Hospitals Urging SCOTUS to Limit False Claims Act Penalties

07 July 2014 Health Care Law Today Blog

What do a moving company and a hospital association have in common? The False Claims Act (FCA). 

The American Hospital Association along with the United States Chamber of Commerce and the Pharmaceutical Research and Manufacturers of America recently submitted an amici curiae brief in support of petitioners, Gosselin World Wide Moving, urging the Supreme Court to bar excessive FCA penalties. Large penalties under the FCA are of concern to business that contract with the government as well as entities that participate in Federal Health Care Programs.

The FCA creates liability for treble damages plus a civil penalty of $5,000 to $11,000 for each false claim submitted. The question is whether the Fourth Circuit erred in finding that the FCA requires imposition of a separate penalty for each invoice submitted to the Government. The Fourth Circuit held that a $24 million FCA penalty was not excessive, although damages were not proven at trial and the government had paid $3.3 million for the services in question.

Amici argue that the FCA creates “irrationally large” penalties that do not fit the severity of the harm done to the Government and are instead a repercussion of how the Government’s invoicing process that is imposed on contracting parties.  There is a division among lower courts regarding how to calculate FCA penalties.

With an increasing number of FCA cases being brought each year by relators and with a large number focused on the health care industry, hospitals and other health care providers will want to see whether the Supreme Court weighs in on this issue.

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