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Provider Alert: Department of Justice to Target Executive Compensation to Curb Healthcare Fraud and other Corporate Crime
ccghealthcare
- ccghealthcare
- October 12, 2022
- 11:21 am
New DOJ Policy to “Claw Back” Compensation
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.
I’ll explain.
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.
What Does this New DOJ Policy Mean for Healthcare Companies?
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.
Provider Alert: Department of Justice to Target Executive Compensation to Curb Healthcare Fraud and other Corporate Crime
ccghealthcare
- ccghealthcare
- October 12, 2022
- 11:21 am
The Office of Inspector General (“OIG”) modified the personal services and management contracts safe harbor of the federal Anti-Kickback Statute (“AKS”) earlier this year. These modifications expand protections to payment structures that incorporate value-based care models.
The personal services and management contracts safe harbor was revised in three meaningful ways: (i) replaced the requirement to specify aggregate compensation in advance with a more lenient requirement to specify compensation methodology in advance; (ii) eliminated certain written requirements for part-time or periodic contracts; and (iii) created new protections for outcome-based payment arrangements.
The OIG substituted the requirement that aggregate compensation be set in advance with a requirement that the methodology for determining compensation be set in advance. This change allows more flexibility in designing agreements and mitigates the difficulty of satisfying this Safe Harbor by generating compensation schedules (instead of the methodology) in advance.
Additionally, the new rule better aligns the Safe Harbor with the equivalent Stark Law exception, which streamlines and simplifies drafting of personal services agreements.
Such methodologies must still adhere to Safe Harbor’s other conditions, including requirements that the methodology be commercially reasonable, consistent with fair market value, and not take into account referrals or other business implicating federal healthcare programs. The Safe Harbor will not protect arrangements that do not meet the above conditions.
Since the 2021 rule modification of the personal services and management contracts safe harbor is so recent, there are no opinions reflecting the interpretation of what “methodology for determining compensation” from the OIG. However, OIG commentary on the rule changes gives some insight as to the language change under the AKS. OIG commentary indicates that it believes that other safe harbor conditions mitigate the risk of structured agreements that may arguably take into consideration the volume and value of referrals.
OIG has stated that it is possible to structure an arrangement to fit within the safe harbor by using an hourly rate or other set, verifiable formula provided that all other conditions of the safe harbor are met. OIG has also cautioned that parties seeking protection under this safe harbor must evaluate the specific facts and circumstances of their arrangement to determine whether the compensation methodology over the term of the agreement is set in advance before any payment under the arrangement is made. Any remuneration also must meet all other conditions of the safe harbor for protection.
Questions about whether a business practice violates the Federal Anti-Kickback Statute, or whether these new modifications to the Personal Services Safe Harbor are applicable? Call us today for a consultation.