DOJ’s National Fraud Enforcement Division Announces Priorities

In an August 13 memo, Assistant Attorney General Colin M. McDonald set forth the priorities of the Department of Justice (DOJ) National Fraud Enforcement Division that will be focused primarily on criminal public benefits fraud and misuse of taxpayer dollars. 

In the health care space, the primary targets in include home health agencies and hospice providers, as well as pharmacists and physicians who may be involved in drug diversion.

This focus on government benefits fraud and government procurement fraud means there will likely be even more scrutiny on providers that bill to or contract with government programs and agencies.

What is the National Fraud Enforcement Division?

This criminal division was created in April by consolidating and realigning sections of the DOJ that previously prosecuted public funds fraud including the Health Care Fraud Unit, the Tax Section and the Market, Government and Consumer Fraud Unit of the DOJ’s Criminal Division.  At the time, it was announced that the newly created division would work closely with the Task Force to Eliminate Fraud, a “whole of government” effort chaired by the vice president to eliminate fraud, waste and abuse in Federal benefit programs.

The McDonald memo comes only days after the DOJ Criminal Division’s Fraud Section renamed itself the “White Collar and Corporate Enforcement Section” in an effort to maintain its focus on certain fraud enforcement, like insider trading and securities fraud.  Although we understand that there was some discussion about this, the DOJ Civil Division Civil Frauds Section is currently not part of the National Fraud Enforcement Division and will continue to separately investigate and litigate civil False Claims Act cases. 

What are the Division’s Health Care Priorities?

The McDonald memo details some of the efforts that the division will focus on when attempting to combat health care fraud.  According to the memo, approximately 3 to 10 percent of all health care spending is the result of fraud.

The memo specifically identifies as a priority criminal fraud by home health care providers and hospice centers. The memo also notes as primary targets kickbacks, drug diversion, and attempts to deceptively market unsafe products and services. The memo mentions that the division will also seek to investigate fraud in telemedicine as well as general Medicare and Medicaid fraud. 

This focus on home health care and hospice providers comes amid a wider crackdown on both provider types by the Centers for Medicare & Medicaid Services, which has placed a temporary nationwide moratorium on new Medicare enrollments for these providers, citing instances of what it claims to be fraud.

This memo seems to advance that effort further by placing those providers in the crosshairs of the Health Care Fraud Strike Force but with greater resources, data analytics support and technology.

Other targets in the health care space are pharmacists and physicians who may be involved in drug diversion.  In June, the DOJ announced, as part of its Health Care Fraud Takedown with CMS , the Department of Health and Human Services Office of Inspector General and the Drug Enforcement Administration, a number of charges for diversion of prescription opioids and controlled substances. The McDonald memo shows that this will continue to be a priority, noting that “[t]he illegal prescribing and dispensing of opioids and other controlled substances results in addiction and devastates American families and communities.”

What are the Division’s Other Priorities?

While the McDonald memo has limited details, it breaks down four other specific categories of fraud that the division will seek to prosecute.

Public trust and financial integrity: The division will focus on the financial integrity of government benefit and grant programs as well as public procurement fraud.  The focus on procurement fraud will especially seek out instances of bid rigging, self-dealing, bribery, product substitution, and billing fraud. 

Internal Revenue: The division’s tax section will focus on tax return preparers that include false claims on individual tax returns as well as individuals who conceal their income and falsify information on tax returns.  According to the memo, the division will accomplish this with data analytics and financial forensics.

Global Trade and Commerce: This section will focus on trade fraud and customs evasion by prioritizing investigation of transshipment schemes, country-of-origin fraud, and undervaluation of imports as well as forced labor schemes.

Corporate Misconduct: The memo indicates that the division will focus on prosecuting instances where businesses “benefit financially from the criminal conduct of their employees” and reward corporations that voluntarily self-disclose, cooperate, and remediate identified wrongdoing.

What does this mean?

The division was created in part by reorganizing sections within DOJ that were already focused on criminal fraud prosecution.  In some instances, this memo indicates that those prosecutions will continue unabated.

There is, however, a distinct pivot in this division’s priorities to focusing on government benefits fraud and government procurement fraud, which means there will likely be even more scrutiny on providers that bill to or contract with government programs and agencies.

Reed Smith will continue to follow developments related to health care fraud enforcement. If you have any questions about the National Fraud Enforcement Division or anything else regulated to fraud enforcement please don't hesitate to reach out to the health care lawyers at Reed Smith.