False Claims Enforcement in 2022: What to Expect in the Year Ahead | Foley Hoag LLP – White Collar Law and Investigations
This is the seventh article in this year’s series examining important trends in white-collar law and investigations. Our previous post Discussed SEC Enforcement in 2022: A Look Ahead. Next: ESG and the SEC: what’s next on the horizon?
Looking further into 2023, we expect to see several trends in the DOJ’s enforcement of the False Claims Act:
- First, continuing a trend that began under the Trump administration, we expect the total number of cases brought under the False Claims Act to continue to rise, fueled in part by the continued focus focused on direct business introductions rather than whistleblowers, often as a consequence of the government’s growing reliance on data analytics.
- Second, we expect the healthcare industry to continue to receive the lion’s share of law enforcement scrutiny, with a particular focus on telehealth services, Medicare Advantage fraud, procedural medically unnecessary and suspected bribes.
- Third, we expect increased use of the False Claims Act to ensure compliance with cybersecurity standards and to root out suspected pandemic-related fraud.
Constant stream of new questions fueled by data analysis
As discussed in last year’s post, the period between 2017 and 2020 was the most active enforcement period in the history of the False Claims Act, measured by the number of new cases opened. This increased activity was the result of a sharp increase in the number of cases brought directly by the government rather than through who tam relationships or whistleblowers. Unlike the period 2013-2016, when the government carried an average of 118 cases per year, the government carried an average of 170 cases per year between 2017 and 2020, with a maximum of 259 cases in 2020. The first year of the Biden administration showed a continuation of this trend, with 203 cases brought by the government, or more than 25% of the total number of new cases brought in 2021.
In remarks last year at the Federal Bar Association’s Qui Tam Conference, Senior Assistant Deputy Attorney General for the Civil Division Brian Boynton alluded to the DOJ’s ongoing efforts to expand its role in the identification and direct presentation of business, in particular through the use of Data Analysis. According to Boynton, “Our sophisticated data analysis allows us to identify patterns among different types of healthcare providers, giving us a way to identify trends and extreme outliers.” In addition to allowing the government to “see where the most at-risk physicians are located in each state and federal district,” data analytics also allow the government to “demonstrate and quantify sophisticated relationships, such as a physician offering prescriptions of controlled substances to a patient”. which is likely to divert them” and, in addition, to target misconduct related to COVID-19.
Going forward, we expect the FCA law enforcement landscape to be shaped by an increasing number of cases brought directly by the government, and we expect this trend to continue as that the government devote more resources to analyzing massive amounts of billing data at their fingertips.
Healthcare has been, and almost certainly will remain, the largest sector targeted by the DOJ for FCA enforcement. Indeed, of the more than $5.6 billion in settlements and judgments reported by the DOJ in fiscal year 2021, more than $5 billion related to cases involving the healthcare sector. We expect this trend to continue this year.
In particular, we expect continued attention in the area of telehealth. Due to the COVID-19 pandemic and pandemic-related policies aimed at improving access to care, telehealth services have expanded. This expansion has resulted in alleged abuses, and the DOJ has targeted these abuses both criminally and civilly. For example, last May, the ministry announced the first charges in the country regarding the exploitation of expanded telehealth policies stemming from the submission of false and fraudulent requests for telemedicine encounters that apparently did not occur.
Along the same lines, we expect to see continued enforcement of unnecessary medical services and services not rendered as billed. The ministry said it emphasizes programs that target elderly patients by providing poor or unnecessary care or no care at all. For example, in 2021, the Department reached an eight-figure settlement with a nursing home operator over alleged false allegations of unreasonable and unnecessary rehabilitation therapy services and substandard skilled nursing services.
The Medicare Advantage program, also known as Medicare Part C, has also been a high priority for the DOJ. Medicare Part C pays a lump sum to private health insurance companies for each patient enrolled in their plans. These payouts are adjusted for various risk factors, so plans receive higher payouts for higher-risk participants. The DOJ has focused on plans and providers who manipulate this risk adjustment process to increase payment amounts. For example, in August last year, The DOJ announced a $90 million FCA settlement with a California-based health services provider to resolve allegations that it provided inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage plans. We expect such enforcement actions to continue this year.
Finally, we expect continued FCA enforcement to target kickbacks. In 2021, the Department resolved cases related to bribery violations involving companies in the healthcare industry, including an electronic health records provider, home healthcare agencies, hospitals, drug treatment facilities, pharmaceutical companies, diagnostic testing companies and medical device companies. Given this magnitude, companies in the healthcare industry should turn their attention to anti-bribery law compliance.
Our prediction last spring that the DOJ would focus FCA enforcement efforts in the area of cybersecurity proved prescient. Like us reported in October, the department announced the launch of a new civilian cyber fraud initiative that will use the FCA to pursue cyber vulnerabilities and incidents that arise with government contracts and grants. According to Deputy Attorney General Lisa Monaco, the department aims to “foster cybersecurity accountability” through FCA enforcement. And while the Department “takes[s] very seriously [its] mission to help victims of cyber intrusions”, victims who, for example, do not timely report an alleged violation can be punished with civil fines.
Indeed, in a speech at the Cybersecurity and Infrastructure Security Agency’s (CISA) Fourth Annual National Cybersecurity Summit, Mr. Boynton described three “common cybersecurity failures” that the Department considers “candidates for choices” for a potential FCA application: (1) know failures comply with cybersecurity standards; (2) become aware of misrepresentations regarding security controls and practices; and (3) knowledge of failures to timely report suspected violations. Importantly, the initiative will focus on cases affecting federal agencies and sensitive government information and systems. Entities that provide government cyber products and services should therefore be made aware of the DOJ’s new direction in this area, as FCA growth in this area is likely in the coming years.
Finally, we expect to see a continued focus on using the False Claim Act to reduce pandemic-related fraud. With the Attorney General establishing a COVID-19 Fraud Enforcement Task Force in May 2021, expect to see a steady stream of pandemic-related questions over the coming year. The announcement by the Task Force GA highlighted the variety of alleged fraud stemming from the pandemic and foreshadowed likely areas of activity:
The pandemic has given rise to various forms of fraud. Those intent on illegally profiting from the pandemic have capitalized on the scarcity to sell fake vaccines and sell millions of counterfeit N95 masks and other personal protective equipment to healthcare facilities desperate to protect patients. front line workers. They inflated their payroll to get bigger loans than they were eligible for. They used shell companies and received aid that they illegally misappropriated. They set up operations to apply for identical loans on behalf of several companies. And they fraudulently misrepresented the products or services they sold to the federal government.
Like the pandemic itself, which has been going on longer than many imagined, the DOJ’s efforts to prosecute pandemic fraud through the use of the FCA are set to persist for years, with each new phase of the pandemic offering new opportunities. new opportunities for alleged fraud and abuse.