DOJ Report on FCA Settlements Shows Focus on Healthcare
The U.S. Department of Justice (DOJ) recently announced it recovered more than $5.6 billion under the False Claims Act (FCA) in fiscal year 2021, more than double the $2.3 billion recovered in fiscal year 2020.1
Healthcare-related recoveries accounted for almost 90% of the 2021 settlements and judgments.
The 2021 total is just shy of the record amount recovered in fiscal year 2014, when DOJ reported $6 billion, notes Michael J. Podberesky, JD, partner with McGuireWoods in Washington, DC. That year’s figures included $3.1 billion in settlements with financial institutions related to false statements regarding federally insured mortgage and loan programs.
Last year’s recovery total also was boosted by a $3 billion settlement from opioid manufacturer Purdue Pharma. That makes the 2021 total seem more significant than it is, Podberesky says. Without that settlement, the 2021 total was slightly higher than 2020 recoveries but still lower than the average recoveries over the past five years. Nonetheless, DOJ’s report explained healthcare remains a major focus for fraud investigations.
“Of the more than $5.6 billion in settlements and judgments reported by the Department of Justice this past fiscal year, over $5 billion relates to matters that involved the healthcare industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians,” the DOJ reported. “The amounts included in the $5 billion reflect recoveries arising from only federal losses, and, in many of these cases, the department was instrumental in recovering additional amounts for state Medicaid programs.”
The DOJ report detailed how the settlement figures include enforcement actions regarding healthcare fraud, the opioid epidemic, the Medicare Advantage Program, unlawful kickbacks, unnecessary medical services, procurement fraud, and COVID-19-related fraud.
In one example, electronic health record [EHR] technology vendor Athenahealth paid $18.25 million to resolve allegations it “invited customers and prospective customers to lavish all-expense-paid sporting, entertainment, and recreational events to generate sales of its EHR product.”
Pharmaceutical manufacturers Taro, Sandoz, and Apotex paid more than $400 million to resolve allegations they violated the Anti-Kickback Statute with arrangements on price, supply, and allocation of customers with other pharmaceutical manufacturers. DOJ alleged a conspiracy to fix the price of certain generic drugs.
Enforcement action is likely to increase as the Biden administration fills cabinet positions and can more aggressively pursue healthcare fraud, Podberesky says. The number of non-qui tam cases filed in 2021 was relatively high, which is noteworthy for recipients of federal funds because non-qui tam cases tend to recover a good bit more than qui tam cases.
The number of cases filed in 2021 means many enforcement actions will mature in the coming one to five years.
“The seed corn is there for the numbers to continue inching upward in the coming years, which aligns with the Biden administration’s promises to increase enforcement activity and [pursue] those who take advantage of federal programs,” Podberesky says. “I think we will continue to see an upward trend in recoveries.”
DOJ also is likely to focus on the funds disbursed during the pandemic, which could prompt a substantial increase in enforcement activity and recoveries.
“People have been predicting a tsunami of pandemic-related fraud enforcement, and we haven’t seen that yet. But it’s still early,” he explains. “The typical FCA case takes years to investigate, and often after that another year to settle. It may not become public until three or four years after the matter was initiated.”
So far, the government has pursued the low-hanging fruit of pandemic fraud — the criminal cases in which individuals openly defrauded the government by obtaining funds under false pretenses or misusing federal dollars intended for COVID-19 relief, Podberesky notes. Those were relatively quick and easy cases, and now DOJ likely will purse the more complex investigations that involve healthcare organizations.
Many healthcare providers are applying for forgiveness for loans related to personal protective equipment (PPE) during the pandemic. Podberesky advises looking carefully at those applications before submission. Make sure you satisfied all the regulatory requirements for loan forgiveness and that any claims are accurate and supported by documentation.
“I think we will see a wave of PPE and other provider relief fund cases, and that’s where your compliance program will make the difference,” he says. “If you have a robust compliance program and this matter just slipped through the cracks, they’re going to treat that company very differently than another company that had the same conduct but didn’t have a good compliance program in place.”
REFERENCE
- U.S. Department of Justice. Justice Department’s False Claims Act settlements and judgments exceed $5.6 billion in fiscal year 2021. Feb 1, 2022.
SOURCE
- Michael J. Podberesky, JD, Partner, McGuireWoods, Washington, DC. Phone: (202) 857-1753. Email: [email protected].
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