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DOJ RELEASES NEW GUIDELINES FOR COOPERATION CREDIT IN FALSE CLAIMS ACT CASES

May 9, 2019

On May 7, 2019, the U.S. Department of Justice (DOJ) released new guidance on how targets of False Claims Act (FCA) investigations may receive “credit” for proactively disclosing misconduct and cooperating with the government. These new guidelines are being included in DOJ’s Justice Manual, which sets out the Department’s official policies for US Attorneys’ Offices across the country. The new policies are particularly important for healthcare providers, who sometimes find themselves as the subject of FCA investigations related to fraud and abuse claims due to the highly-regulated nature of the industry. 

While government attorneys have long exercised discretion when it comes to rewarding cooperators in FCA investigations, the new guidance provides explicit information on DOJ’s expectations for potential cooperators. The new policy states that “[DOJ] has a strong interest in incentivizing companies and individuals that discover false claims to voluntarily disclose them to the government” so that that the government can pursue action to make itself whole following a loss caused by false claims and fraud.

As such, the guidance provides that “entities or individuals that make proactive, timely, and voluntary self-disclosure to the Department about misconduct will receive credit during the resolution of a FCA case.” The policy also states that entities already on notice of a potential government fraud claim may receive credit for disclosing any additional misconduct discovered during the course of an internal investigation.

DOJ is also encouraging forms of cooperation other than outright disclosure that may earn an entity credit. The new policy lays out a detailed list of forms of potential cooperation, including:

  • identifying individuals substantially involved in or responsible for misconduct;
  • preserving and collecting documents and data that could serve as evidence in future litigation;
  • making individuals with relevant knowledge available for interviews and depositions with government investigators;
  • disclosing facts and evidence gathered during internal investigations;
  • assisting in determination of the losses caused by the misconduct; and
  • admitting liability or accepting responsibility for the wrongdoing or relevant conduct.

The Justice Manual also states that its list is not exhaustive, and other forms of assistance may earn an entity or individual credit.

In addition to providing credit for proactive cooperation, DOJ’s new guidance also directs Department attorneys to consider whether an entity engaged in remedial actions. Such remedial actions include performing an investigation and analysis into the misconduct, implementing or improving compliance programs, and disciplining individuals responsible for misconduct either through direct participation or failure in oversight.

Not surprisingly, the guidelines are not explicit about the form or extent of credit that cooperating entities and individuals should expect. Rather, the Justice Manual sates that “where conduct of the entity or individual warrants credit, the Department has discretion in FCA cases to reward such credit. Most often, this discretion with be exercised by reducing the penalties and damages multiple sought by the Department.” However, the guidelines clearly state that the maximum credit that a defendant may earn cannot exceed an amount that would result in the government receiving less than full compensation for the defendant’s misconduct.

The new policy also contains guidance about forms of cooperation credit of particular importance to healthcare providers. In addition to their discretion in reducing monetary penalties, DOJ attorneys are also authorized to consider “additional avenues that would permit an entity or individual to claim credit in FCA cases” including notifying a relevant agency about the cooperation so the agency may consider the cooperation in suspension, exclusion, or monetary damages administrative decisions.

This form of credit may be especially key to healthcare institutions who are facing suspensions from government payment plans, such as Medicaid and Medicare. By cooperating fully with the government, these insitutions may reduce their exposure to administratively-imposed penalties. However, the Justice Manual also explicitly states that such agencies may consider the cooperation in their own discretion, so there is no guarantee that cooperation will earn an entity credit with CMS or any other agency.  

While it will take time to see how they will impact FCA investigations and cases, these new policies create not only additional pressure for providers, but also incentives for healthcare organizations to conduct their own robust internal investigations into fraud allegations. DOJ attorneys will likely expect organizations seeking credit to share the results of these investigations and fully comply with any government investigation. If you have questions about the new DOJ policies or need guidance while addressing fraud and abuse concerns, please contact Eric Atkinson, Mary Malone, Davis Powell, or another member of Hancock Daniel’s Healthcare Investigations and Enforcement Actions team.

The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel & Johnson, P.C., is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel  & Johnson, P.C. be liable for any direct, indirect, or consequential damages resulting from the use of this material.