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The Dangers of an FCA Jury Trial: Single Damages, Civil Penalties and Treble Damages

Healthcare providers facing violations of the False Claims Act (“FCA”) often question the process that may unfold as the government assembles its case, as well as the potential solutions for resolution. This blog examines a recent federal jury trial as an illustration of the financial penalties at stake when a case is decided by a jury and the rationale for considering alternative solutions.

What is the False Claims Act?

The FCA is a federal “whistleblower” law that empowers individuals or private parties to bring a civil lawsuit on behalf of the government for false claims and to share in any recovery. The action enables the government, if it chooses to intervene, to investigate claims of fraud which, in the healthcare context, may accuse healthcare providers or entities of engaging in a course of conduct that violates the government’s Medicare and Medicaid programs. Entities including the Office of Inspector General of the U.S. Department of Health and Human Services and the Federal Bureau of Investigation may assist in the case investigation.

How a Whistleblower Case Against a Surgical Product Distributor Resulted in a $43 Million Verdict

Early in 2023, a jury in Minnesota federal court issued a verdict in favor of the United States and against the defendant, a surgical product distributor, in excess of $43 million. (United States ex rel. Fesenmaier v. The Cameron-Ehlen, Group, Inc. et al., Case No. 0:13-cv-3003 (D. Minn)).

The whistleblower alleged a fraud scheme wherein the defendant paid kickbacks to ophthalmic surgeons to induce their use of defendants’ products in cataract surgeries reimbursed by Medicare. The government alleged that these illegal kickbacks were in violation of the Anti-Kickback Statute (“AKS”), which prohibits the exchange (or offer to exchange) anything of value given

  • knowingly and willingly; and
  • in return for referring a person or furnishing an item or service for which a Federal healthcare program, like Medicare, can pay.

The government’s case alleged that the kickbacks came in the form of trips for physicians to lavish resorts and sporting events, often on private planes. The surgical product distributor argued that the physicians paid for these trips and events, but according to the government, the amount was often below fair market value, thus prohibiting such payment from falling within a safe harbor of the AKS. The jurors were asked to analyze the distributor’s intent when arranging for the physician trips. The government had the burden to prove “willfulness” beyond good faith, but the defense could have presented “good faith” as an honestly held belief or opinion, or acting in a manner consistent with the advice of counsel.

Following the six-week jury trial, the jury concluded that the defendant’s behavior violated the AKS, which in turn resulted in the submission of 64,575 false claims to the Medicare program between 2006-2015. The payments by Medicare were in a lump sum for both the procedure, performed by the physician, and the lens, which was supplied by the defendant. Thus, the distributor violated the FCA as being in receipt of the “false” funds even though the distributor did not directly bill Medicare.

Penalties for FCA Violations

The jury in this case unanimously decided that the distributor was liable for $43 million in single damages for violating the FCA and AKS. It is critical for providers to know that the power, and thus the danger, of the FCA is that it allows for “treble damages and penalties.” Such civil penalties are assessed after a finding of single-damages liability.

The minimum and maximum penalty assessments vary depending on the date of the FCA violation. For violations occurring before November 2, 2015, the minimum per-claim penalty is $5,500, with the maximum at $11,000. But for violations occurring after that date, the minimum penalties have greatly increased. For example, the minimum penalty assessed for claims submitted after January 30, 2023, has increased to $13,508, with the maximum at $27,018 for each violation.

What this meant in the case was that the government asked the presiding judge to order the defendant to pay nearly $490 million in total liability. It is worth noting that the proposed award includes penalties “at the minimum end of the statutory range for each of the false claims” of $358.45 million and $131 million in treble damages, according to the government’s motion.

It is important to understand that a settlement of claims by agreement prior to trial rarely includes civil penalties. Thus, the risks of going to trial are significantly heightened when facing FCA liability. Attorneys Paul D. Werner and Nicole P. Allocca are experienced in helping healthcare providers navigate these risks and weigh potential outcomes and solutions when facing FCA claims and potential liability.

  • Posted on: Mar 22 2023