On May 6th, we posted about the possibility that the Department of Justice (“DOJ”) might dramatically increase False Claims Act (“FCA”) penalties after the Railroad Retirement Board (“RRB”) nearly doubled the per-claim penalties it imposed under the FCA. After nearly two months of anticipation, DOJ published an Interim Final Rule yesterday announcing that it intended to increase the minimum per-claim penalty under Section 3730(a)(1) of the FCA from $5,500 to $10,781 and increase the maximum per-claim penalty from $11,000 to $21,563. These adjusted amounts will apply only to civil penalties assessed after August 1, 2016, whose violations occurred after November 2, 2015. Violations that occurred on or before November 2, 2015 and assessments made before August 1, 2016 (whose associated violations occurred after November 2, 2015) will be subject to the current civil monetary penalty amounts.
The penalty increases proposed by DOJ are the same as those proposed by the RRB back in May. The RRB’s increase resulted from a section of the Bipartisan Budget Act of 2015, called the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the “2015 Adjustment Act”), which required federal agencies to update civil monetary penalties (“CMPs”) within their jurisdiction by August 1, 2016. The 2015 Adjustment Act amended the Federal Civil Penalties Inflation Adjustment Act of 1990—which is incorporated into the text of the FCA—and enacted a “catch-up adjustment.” Under the “catch-up adjustment,” CMPs must be adjusted based on the difference between the Consumer Price Index (“CPI”) in October of the calendar year in which they were established or last adjusted and the CPI in October 2015.
DOJ last raised the civil penalty amounts under the FCA to their current levels in August 1999, but because the 2015 Adjustment Act repealed the legislation responsible for the 1999 adjustment, DOJ looked back to 1986 when civil penalties were set at a minimum of $5,000 and a maximum of $10,000. This calculation resulted in a CPI multiplier of more than 215% resulting in the new minimum per-claim penalty of $10,781 ($5,000 x 2.15628) and a maximum per-claim penalty of $21,563 ($10,000 x 2.15628). Under the 2015 Adjustment Act, the increases are required unless DOJ, with the concurrence of the Director of the Office of Management and Budget, makes a determination to increase a civil penalty less than the otherwise required amount. As to the FCA civil penalty, as well as scores of other civil penalties under DOJ’s jurisdiction, DOJ declined to seek this exception.
DOJ is providing a 60-day period for public comment on this Interim Final Rule. Like the rest of the health care industry, we will be watching closely to see if commenters are able to convince the Department to reconsider these astronomical penalty amounts.