By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA
A Health Care Provider Defense and Compliance Firm

When you think of False Claims Act (FCA) enforcement, your mind may go straight to hospital systems, pharmaceutical giants, or multi-state payer fraud schemes. But a recent $4 million settlement involving a shipyard in Bayonne, New Jersey, is a stark reminder that the FCA is not just about billing fraud, it’s about integrity across every inch of government contracting. And if you’re a health care provider contracting with the government through TRICARE, VA, DOD, HRSA, CMS, or otherwise, this case should set off alarm bells.

DOJ Targets Immigration Related Fraud in Federal Contracts

The Department of Justice announced that Bayonne Drydock and Repair Corporation agreed to pay $4,043,810.56 to resolve allegations that it violated the FCA by using unauthorized aliens to perform work on U.S. Navy ships under government contracts. But the issue wasn’t limited to immigration violations alone.

According to the settlement and related criminal case documents, Bayonne’s Risk Manager—who has since pleaded guilty to a federal charge—allegedly helped multiple subcontractors employ at least 52 unauthorized workers on these defense projects. This individual took affirmative steps to circumvent labor and immigration rules even after being notified that unauthorized workers had been identified.

That conduct, the government alleged, rendered Bayonne’s contract-related certifications false. Specifically, Bayonne had agreed to comply with contract terms that required use of lawful labor and truthful reporting. By knowingly permitting or encouraging its Risk Manager to subvert those terms, Bayonne opened itself up to civil FCA liability, independent of the underlying labor law violations.

Key Takeaways for Health Care Providers with Government Contracts

1. FCA Liability Extends Beyond Billing
   This case is a prime example of how compliance failures unrelated to claims data can still trigger massive FCA exposure. If you’re a health care provider with DOD or VA contracts your obligations under those contracts likely include certifications about personnel, cybersecurity, anti-kickback compliance, and more. A failure to truthfully adhere to any of those representations, especially if repeated or concealed, can make every claim you submit under the contract “false” within the meaning of the FCA.
2. Subcontractor Conduct is Your Responsibility
   Bayonne didn’t directly hire the unauthorized workers, its subcontractors did. But those subs were allegedly controlled by the company’s own Risk Manager, which eliminated any plausible deniability. As the DOJ makes clear in this and similar cases, your contractors and agents are your liability under the FCA.
   
   In the health care context, think about contract medical directors, MSOs, third-party staffing firms, call centers, and vendors performing services under grant-funded or government-backed programs. If they’re cutting corners or violating the terms of your federal contracts, you are on the hook.
3. FCA Enforcement is Not Just About Dollars It’s About Risk
   This case didn’t involve overbilling. There’s no allegation that Bayonne submitted inflated invoices or charged for services it didn’t perform. Instead, the government said the breach of contract terms and misrepresentations around compliance created a material risk to national security and public trust.
   
   For health care contractors, this precedent could mean that misrepresentations about clinical staffing, data privacy, or quality assurance systems could likewise form the basis of a civil FCA action, even absent a dollar-for-dollar claim dispute.

Final Thought: Contract Compliance is FCA Compliance

Whether you’re a behavioral health provider under a DOD contract, a lab with TRICARE billing, or a rural health clinic receiving federal grants, the Bayonne Drydock settlement is a wake-up call. The False Claims Act isn’t just about billing codes and upcoding audits anymore, it’s about full-spectrum contractual integrity. If your entity touches federal funding in any form, now is the time to review your contracts, subcontractor relationships, personnel documentation, and internal compliance attestations. FCA enforcement shows no signs of slowing down, and the long arm of the government is reaching further than ever.

Need help evaluating your exposure under federal contract obligations?

Contact Parrella Health Law at 857.328.0382 or email Chris directly at cparrella@parrellahealthlaw.com to schedule a strategic compliance assessment.