The BBA contained key changes to federal health care fraud statutes that, on the whole, reflect ongoing Congressional efforts to heighten penalties for health care fraud infractions. The revisions to the AKS and CMPL will, in Congress’s view, raise the stakes companies and individuals face in health care fraud cases. As the CBO’s analysis suggests, these penalty increases may not change the total amount prosecutors can extract in run-of-the-mill health care cases. But corporations being prosecuted for technical AKS violations, or under novel legal theories with no damages to recoup through restitution, will likely feel the deterrent effect of doubled or quadrupled penalties. Whether this meaningfully affects corporate or individual decision-making or conduct, given the complex regulatory scheme governing federal health care programs, remains to be seen.