How healthcare providers can silence the DOJ alarm

October 6, 2015

The healthcare system of the United States is a perennial ‘hot topic’ in the national public arena. Debate has swirled around insurance coverage, billing, medical malpractice, elder care and organ donation, among other topics. One significant underlying – and largely silent – healthcare industry issue is reaching a boiling point: for right or wrong, our nation’s healthcare industry recently has become a major focus of the United States Department of Justice (DOJ). The federal government, through DOJ prosecution of the full range of healthcare providers, has reaped billions in recoveries. Smart, future-focused healthcare companies (HCPs) should be proactive in ensuring compliance with federal regulations governing provision of healthcare.

Let’s start with statistics. In the most recent fiscal year, the DOJ reported monetary recoveries from United States healthcare providers and entities of US$2.3 billion. This marked the fifth straight year of increasing recoveries under the False Claims Act. The arguments undergirding these settlements ran the gamut from a ‘lack of medical necessity’ for services that were provided and marketing drugs not approved by federal healthcare providers to self-referrals and kickbacks. Nearly all areas of the healthcare industry are vulnerable: to date, the DOJ has targeted ambulance companies, nursing homes, physicians, chiropractors and major healthcare systems and pharmaceutical companies. With healthcare becoming an ever-larger segment of the United States economy and a greater drain on the federal budget, the government’s scrutiny of all sectors of healthcare is likely to increase. This should raise an alarm for the entire industry.

One key step that companies in the cross-hairs should take involves addressing – and anticipating – compliance problems. Even if a company adopts a comprehensive compliance programme, and earnestly attempts to scrupulously obey the law, compliance failures are going to occur. These compliance glitches equate to potential violations of the law. As such, they require investigation, but the core issue is determining what type of investigation is necessary. When attorneys conducting these investigations have spent too much time within the government arena, they approach compliance failure allegations with a prosecutor’s mindset, seeking to determine who the responsible parties are and then delivering those individuals to the government for prosecution. The entire representation is likely to cost hundreds of thousands or even millions of dollars in fees to the law firm, while ultimately leaving the company defenseless.

Ironically, the larger the penalty finally agreed upon, the greater the justification for the fees that were charged. Moreover, these investigations do not necessarily take into account the needs of the HCP.

When a potential compliance failure has been detected, the company needs to know:

  1. What occurred that led to the failure?
  2. What are the potential damages and how can they be mitigated?
  3. How to avoid future violations.

These needs can be addressed adequately with a more limited investigation conducted by an attorney retained to defend the company, with a specific focus on serving the healthcare business by approaching the investigation with the client’s needs in mind. The investigation’s scope should be limited to the specific violation alleged and closely related subject matters. For instance, when a compliance failure allegedly occurs in a nursing home setting involving a claim of fraudulent billing, policies governing the services provided to residents care might be reviewed in tandem with billing procedures. This is to ensure that the services actually provided are authorised under appropriate regulations. However, the investigation would not need to go further afield. This type of investigation provides an economical alternative to larger scale explorations of alleged company failures by attorneys whose government experience may make them predisposed to identifying ‘wrong-doers’ instead of defending the company. In addition, more focused investigations conducted by a company-retained attorney allow the client to protect itself.

Determining what happened is actually much more complicated than it sounds. As is the case in other areas, the world operates on a spectrum that is substantially greyer than most former prosecutors would like to admit. No internal investigation, regardless of expense or duration, will ever be as thorough as a federal investigation. Private actors, including the most powerful law firms, lack the power of the grand jury subpoena or the ability to offer immunity or favourable plea terms to secure testimony. There is little that can be done to force recalcitrant witnesses to speak or to compel a third party to provide documentation or cooperate with an internal investigation. This means that the internal investigation is nearly always going to have gaps. These gaps must be accepted as a given.

In addition, especially in the healthcare field, most crimes have a ‘specific intent’ element, usually an intent to defraud the government. There is rarely a ‘smoking gun’ in the real world. People rarely commit their intent to emails or memoranda. In fact, ‘intent’ is usually proven by circumstantial evidence. Frequently, however, the circumstances that could establish wrongdoing might also be explained away innocently. The issue becomes much more complex when different witnesses from divergent vantage points and having different agendas give conflicting statements. Also, the need to separate fact from rumour, first-hand knowledge from hearsay, and facts from opinion, are key parts of any internal investigation. Ultimately, if a matter is to be tried before a jury, the Federal Rules of Evidence will determine the content of what the jury hears versus evidence the jury does not hear.

In most internal investigations currently being conducted, the investigators involved attempt to resolve conflicts between different witnesses and make judgement calls concerning credibility of witnesses to arrive at conclusions that may or may not be accurate. If the goal is to defend the company, however, there is no need to resolve exactly what occurred. In fact, the seeds of an intent-based defence may exist in the ambiguity surrounding exactly what happened.

It is sufficient to document the differing versions of events that witnesses invariably tell. If there is evidence of a criminal violation and the injuries from that violation can be mitigated, actions can be taken to mitigate those injuries without necessarily knowing exactly what happened. Likewise, if the potential (or alleged) violation resulted from a gap in a compliance programme, that gap can be eliminated without a factual conclusion as to who exactly was responsible for the gap or other aspects of the compliance failure. HCPs should remember that problems can be redressed, and compliance programmes fixed, without involving the government.

Investigations are here to stay for the immediate future (and likely beyond); however, not every investigation needs to cost a company millions. Opting for less expensive alternatives – such as a smaller scale internal investigation – can retain precious company resources while actually paving the way for a successful defence of the company. Exploring these suggested options for addressing alleged compliance issues internally via company-retained legal counsel can silence the blaring of the ‘DOJ alarm’ currently affecting the nation’s healthcare sector.



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