Health Care Fraud Means Never Having to Say You're Sorry
57 Pages Posted: 18 Aug 2020 Last revised: 14 Sep 2020
Date Written: July 28, 2020
For decades, the Department of Justice has issued a steady flood of press releases announcing False Claims Act (FCA) settlements against health care entities and extolling the purportedly sharp message sent to the industry through these settlements about the consequences of engaging in wrongdoing. The FCA is the primary mechanism for government enforcement against health care entities engaged in wrongdoing, and it is expected to be DOJ’s key tool for addressing fraud arising out of government programs in response to the COVID-19 pandemic. While DOJ has pointed to three key goals of its enforcement efforts – deterrence, incentivizing cooperation, and building a culture of compliance in the health care industry – careful examination of the settlements touted in those DOJ press releases calls into question whether DOJ’s settlement practices – which almost uniformly lack any admission of responsibility by defendants – are conveying the message DOJ seeks to impart or having the impact it hopes to achieve.
In A Path to Data-Driven Health Care Enforcement, the author analyzed newly available data which revealed that despite the billions of dollars collected by DOJ from health care FCA cases each year, the practical consequences for wrongdoing are surprisingly minor for defendants – most resolutions amounted to little more than restitution in the form of defendants putting the cookies back in the jar. This article, the second in a series analyzing civil FCA resolutions, addresses a potentially bigger problem with DOJ’s enforcement practices – the near-universal use of settlement agreements that allow defendants to publicly deny the allegations of wrongdoing and dismiss settlements as a mere cost of doing business.
Virtually all FCA cases resolve without requiring the defendant to admit wrongdoing, and many defendants issue explicit public denials of wrongdoing when the resolution is announced, fueling a cost-of-doing-business narrative in which health care entities are required periodically to pay inconsequential settlements to the government regardless of their conduct. DOJ thereby risks both diminishing the general deterrence value of resolutions, and lending credence to the vocal skepticism among industry and the defense bar that DOJ could, in fact, prevail at trial.
DOJ’s willingness to allow settlements in health care fraud cases without admissions is diametrically contrary to DOJ’s clear policy in criminal cases against permitting resolutions without defendants’ clear and unequivocal acceptance of responsibility for violating the law. Permitting no-responsibility settlements in the civil FCA context both suggests that DOJ pursues, illegitimately, weak cases it cannot prove at trial, and at least potentially weakens the general deterrence value of civil FCA claims in general. New defendants may be left with cover that they are not wrongdoers but are merely ensnared in an illegitimate money grab. Even defendants who frankly recognize that they are in violation of the statute may be comforted that they likely face paying little more than restitution, and no significant penalties or social opprobrium. These practices suggest that DOJ rewards willingness to settle, and the monetary recovery it brings, above all other factors, and further lends credence to the widespread belief that civil health care fraud settlements simply do not signal wrongdoing.
There is no law, policy, or practice that prevents DOJ from requiring admissions in FCA settlements. An in-depth review of nearly 200 FCA resolutions involving health care entities over the past two years reveals that approximately 92% did not include defendants’ clear acceptance of responsibility, and approximately 37% involved defendants actively denying responsibility.
Notably, the few cases in which defendants did admit wrongdoing do not differ by way of their subject matter, the facts, or available evidence, but instead are distinguishable only on the basis of the U.S. Attorney’s offices pursuing the cases, which have unique internal, and informal, policies favoring admission of wrongdoing.
Data analysis also reveals an additional troubling fact with respect to these settlements. In 2019, the DOJ announced a policy position that acceptance of responsibility would be rewarded with more favorable settlement terms. The data described in this Article provides no evidence of any such benefit, and anecdotal evidence provides substantial reason for skepticism that such a benefit exists at all. It would be beneficial if DOJ were to move toward favoring admission of wrongdoing, and actually rewarding acceptance of responsibility in the terms of settlements that include such admissions.
The absence of any DOJ policy favoring admissions has important negative consequences, undermining DOJ’s goals of deterrence, incentivizing cooperation, and building a culture of compliance. First, when corporate actors believe FCA settlements are simply a cost of doing business, and that DOJ will pursue claims regardless of wrongdoing, and when those actors believe that the consequences of even a successful claim will be relatively painless from a financial and reputational perspective, those actors have little incentive to put in place compliance structures dedicated to preventing wrongdoing. Second, and perhaps most importantly, when DOJ touts resolutions, but the force of those settlements is immediately diminished by corporate denials of responsibility, those denials threaten to undermine the legitimacy of the system that is necessary for DOJ to encourage cooperation, and for the government and well-meaning corporate actors to cultivate an industry-wide culture of compliance. This article examines DOJ policy both from an economic incentive perspective and in light of research surrounding the psychology of legal authority, concluding that under both lenses DOJ undercuts its own goals.
While scholars – as well as judges and politicians – have devoted significant attention to the Securities and Exchange Commission’s use of “neither admit nor deny” resolutions in another area of corporate responsibility in which civil enforcement often plays a more significant role than criminal prosecutions, DOJ FCA settlements have not garnered similar attention, notwithstanding the fact that the typical FCA settlement falls short of even the SEC model by allowing settling defendants to flatly deny wrongdoing.
With DOJ actively reforming FCA policy and the FCA poised to take center stage in the government’s fight against COVID-19 program abuse, it is beyond time to address this gap in DOJ’s enforcement policy.
Keywords: health care, compliance, fraud, false claims act, Department of Justice, fines, cooperation, settlement, enforcement, acceptance of responsibility, admissions
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