The DOJ is always finding new ways to remove the incentives for white-collar crime and non-compliance. A new initiative announced seeks to leverage the power of the corporation against its executives that engage in healthcare fraud.
Deputy Attorney General Lisa Monaco announced a policy change that has drastic consequences for executives of healthcare corporations that are accused of violations of the false claims act and other healthcare statues. The Justice Department announced this week that it will push companies to claw back compensation from executives that engage in fraud including healthcare fraud.
The way the DOJ proposes to do this is by withholding “cooperation credit” for companies that do not “claw back” executive compensation.
When a company uncovers non-compliance and potential fraud there is a strong incentive to report wrongdoers after an internal investigation in order to receive non-prosecution or a lighter sentence. In the corporate context a sentence is usually large fines and can include a Corporate Integrity Agreement – an agreement with the government to increase compliance.
Before this shift, investigating and uncovering the wrongdoing and reporting to the government was sufficient. But now, Deputy Attorney General Lisa Monaco wants to ensure the corporation “claws back” executive compensation in order to receive a lesser sentence or an agreement to avoid prosecution.
First, any healthcare company suspecting wrongdoing MUST conduct an internal investigation to gather all of the facts and determine (1) if wrongdoing occurred, (2) who did it, and (3) what modifications to the compliance plan can prevent future misconduct. This is and was always the first step. And the good thing is, we can help with that. Our experienced healthcare fraud investigators can quickly spot wrongdoing and help your board and counsel identify wrongdoers and take corrective action.
In addition, our financial fraud investigators can review executive compensation and determine the appropriate steps to “claw back” compensation if needed.
Remember, a company without a strong compliance plan gets the brunt of the DOJ when wrongdoing occurred. Failure to have a proper compliance plan can even be considered “willful blindness” and implicate the board and executives in the wrongdoing.
Contact CCG for your compliance plan or internal investigation today.
In Allina v. Azar the Supreme Court determined that agency guidance that does not undergo the formal rulemaking process cannot be binding on private entities. This was a landmark decision and halted the use of the use of such documents in healthcare fraud and false claims act cases. Three memos from the DOJ resulted from that case: the Sessions Memo, the Brand Memo, and the Garland Memo. Each had a different take on the impact of that case. Each is vitally important to your practice, how you bill, and how you determine liability for potential healthcare fraud and false claims actions.
The Sessions Memo
Guidelines without a formal rulemaking process or act of legislation are de facto regulations and agency guidance documents, non-binding on parties. On November 16, 2017, former United States Attorney General Jeff Sessions authored a memorandum entitled Prohibition on Improper Guidance Documents (“Sessions Memo”). It reminded components of the Department of Justice that guidance documents had not gone through the rule-making process and could not be issued or used to bind private parties. The actual language states, “Effective immediately, Department components may not issue guidance documents that purport to create rights or obligations binding on persons or entities outside the Executive Branch (including state, local, and tribal governments).”
The Sessions Memo was intended to prevent DOJ components from evading required rulemaking processes by using guidance memos to create de facto regulations. Therefore, while guidelines may exist from entities, such as CMS, they are not statutes having gone through a legislative or formal rulemaking process, and if they are going to be used by prosecutors, they should be used as nothing more than to say the individual(s) had knowledge of the guidelines and violated them but did not violate the law. Only those documents that have gone through the legislative and rulemaking processes that have been implemented via statutory and regulatory guidance should be relied on. Those documents that have not gone through the above formal process should not be used to create or establish obligations or rights with respect to regulated private parties. The actual language states, “[e]ffective immediately, Department components may not issue guidance documents that purport to create rights or obligations binding on persons or entities outside the Executive Branch (including state, local, and tribal governments).”
The Brand Memo
As a follow-up to the Sessions Memo, Associate Attorney General, Rachel Brand, issued her own memorandum (“Brand Memo”) directed at the use of guidance documents in False Claims Act and other affirmative civil enforcement cases, however, the principles should also be applicable to criminal enforcement actions. The Brand Memo made it clear that the principles set out in the Sessions Memo should also be followed by DOJ prosecutors when determining whether guidance documents issued by other federal agencies should be considered “binding” when the requirements set out in the guidance documents are not supported by existing statutes and/or regulations. The Brand Memo states: “The Department should not treat a party’s noncompliance with an agency guidance document as presumptively or conclusively establishing that the party violated the applicable statute or regulation. That a party fails to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying legal requirements; agency guidance documents cannot create any additional legal obligations.”
Then, in 2018, the Justice Department updated the United States Attorney Manual, renaming it the Justice Manual, and along with the above referenced memos, it addressed De-facto Regulations and Agency Guidance Documents. Justice Manual section 1-19.000 addresses the limitations on issuance of guidance documents while section 1-20.000 focuses on the USE of guidance documents issued by other federal agencies in litigation. It provides, “Criminal and civil enforcement actions brought by the Department must be based on violations of applicable legal requirements, not mere noncompliance with guidance documents issued by federal agencies, because guidance documents cannot by themselves create binding requirements that do not already exist by statute or regulation.”
Justice Manual § 1-20.201 instructs that if an agency guidance document describes a statutory or regulatory provision, federal prosecutors are permitted to use and rely on such agency guidance documents to argue that a party’s awareness of the guidance document shows that the party had the requisite notice or knowledge of the law. Section 1-20.202 further provides that an agency guidance document can be used as probative evidence that “a party has satisfied, or failed to satisfy, professional or industry standards or practices relating to applicable statutory or regulatory requirements,” and that this rationale applies “broadly in the healthcare arena” expressly citing guidance documents issued by the Centers for Medicare and Medicaid Services (“CMS”) such as the agency’s Medicare Benefit Policy Manual and Local Coverage Determinations (“LCDs”) as relevant evidence that procedures may (or may not) be medically reasonable and necessary.
The Garland Memo
Shortly after taking office, Merrick Garland elected to strip the prior protections Sessions and Brand offered to potential false claims and healthcare fraud defendants. While still bound by the Supreme Court decision in Allina v. Azar, he wanted to erase the prior administrations efforts to ensure enforcement actions were based on actual promulgated guidance. On July 1, 2021 he issued the Garland Memo which respects the Azar decision but claims that DOJ prosecutors can use unpromulgated guidance documents as evidence of scienter or to convince a judge and jury that the provider knew the rules and intended to break them.
The impact of the Garland Memo is that DOJ prosecutors will continue to apply guidance documents that were authored by agencies but did not go through the formal rulemaking procedure as evidence in enforcement actions. Just as before, non-compliance with an LCD, NCD, or the Medicare Claims Processing Manual may be the basis of federal prosecution.