By August 1, 2016, all federal agencies must adjust their civil monetary penalties, including penalties required by the False Claims Act (“FCA”), to account for inflation. Last month, the Railroad Retirement Board, which occasionally has FCA cases, became the first agency to adjust its penalties. These adjustments are in response to Congress’s Bipartisan Budget Act of 2015 (“Act”), which requires federal agencies to update their civil monetary penalties to account for inflation, including a cost-of-living adjustment percentage. Under the new rule, FCA penalties will increase from $5,500 to $10,781, with maximum per-claim penalties increasing from $11,000 to $21,563.

So, what are the implications of this increase? For one, there will be a substantial increase in cumulative FCA penalties. Each separate false claim filed under the FCA constitutes a claim for which a penalty will be imposed. This is true even if these separate claims are combined and submitted together. A majority of the false claims submitted are in the health care industry. Notably, in 2015, two-thirds of the FCA claims filed were filed against health care providers and insurers. These health care FCA cases typically involved hundreds, or even thousands, of claims.

As we wait for the increased penalties to take effect across the board, pundits are speculating on the impact this increase will have. Some experts believe this increase will lead to an outbreak of Eighth Amendment constitutional challenges based on claims of excessive penalties, while others believe the increase will lead to more settlements from entities eager to curtail further financial loss. Finally, some believe there will be no discernible impact. At the present, there is no clear answer as to what the impact of the increased penalties will be.

The Health Law Gurus™ will continue to monitor the impact of the increased penalties. Please check back with us for updates.