The Government generally combats healthcare fraud via the False Claims Act (FCA), 31 U.S.C. §§ 3729 – 3733. Like most civil litigation, the large majority of FCA investigations and lawsuits are resolved through settlement rather than trial. FCA settlement agreements typically set forth the allegations of fraud and a denial by the defendant or investigated party. The settlements include a monetary sum, but the Government can also require more from the settling defendant. This may occur because the agency overseeing the affected federal program(s) determines that allowing the defendant to continue submitting claims to the government, without further corrective actions, would pose a substantial risk. FCA settlements thus fall across the “OIG Risk Spectrum” as follows:
Highest Risk ← → Lowest Risk
Exclusion Heightened Scrutiny Integrity Agreements No Further Action Self-disclosure
Starting from lowest risk, self-disclosure occurs when a provider identifies the potential false claim and self-reports it to OIG. This route avoids the costs and disruptions associated with a Government-directed investigation and civil or administrative litigation, and shows a commitment to integrity by the provider. It also results in a reduced settlement amount because generally the Government requires a 1.5x multiplier for a self-disclosure resolution (as opposed to a 2x multiplier in FCA investigations and 3x damages plus penalties for judgments obtained after trial).
No further action means that the Government will accept the settlement sum in exchange for dropping the investigation or case, with no other obligations or action required by the defendant. This usually occurs in the absence of egregious conduct such as patient harm, intentional fraud, and where the scope of the fraud and financial harm caused by the defendant are both relatively small.
Integrity Agreements entail the provider or individual hiring a third-party review officer to help strengthen the person or provider’s compliance program and promote compliance so that future issues can be prevented or identified, reported, and corrected. Integrity Agreements also require additional corrective actions or policies to be implemented so that the violations will not re-occur.
Heightened scrutiny means that, in addition to the terms of an Integrity Agreement, the OIG will actively monitor compliance for that provider.
Finally, exclusion means that the provider or individual is “excluded” from federal programs such that the programs will not pay for any items or services furnished, ordered, or prescribed by the excluded person. Exclusion is an especially harsh penalty, because it usually results in the defendant having to shut down as they will be completely cut off from federal reimbursement and from serving any Medicare/Medicaid beneficiaries moving forward. For pharmacies, Pharmacy Benefits Managers (or PBMs) often exclude a pharmacy from the network simply upon learning of an FCA settlement.
From the first quarter of fiscal year 2024, the Government entered into 37 FCA settlements, none of which were from a self-disclosure, and 81% of the settlements involved no further action by the Government. In FY 2023, there were 235 settlements and 77% of them involved no further action by the Government. Thus, it appears that approximately one-fifth to one-quarter of FCA settlements have imposed more severe penalties and/or remedial actions, such as exclusion and requiring defendants to enter into an Integrity Agreement.
While the majority of resolutions just require a monetary settlement, whether a resolution includes no further action, oversight, or exclusion depends on four categories:
- The nature and circumstances of conduct, which includes
- Whether there was harm to patients
- The severity of financial loss
- Whether the individual had a leadership role in the scheme
- Whether there is a history of misconduct
- Conduct during the Government’s investigation (compliance versus evasiveness)
- Significant ameliorative efforts (including discipline, training, increased compliance); and
- History of compliance with OIG and whether compliance protocols are in place
Where a case falls on the Risk Spectrum thus largely depends on the Government’s perception of the egregiousness of the defendant’s conduct. Accordingly, it is important to communicate to the government any legal defenses, extenuating circumstances, and mitigating factors that may sway the government to take no further action.
How Frier Levitt Can Help
If you are a medical or pharmacy provider and you receive a Civil Investigative Demand or subpoena, it is highly likely that you are the subject of an FCA investigation and potentially an FCA lawsuit. It is critical to obtain counsel that understands the intricacies and defenses of the False Claims Act. Frier Levitt’s attorneys include former government prosecutors who are familiar with how FCA investigations are conducted, and routinely represent providers and pharmacies facing government audits or investigations. Please contact us today to learn more.
