With collections amounting to $5.6 billion, FY 2021 marks DOJ’s largest annual total FCA recovery since FY 2014, and more than twice the $2.3 billion received in FY 2020. FY 2021 was also a record-shattering year for DOJ as it relates to health care fraud enforcement; over $5 billion (90% of the total) was obtained from cases pursued against individuals and entities in the health care and life sciences industries.
On August 30, 2021, the DOJ announced a $90 million dollar settlement with Sutter Health and affiliates (“Sutter Health”) to settle False Claims Act (“FCA”) allegations brought by qui tam relator, Kathy Ormsby, related to the Center for Medicare & Medicaid Services’ (“CMS”) MA Program. Sutter Health elected to settle with DOJ and the relator without an admission of liability. As part of the Settlement Agreement, the Office of Inspector General (“OIG”) required Sutter Health to enter into a Corporate Integrity Agreement.
In a move that reminds us that successful defendants can—and should—seek attorneys’ fees in the right case, a magistrate judge in the U.S. Court of Appeals for the Ninth Circuit awarded pharmaceutical company Aventis Pharma SA (“Aventis”) attorneys’ fees in a False Claims Act (“FCA”) case brought by a competitor, Amphastar Pharmaceuticals Inc. (“Amphastar”). The FCA contains a fee-shifting component, permitting prevailing parties to recover attorneys’ fees from the opposing party—but the playing field is not equal. This fee-shifting provision entitles a prevailing plaintiff to an award of reasonable attorneys’ fees and costs, regardless of whether the government elects to intervene in the case. 31 U.S.C. § 3730(d)(1)-(2). A defendant, on the other hand, can only be awarded attorneys’ fees in cases in which the government has declined to intervene and where the defendant can show that the opposing party’s action was “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4).
Earlier this summer, Ethan P. Davis, Principal Deputy Assistant Attorney General for the Civil Division of the U.S. Department of Justice (DOJ) delivered remarks addressing DOJ’s top priorities for enforcement actions related to COVID-19 and indicating that DOJ plans to “vigorously pursue fraud and other illegal activity.” As discussed below, Davis’s remarks not only highlighted principles that will guide enforcement efforts of the Civil Fraud Section under the False Claims Act (FCA) and of the Consumer Protection Branch (CPB) under the Food, Drug, and Cosmetic Act (FDCA) and the Controlled Substances Act (CSA) in response to the COVID-19 public health emergency (PHE), they also provide an indication of how DOJ might approach enforcement over the next few years.
DOJ'S KEY CONSIDERATIONS & ENFORCEMENT STRATEGY FOR COVID-19
Davis highlighted two key principles that would drive DOJ’s COVID-related enforcement efforts: the energetic use of “every enforcement tool available to prevent wrongdoers from exploiting the COVID-19 crisis” and a respect of the private sector’s critical role in ending the pandemic and restarting the economy. Under that framework, DOJ plans to pursue fraud and other illegal activity under the FCA, which Davis characterizes as “one of the most effective weapons in [DOJ’s] arsenal.”
However, as DOJ pursues FCA cases, it will also seek to affirmatively dismiss qui tam claims that DOJ finds meritless or that interfere with agency policy and programs. DOJ also plans to collect certain information from qui tam relators regarding third-party litigation funders during relator interviews. DOJ’s emphasis on qui tam cases—cases brought under the FCA by relators or whistleblowers—for COVID-related enforcement highlights the impact such matters have on DOJ’s enforcement agenda.
- DOJ will consider dismissing cases that involve regulatory overreach and are not otherwise in the interest of the United States.
Although Davis emphasized that the majority of qui tam cases would be allowed to proceed, in order to “weed out” cases that lack merit or that DOJ believes should not proceed, DOJ will consider dismissing cases that “involve regulatory overreach or are otherwise not in the interest of the United States.” This is consistent with the principles reflected in the 2018 Granston Memo that instructed DOJ attorneys to consider “whether the government’s interests are served” when considering whether cases should proceed and listed considerations for seeking alternative grounds for dismissal of FCA cases. Davis gave examples throughout his speech of actions DOJ might consider dismissing:
- Cases based on immaterial or inadvertent mistakes, such as technical mistakes with paperwork
- Cases based on honest misunderstandings of rules, terms, and conditions
- Cases based on alleged deviations from non-binding guidance documents
- Cases against entities that reasonably attempted to comply with guidance and “in good faith took advantage of the regulatory flexibilities granted by federal agencies in the time of crisis.”
DOJ litigators have been advised to inform relators of the possibility of dismissal. Additionally, qui tam suits based on behaviors temporarily permitted during the COVID-19 pandemic, particularly in circumstances in which agencies exercised discretion to waive or not enforce certain requirements, might
“fail as a matter of law for lack of materiality and knowledge.”
- DOJ will now include a series of questions during relator interviews to identify third-party litigation funders.
During each relator interview, DOJ has instructed line attorneys to ask a series of questions to identify whether the relator or their counsel has a third-party litigation funding agreement, which is an agreement in which a third party—such as a commercial lender or a hedge fund—finances the cost of litigation in return for a portion of recoveries. Under the new policy detailed in Davis’s speech, if a third-party funder is disclosed, DOJ will ask for the following:
- the identity of the third-party litigation funder,
- information regarding whether information of the allegations has been shared with the third party,
- whether the relator or their counsel has a written agreement with the third party, and
- whether the agreement between the relator or their counsel and the third party includes terms that entitles the third-party funder to exercise direct or indirect control over the relator’s litigation or settlement decisions.
Relators must inform DOJ of changes as the case proceeds through the course of litigation. While Davis characterizes these changes as a “purely information-gathering exercise for the purpose of studying the issues,” the questions are in furtherance of DOJ’s ongoing efforts to uncover the potential negative impacts third-party litigation financing may have in qui tam actions.  The questions Davis referenced in his remarks reflect DOJ’s concerns with third-party litigation funding as expressed by Deputy Associate Attorney General Stephen Cox in a January 2020 speech. Davis emphasized that DOJ particularly sought to evaluate the extent to which third-party litigation funders were behind qui tam cases DOJ investigates, litigates, and monitors; the extent of information sharing with third-party funders; and the amount of control third-party funders exercised over the litigation and settlement decisions. While the Litigation Funding Transparency Act of 2019 has remained inactive since its introduction in February 2019 by Senator Grassley and the 2018 proposal by the U.S. Court’s Advisory Committee on Civil Rights’ Multidistrict Litigation Subcommittee to require disclosure of third-party litigation funding remains under consideration, DOJ’s plans to include this line of questioning potentially signals DOJ’s intention to take more concrete and significant steps to address third-party litigation funding in the future.
Through a January 9, 2020, press release, the Department of Justice (“DOJ”) reported more than $3 billion in total recoveries from settlements and judgments from fraud-related civil matters brought under the False Claims Act (“FCA”) for fiscal year (“FY”) 2019. An increase over the $2.9 billion recovered in FY 2018, FY 2019 reflected the ninth highest amount of recoveries in the past 30 years. The accompanying statistics released by DOJ reflect several themes related to FCA enforcement concerning the health care and life sciences industry.
The Health Care and Life Sciences Industry Accounted for Approximately 87 Percent of FY 2019 Recoveries
Consistent with previous years, fraud actions involving the health care and life sciences industries continue to drive DOJ’s FCA recoveries. Health care-related fraud recoveries alone have now exceeded $2 billion for 10 consecutive years. In FY 2019, health care-related matters generated approximately $2.6 billion in recoveries, or 85 percent of recoveries from all sectors combined, which does not include recoveries from state-based Medicaid actions with which DOJ may have assisted. The $71 million increase in recoveries from health care-related matters between FY 2018 and FY 2019 marks the third consecutive year of increasing health care-related recoveries. Notably, recoveries from health care-related cases brought directly by DOJ increased from $568 million to $695 million between FY 2018 and FY 2019, the second highest amount recovered in 30 years.
During a November 29, 2018 speech, Deputy Attorney General Rod Rosenstein announced changes to Department of Justice (“DOJ”) policy concerning individual accountability in corporate cases. The announcement followed the DOJ’s year-long review of its individual accountability policies and the September 2015 memorandum issued by then-Deputy Attorney General Sally Yates, commonly known as the “Yates Memo.”
While making clear that pursuing individuals responsible for corporate wrongdoing remains a top priority in every investigation conducted by DOJ, Mr ...
A dental practice and related dental management company have become the first two entities to make their way on to the newly created “High Risk – Heightened Scrutiny” list from the Office of Inspector General for the United States Department of Health and Human Services (the “OIG”).
ImmediaDent of Indiana, LLC, a professional dental practice (“ImmediaDent”), and Samson Dental Partners, LLC, a dental management company which provides management and administrative services to ImmediaDent and other dental practices in Indiana, Kentucky and Ohio ...
The Department of Justice (DOJ) announced this week that it has entered into a settlement agreement with Davita Medical Holdings (Davita) for $270 million dollars to resolve certain False Claims Act liability related to Medicare Advantage risk adjustment payments.
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For health care providers and other government contractors, perhaps no law causes more angst than the False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”). A Civil War-era statute initially designed to prevent fraud against the government, the FCA is often leveraged by whistleblowers (also known as “relators”) and their counsel who bring actions on behalf of the government in the hope of securing a statutorily mandated share of any recovery. These qui tam actions often can be paralyzing for health care entities, which, while committed to compliance, suddenly find ...
On March 15, 2017, the United States District Court for the Western District of Pennsylvania issued an opinion that sheds insight on how courts view the "writing" requirement of various exceptions under the federal physician self-referral law (or "Stark Law"). The ruling involved the FCA qui tam case, United States ex rel. Emanuele v. Medicor Assocs., No. 1:10-cv-245, 2017 U.S. Dist. LEXIS 36593 (W.D. Pa. Mar. 15, 2017), involving a cardiology practice (Medicor Associates, Inc.) and the Hamot Medical Center. The Court's detailed discussion of the Stark Law in its summary judgment ...
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