by Elizabeth E. Hogue, Esq.

Relief for Providers from Devastating Penalties?

A judge in the Northern District of Texas recently decided that even the minimum penalties mandated under the False Claims Act (FCA) violate the Eighth Amendment’s Excessive Fines Clause [see U.S. ex rel. Taylor v. Healthcare Associates of Tex. (N.D. Tex. Feb. 26, 2025)]. The FCA punishes providers for submission of information that is not true in order to get paid by the federal government.

Life Threatening Penalties

The penalties assessed against providers under the FCA may be described as “life threatening.” That is, it may be difficult for providers’ businesses to survive payment of such severe penalties. The minimum penalty increased from $13,946 to $14,308 in 2025. The maximum penalty per claim increased from $27,894 to $28,619.

Ex Post Facto

These increased penalties will be assessed for violations that occurred prior to the change, but that are assessed after they are in effect. These penalties certainly make it clear why it is difficult for providers to survive violations of the FCA.

False Claims

In the Taylor case above, for example, the defendants allegedly submitted false claims as follows:

As “incident to” a physician’s care without proper documentation
For services by providers who were not eligible to bill the Medicare Program
For services performed by medical assistants instead of qualified practitioners

FCA Math Doesn't Add Up

The jury found that one of the defendants, a primary care medical group practice, submitted 21,944 false claims for $2,753,641.86 in actual damages. After trebling the damages as required by the FCA, the Court said it would enter judgement against the defendant for approximately $8 million. The Court acknowledged, however, that penalties under the FCA are fines subject to the Eighth Amendment of the U.S. Constitution.

Grossly Disproportional to the Gravity

The Court then applied the following four factors to decide whether the “fine was grossly disproportional to the gravity of the offense” under the Eighth Amendment:

The essence of the defendant’s crime and its relationship to other criminal activity
Whether the defendant was within the class of people for whom the statute of conviction was principally designed
The maximum sentence, including the fine that could have been imposed
The nature of the harm resulting from the defendant’s conduct

Fraud...or a Reporting Error?

With regard to the first factor, the Court emphasized that the defendant’s misconduct involved violations of Medicare billing rules, but did not include billing for services that were not provided. In fact, the Court said that even though the defendant violated Medicare billing rules, the misconduct was “closer in gravity to something like a ‘reporting offense.’” There was, said the Court, no evidence that the defendant’s conduct was “related to other criminal or fraudulent activity.

Magnitude of Harm

The Court also focused attention on the fourth factor. The defendant’s harm was certainly significant, but the harm, according to the Court, did not necessitate a penalty “two orders of magnitude greater than the actual financial harm,” especially when the actual damages were substantial, i.e., one hundred times the amount of actual damages. That ratio was “grossly out of alignment with the ratios in other similar cases.” The Court imposed a civil penalty of $8,260,925.58 that represents less than 3% of the statutory minimum.

Final Thoughts

Whether other Courts follow the Taylor case described above remains to be seen, but it is quite clear that providers need relief from the penalties of the FCA.

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Elizabeth Hogue is an attorney in private practice with extensive experience in health care. She represents clients across the U.S., including professional associations, managed care providers, hospitals, long-term care facilities, home health agencies, durable medical equipment companies, and hospices.

No portion of this material may be reproduced in any form without the advance written permission of the author.

©2025 by The Rowan Report, Peoria, AZ. All rights reserved. This article originally appeared in The Rowan Report. One copy may be printed for personal use: further reproduction by permission only. editor@therowanreport.com

by Elizabeth E. Hogue, Esq.

The "Wicked Witch" Chevron is Gone

On June 28, 2024, the U.S. Supreme Court overturned a decision of the Court in 1984 often referred to as “Chevron.” The Chevron case said that Courts must defer to administrative actions that are reasonable interpretations of ambiguous statutory language.

In Loper Bright Enterprises v. Raimondo, however, the U.S. Supreme Court abandoned the decision in Chevron and said that:

- The “deference that Chevron requires of courts reviewing agency action cannot be squared with” the Administrative Procedure Act (APA). The APA “specified that courts, not agencies, will decide ‘all relevant questions of law’ arising on review of agency action…even those involving ambiguous laws – and set aside any such action inconsistent with the law as they interpret it.”
- The framers of the U.S. Constitution envisioned that the final “interpretation of the laws” would be “the proper and peculiar province of the courts.”
- The views of the executive branch should inform the judgment of the judiciary, not supersede it.
- “Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”

What Does it Mean for Providers?

The short answer is that we don’t know yet. It is unclear how the new standards of the Loper Bright decision will be applied and affect health care providers. The Supreme Court said that the recent Court decision does not call past cases into question that were based on Chevron, but existing regulations are not insulated from challenges. It is likely that several providers will “swing for the fences” for favorable rulings based on Loper Bright!

One possible “candidate” for disruption is the reliance of administrative law judges (ALJs) on Chapter 8 of the Medicare Program Integrity Manual. This section offers an overview of use of inferential statistics and statistical sampling to estimate overpayments in Medicare audits. Chapter 8 of the Manual is only nine pages long. ALJs routinely use this section of the Manual to hamper providers’ ability to mount a compelling defense that challenges auditors’ methods using widely accepted standards within the statistical community. Challenges to this practice based on Loper Bright may prevent ALJs from reliance on these sections of the Manual.

Another possible target is the use of sub-statutory and even sub-regulatory guidance from the Centers for Medicare and Medicaid Services (CMS) and the Medicare Administrative Contractors (MACs) by fraud and abuse enforcers to make determinations about illegal conduct, especially under the False Claims Act (FCA). Defendants arguably now have a better chance to challenge the basis of claims of illegal conduct in light of Loper Bright.

The story of Loper Bright has not been written by any means. Surely providers should use this significant change in the law to their benefit whenever possible.

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©2024 by The Rowan Report, Peoria, AZ. All rights reserved. This article originally appeared in Healthcare at Home: The Rowan Report. One copy may be printed for personal use: further reproduction by permission only. editor@therowanreport.com

No portion of this material may be reproduced in any form without the advance written permission of the author.