Key DOJ Health-Care Enforcement Trends to Watch

With the fall of Biden’s first year of administration, the Chamber of Business Lawyers, corporations and executives are still anxiously awaiting significant guidance from the Department of Justice on how they will approach corporate enforcement under Attorney General Merrick Garland.

To date, the DOJ has not issued any major policy statements, but a majority of the division’s officers – including the Assistant Attorney General and the Chief of the Criminal Police Department – have approved the Senate’s confirmation process, and it is likely that there will be references to the division’s enforcement priorities and initiatives follow.

Below are some key enforcement issues that we believe the DOJ’s new leadership will likely be driving the government’s enforcement policy forward.

Cooperation Loan Standards according to the Monaco Memo

The Department’s Memorandum on Individual Accountability for Corporate Misconduct, issued in 2015 by former Assistant Attorney General Sally Yates, significantly increased the requirements companies must meet in order to receive a collaborative loan.

The Yates Memo mandated that companies “must provide the ministry with all relevant facts about the individuals involved in company misconduct” in order to qualify for a collaborative loan. Subsequent policy guidance from Assistant Attorney General of the Trump administration, Rod Rosenstein, eased this all-or-nothing approach, giving federal attorneys more discretion, and giving companies the option to obtain partial credit if they “made meaningful contributions to the government’s investigation” and identified individuals who are “materially involved in or responsible for the criminal behavior.”

It remains to be seen whether Deputy Attorney General Lisa Monaco will return to a more restrictive approach to the granting of collaborative loans in a policy paper bearing her name, but in related areas, such as the 2020 guidelines on effective corporate compliance programs, federal prosecutors are still holding companies more demanding standards.

However, at least in the context of the enforcement of the False Claims Act, there may be cause for optimism. The recent announcement of an FCA resolution between the DOJ’s trade disputes division and an Ohio healthcare system reportedly affected only a single damage multiplier – a favorable outcome given the division’s ability to seek triple damages under the law.

The case may be a harbinger of future settlements for companies that disclose themselves and offer a solid collaboration that meets the department’s requirements on FCA matters.

Increased enforcement focus on private equity

The DOJ and other government regulators and enforcement agencies – such as FinCEN and the SEC – have signaled that private equity firms and their portfolio companies are under increased scrutiny, especially if the firm invests in a company in a highly regulated industry, such as the health sector, and is aware of the misconduct of a portfolio company or takes an active role in it.

Until recently, the DOJ had rarely intervened in FCA proceedings against private equity firms. That all changed in 2018 when the department filed an intervention lawsuit against the compounding pharmacy Patient Care America (PCA) and its private equity owner Riordan, Lewis & Haden Inc. (RLH) in the United States ex rel. Medrano v. Diabetic Care Rx LLC d / b / a Patient Care America. In Medrano, the DOJ alleged that PCA paid bribes to three marketing firms to target TRICARE beneficiaries for medically unnecessary prescriptions.

In another FCA case involving private equity, the department adopted an aggressive theory of FCA liability that targeted private equity investors who had not taken active leadership in the behavior of the portfolio company.

The coincidence of the expansion of private equity into the healthcare sector and the impending wave of enforcement related to Covid-19 mean that the prioritization of private equity firms as FCA defendants will only increase. Expect the DOJ to double its position that when investing in portfolio companies, private equity firms are expected to know that the companies are subject to certain fraud and abuse laws and act accordingly.

Continued enforcement work in health care

After two years of being dominated by a global pandemic, the DOJ has focused heavily on criminal and civil enforcement in the healthcare sector. In fiscal 2020, the DOJ initiated over 1,000 new criminal investigations into healthcare fraud, in addition to nearly 1,100 new civil investigations into healthcare fraud.

The new criminal investigations represented an increase of nearly 10% since 2019, while the number of civil investigations remained constant. In total, prosecutors brought charges against nearly 700 defendants in 412 trials, many of whom stem from investigations initiated by one of the DOJ’s nationwide health fraud forces.

In addition to criminal activity, the federal government confiscated more than $ 2.2 billion from FCA cases in fiscal 2020. Health cases made up an unusually high 83% of total recoveries. In the first half of 2021, the FCA’s resolutions in the health and life science industries have already exceeded $ 200 million and, in line with recent trends, these matters made up the largest proportion of total revenues for any industry.

The DOJ has identified several key health areas as ongoing priorities, including opioid fraud and abuse, the use of Covid-19 aids, abuse of the elderly in long-term care facilities, telemedicine-related fraud, electronic health record abuse, and cybersecurity for payment claims. Many of these priorities can be attributed to fraud either identified or resulting from the Covid-19 pandemic.

The government also provided an unprecedented amount of pandemic relief over the past year: the CARES bill, paycheck protection program, and other Covid-19-related stimulus programs have pumped over $ 5 trillion into the U.S. economy to help individuals and Help companies have been negatively affected by the pandemic.

With this in mind, the DOJ has diverted significant resources to prioritize the investigation and prosecution of criminal behavior related to the pandemic. In addition, the pandemic has uncovered existing healthcare fraud and further expanded healthcare to the technology sector.

The DOJ’s stated enforcement goals, combined with recent indictments, suggest that the DOJ is likely to continue to prioritize the prosecution and investigation of healthcare fraud in the years to come.

This column does not necessarily represent the opinion of the Bureau of National Affairs, Inc. or its owners.

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Information about the author

David Rybicki was Deputy Assistant Attorney General in the Department of Justice, Criminal Division from 2017 to 2020. He previously served as an advisor to the attorney general and assistant attorney general in Washington, DC. He is a partner in the K&L Gates Investigations, Enforcement and Auditing Practice Group.

Robert J. Higdon Jr. served as a North Carolina attorney and in the Department of Justice’s Public Integrity Division for nearly 30 years. From 2017-2021 he was the US Attorney for the Eastern District of North Carolina. He is a partner in the K&L Gates Practice Group Investigations, Enforcement and White Collar.

Nancy Iheanacho is an associate in the Investigations, Enforcement, and White Collar Practice Group. Her global practice focuses on government investigations and enforcement actions, internal investigations, business defense and congressional investigations.