Constitutional Challenges to False Claims Act Could Reshape Healthcare Fraud Enforcement

The False Claims Act (FCA), cornerstone of the Department of Justice’s fight against healthcare fraud, faces significant constitutional challenges that could fundamentally alter how fraud is detected and prosecuted across America’s healthcare system. These challenges, while threatening the law’s effectiveness, also present an opportunity to reassess whether the current approach to combating healthcare fraud is achieving its intended goals.

The FCA’s qui tam provisions allow private whistleblowers to sue entities defrauding government programs on the government’s behalf, potentially sharing in any financial recovery. These provisions have proven remarkably effective – of the $5.7 billion recovered by DOJ in healthcare FCA cases in 2025, $4.5 billion came from qui tam cases, with many successful actions pursued by whistleblowers without DOJ involvement.

However, this system now faces serious constitutional scrutiny. In a 2023 Supreme Court decision, three justices signaled willingness to review the constitutionality of these provisions. Justice Thomas in a dissenting opinion, joined by Justices Kavanaugh and Barrett in a concurring opinion, suggested the system might violate Article II of the Constitution by granting enforcement authority to private individuals that should belong exclusively to the Executive Branch.

The judicial signals have already had impact. One District Court judge has ruled the qui tam system violates the Constitution’s appointment clause, and defendants nationwide are raising similar challenges. The 11th Circuit is currently considering an appeal that, regardless of outcome, could provide the Supreme Court an opportunity to address the question definitively.

The potential invalidation of the FCA’s whistleblower provisions would devastate healthcare fraud enforcement. Yet surprisingly little discussion has focused on potential alternatives or whether the current system optimally serves healthcare enforcement goals.

“Despite decades of substantial recoveries, legitimate questions remain about the deterrent effect of financial penalties alone,” noted legal experts familiar with healthcare fraud cases. “The annual announcement of billions in recoveries may actually indicate that financial penalties aren’t adequately preventing fraud.”

A notable contrast exists between healthcare fraud enforcement and other areas of corporate enforcement. Outside healthcare, the DOJ has increasingly emphasized compliance mandates to prevent future misconduct. As described by Professors Jennifer Arlen and Marcel Kahan, corporate enforcement has “undergone a dramatic transformation,” with federal officials using their authority to impose mandates on firms to alter compliance programs, governance structures, and operations.

Since 2003, the Justice Department’s Principles of Federal Prosecutions of Business Organizations has explicitly acknowledged enforcement as “enabling the government to be a force for positive change of corporate culture.” Yet healthcare enforcement has largely missed this transformation, remaining focused primarily on financial penalties.

This divergence stems largely from the FCA’s dominance in healthcare enforcement. Under the current system, DOJ negotiates financial settlements while HHS-OIG separately negotiates Corporate Integrity Agreements (CIAs) that contain forward-looking compliance requirements. This separation gives DOJ little incentive to trade financial recovery for stronger compliance mandates.

A comprehensive analysis of 425 DOJ False Claims Act resolutions with corporate healthcare defendants between 2018 and 2024 reveals telling patterns. Despite the FCA allowing for treble damages plus penalties, the average settlement had a multiplier of just 1.71, with 87 percent of settlements at or below double damages. Nearly all DOJ press releases (99 percent) emphasized financial recovery, mentioning the settlement amount in the headline or first paragraph.

The data also shows that whether a compliance-focused Corporate Integrity Agreement was required depended almost entirely on the settlement amount. CIAs accompanied 56 percent of settlements exceeding $10 million but only 7 percent of settlements below $2.5 million.

Critics argue the current system inadequately rewards pre-existing compliance programs, fails to meaningfully hold corporate defendants accountable beyond financial penalties, and provides insufficient incentives for corporate cooperation.

While the FCA and its whistleblower provisions remain critical to healthcare fraud enforcement, the constitutional challenges provide an opportunity to address practical deficiencies in the current approach. Reform efforts should recognize both the positive impacts and the questionable incentive structures created by the FCA in its current form.

As these constitutional challenges advance through the courts, the healthcare industry, legal community, and policy makers face a critical moment to reconsider how best to detect, deter, and remedy healthcare fraud in America.