For over a decade, Frier Levitt has continued to regularly guide clients through self-disclosure protocols, particularly in the healthcare and life sciences spheres. We are constantly monitoring the evolving healthcare and life sciences legal landscapes.
On October 4, 2023, the United States Department of Justice (“DOJ”) announced a new voluntary-disclosure policy with respect to corporate mergers & acquisitions. This policy broadly applies to corporate entities, including providers, pharmacies, IPAs, and MCOs seeking to expand either their practices or networks through acquisition of, or through mergers with, providers.
In effect, if a company discovers criminal misconduct and voluntarily discloses it within the safe harbor period – six (6) months after the date of closing – and also pays “appropriate remediation”, which “must include, but is not necessarily limited to, the company agreeing to pay all disgorgement, forfeiture, and restitution resulting from the misconduct at issue”, the DOJ will not seek a criminal guilty plea against the successor company – absent an aggravating factor. This remediation must be effected, in full, within one year from the date of closing.
Additionally, the successor company must fully cooperate with the DOJ, which “includes timely capture, disclosure, and highlighting of all facts relevant to the DOJ’s investigation, providing access to witnesses and assistance in interpreting key documents.”
Although seemingly a protective measure for innocent purchasers, the subsequent remediation may stand to wipe out the net benefits of investment. This places a significant premium on providers, practices, pharmacies, and other healthcare entities undertaking sufficient due diligence prior to deciding to merger with or acquire a new practice – and during the closing phase.
It also necessitates consideration of appropriate representations and warranties in purchase agreements that enable purchasers to seek indemnification from sellers to cover payments and penalties arising from purchaser’s self-disclosure. Conversely, it may also require sellers to cap their liability for buyer self-disclosures when the facts and circumstances giving rise to the self-disclosure have been disclosed by seller in advance of closing.
How Frier Levitt Can Help
Companies that become aware of possible misconduct should immediately confer with experienced healthcare counsel to determine if the situation is appropriate for a voluntary self-disclosure. In certain situations, the voluntary self-disclosure process may provide an avenue to avoid the harshest penalties that may otherwise apply to the applicable conduct. Frier Levitt’s team of attorneys has successfully navigated clients’ resolution of self-disclosed matters with the Department of Health and Human Services’ Office of Inspector General and the Centers for Medicare and Medicaid Services. To learn more about the DOJ’s Voluntary Self-Disclosure Policy and/or other types of self-disclosure, contact Frier Levitt to speak with an attorney.
