DOJ-initiated misrepresentation law activity on the rise | Skadden, Arps, Slate, Meagher & Flom LLP
- The volume of new cases filed under the False Claims Act (FCA) remained high in 2021, and the Department of Justice (DOJ) collected more than $5.6 billion in settlements and judgments – the second annual total biggest in FCA history. The majority came from who tam actions where the government has intervened.
- The DOJ continues to increase FCA enforcement against Medicare Advantage organizations and affiliated entities.
- The circuit courts have made notable decisions regarding the government’s power to dismiss and the application of the excessive fines clause of the Eighth Amendment.
- A Senate bill amending key provisions of the FCA could have broad implications for FCA enforcement.
The volume of new cases filed under the False Claims Act remained high in 2021, although it declined from a record 922 new cases in 2020. A total of 801 new FCA cases were filed, including 203 insiders by the Department of Justice, reflecting the DOJ’s continued emphasis on using the FCA to combat suspected fraud.
The DOJ collected more than $5.6 billion in FCA settlements and judgments in 2021, marking the second-highest annual total in FCA history. More than $5 billion of those recoveries related to health care issues, and more than half came from settlements with manufacturers of prescription opioids. Notably, about 70% of total recoveries came from actions initiated by the DOJ; the rest came from who tam actions in which either the DOJ intervened or the private litigant plaintiff continued the action. In 2014, the year with the largest total FCA awards, only about 27% of total recoveries stemmed from actions initiated by the DOJ and about 73% came from who tam Shares.
In light of the government’s renewed commitment to using internal data analytics to detect and investigate suspected fraud, particularly in health care, we anticipate that DOJ-initiated cases and recoveries will continue to grow. increase in 2022 and beyond. Indeed, the DOJ has already announced several multimillion-dollar FCA settlements in 2022 that did not stem from who tam suit.
Despite the DOJ’s efforts, the whistleblower bar has, once again, contributed significantly to FCA recoveries in 2021, with more than $1.6 billion resulting from who tam lawsuits, reporting relationship prices of $238 million. In who tam In cases where the DOJ refused to intervene, the government recovered about $480 million, the third-highest annual amount since 1986. Yet reporters only received about half that which was awarded in other years with comparable recoveries.
At the same time, the approximately $62 million awarded in unintervened actions is the fourth-highest amount awarded and matches the average total amount awarded over the past decade. For this reason, we expect the rate of new who tam filings in 2022 remain on par with past years and the whistleblower bar to continue to litigate FCA cases where the government refuses to intervene.
Medicare Advantage Organizations Enforcement Efforts
The DOJ continues to focus its FCA enforcement efforts on Medicare Advantage Organizations (MAOs) and contracted providers who allegedly manipulate data used by the government to calculate the payments it will make to cover expected enrollee medical costs. to Medicare. The focus is not surprising, given that Medicare Advantage spending accounts for nearly 50% of total federal Medicare spending. The DOJ has publicly expressed this enforcement priority since 2020, including most recently in its February 1, 2022 press release announcing the 2021 FCA recoveries. For example, the DOJ recently signed a $90 million settlement with a vendor service provider resolving allegations that the company knowingly provided inaccurate information about the health status of Medicare Advantage beneficiaries.
The DOJ is currently litigating several cases against MAOs in which the government has alleged that MAOs (1) conducted reviews of recipients’ medical records and pressured and instigated physicians to retrospectively add diagnoses to those records; (2) reviewed records to identify and submit additional diagnostic codes allegedly supported by medical records, but simultaneously failed to remove codes identified during review that were not supported by medical records, which resulted in a higher payout to AAMs; and (3) provided false attestations that their data submissions were accurate.
Given this increased concentration of law enforcement on AAMs, we expect that AAMs and affiliated entities will be required to increase compliance and audit efforts, and reassess the review of records and similar programs to ensure they do not violate government guidelines or create increased FCA risk.
Notable Circuit Court Decisions Interpreting Key FCA Provisions
In 2021, the United States Court of Appeals for the First Circuit furthered the split in the circuit regarding the government’s power to dismiss FCA who tam actions and, in a first impression case, the United States Court of Appeals for the Eleventh Circuit applied the excessive fines clause of the Eighth Amendment to an award of damages in a who tam action where the government did not intervene.
The first circuit deals with the government’s dismissal authority. In United States ex rel. Borzilleri v Bayer Healthcare Pharms., Inc. (2022), the First Circuit created a new standard of review for dismissals under 31 USC § 3730(c)(2)(A), which allows the government to dismiss an FCA action over the objection of the private reporter. He ruled that a district court must grant the government’s motion for revocation unless “the parent … can demonstrate that the government’s decision to seek the revocation of the who tam the action transgresses constitutional limits or … commits fraud in court. Although the First Circuit did not specify what circumstances might meet this standard, it is clear that the rapporteurs face a heavy burden in seeking to overturn the government’s decision to dismiss a FCA case.
The Eleventh Circuit considers the problem of excessive fines in an unintervened action. In Yates c. Pinellas Hematology and Oncology, Pennsylvania (2021), the Eleventh Circuit held that the Eighth Amendment’s excessive fines clause applies in FCA cases even when the government is not a party. The court held that “all monetary awards in FCA who tam actions are taxed by the United States “independent of government intervention, believing that monetary rewards are mandated by federal law enacted by Congress, and the United States has considerable authority over – and receives a considerable share of the reward of – the cases of the FCA, even when it does not have official party status.
Congress and DOJ Seek to Strengthen FCA Enforcement
FCA Amendments. On November 16, 2021, the False Claims Amendment Act of 2021 authorized the Senate Judiciary Committee and was reported to the entire Senate. As noted, the bill included changes requested by senior Republican officials on the committee that significantly watered down the intent of the original version. This version of the bill aims to:
- modify the standard of materiality adopted by the United States Supreme Court Universal Health Services v. United States, ex rel. Escobarwhich made it difficult to assert FCA claims when the government knew of allegedly fraudulent claims and paid them anyway, forcing the courts to consider other reasons that may have existed for the government’s decision to waive a refund or pay a claim despite actual knowledge of the fraud;
- add a provision that would place the onus on the government to identify a just cause for requesting the dismissal of a who tam an action against the parent’s objection and a rational relationship between the dismissal and this goal; and
- extend FCA’s anti-retaliation provision to former employees.
Given the significance of the proposed changes and the objections already raised by senior Republicans, it remains uncertain whether the bill will pass.
FCA Policy Changes. In 2021, the DOJ reinstated previous guidelines requiring companies to disclose information about everyone involved in misconduct in order to receive cooperation credit (the Monaco Memorandum) in negotiations. It also reinstated the use of non-binding agency guidelines in FCA actions where appropriate and lawful (the Garland Memorandum).
Following the Monaco memorandum, we anticipate that the DOJ will expect companies seeking cooperation credit to disclose all individuals who may have relevant information about any alleged misconduct, even if they played a less than substantial role. We also anticipate that the DOJ will rely more on non-binding agency guidelines, particularly in cases where it interprets ambiguous regulations and may be entitled to deference, or where a party’s compliance with them is tied. to the allegations in question.
We expect the DOJ’s FCA enforcement efforts to remain strong and DOJ-initiated investigations into the health care sector based on data mining efforts to increase. Companies must remain vigilant and review their audit and compliance programs to ensure they effectively detect and prevent fraud, waste and abuse.