New coordination of voluntary self-disclosure policies announced in criminal health care fraud matters

The new National Fraud Enforcement Division (Fraud Division) of the Department of Justice (DOJ) has issued another directive in its recent spate of memoranda and guidance for the newly established division. This most recent contribution is a joint policy statement on coordination of voluntary self-disclosure in criminal health care matters with the Department of Health and Human Services Office of Inspector General (HHS-OIG).

Under the new policy, companies that uncover conduct viewed to violate both criminal and civil federal fraud laws should disclose that conduct to the Fraud Division. Doing so, the memorandum says, will automatically provide the company with the benefits presented by both the DOJ’s Corporate Enforcement Policy (CEP) for corporate criminal matters and the HHS-OIG’s Self-Disclosure Protocol (SDP). But according to the memorandum, disclosure of “potential criminal conduct” will be considered only if it is disclosed to the Fraud Division or another component of the DOJ. Disclosure of that conduct to only HHS-OIG will not avail the company of benefits under the DOJ CEP.

This announcement comes only two weeks after a memo from the Fraud Division detailing the division’s corporate enforcement priorities. We covered that memorandum in both a client alert and a blog post. In that memorandum, the Fraud Division delineated priority cases, with health care fraud topping the list of priorities. And in March, the DOJ issued the CEP, which incentivizes disclosure of fraud. Now, with this new announcement of coordination between HHS-OIG and DOJ, the Fraud Division becomes the center of those disclosures

What does this coordination do?

Health care fraud actions can take different forms, including: 

1. Administrative actions by HHS-OIG involving mandatory and permissive exclusions from Medicare, Medicaid, and other federal health care programs; 

2. Actions for Civil Monetary Penalties (CMP) brought by HHS-OIG through administrative proceedings with Administrative Law Judge review;

3. Civil actions for CMPs brought by DOJ’s Civil Division in federal court for liability under, inter alia, the Anti-Kickback Statute (AKS), the Stark Law and the False Claims Act, and 

4. Criminal prosecutions brought by DOJ’s Fraud Division.  

According to the memorandum, the coordination between HHS-OIG and the Fraud Division allows any corporate entity that reports “potential” criminal fraudulent activity to the Fraud Division to have the benefit of both the CEP for the criminal conduct and the HHS-OIG Self-Disclosure Protocol for any civil or administrative violations. The DOJ emphasized how having “one clear point of contact” – the Fraud Division – will eliminate confusion and “unnecessary bureaucratic barriers.”

The DOJ Civil Division and HHS have separately announced a six month pilot program to allow companies to self-disclose conduct that would generate civil or administrative penalties under the False Claims Act and pay a slightly enhanced remuneration in order to obtain a release of civil liability and administrative penalties.

Will this affect how health care companies approach self-disclosure?

The line between civil and potentially criminal conduct may blur, particularly with respect to the AKS, where intent is a required element and the analysis is highly fact dependent. Now, for non-compliance with administrative regulations or a civil fraud allegation known to the corporate entity that arguably includes a “potential” criminal element or metastasizes into criminal conduct, that “potential criminal conduct” will not receive the benefit of the CEP cooperation if it is only reported to HHS-OIG. 

Going forward, it will be important to determine as early as possible and on an ongoing basis any “potential criminal conduct” to take advantage of the DOJ and HHS-OIG coordination. Although any potentially civil-only issue may be escalated and elevated in profile if disclosed in this way, according to the memorandum, failing to disclose to the Fraud Division could risk losing the opportunity for a declination for any criminal conduct.  When conducting an internal investigation, it is important to continuously and carefully analyze whether there is “potential criminal conduct” that may or should be reported, even if doing so may elevate the risk of scrutiny in a matter that would previously have been treated as most likely having only civil implications. 

Reed Smith will continue to track developments with regard to health care fraud enforcement. If you have any questions about this memorandum or anything involving the DOJ’s Fraud Division and its coordination with other agencies, please reach out to the authors of this post or to your health care lawyers at Reed Smith.