DOJ Memoranda Signal Tempered Approach to FCA Cases But Are These New Constraints Changing the Tone?
AHLA PG Bulletin
This Bulletin is brought to you by AHLA's Fraud and Abuse Practice Group.*
Since early 2018, federal health care regulators and enforcers have seemingly sung a new tune. The Centers for Medicare & Medicaid Services’ (CMS’) walls bear posters inscribed with the phrase “Patients Over Paperwork.”1 The Department of Health and Human Services Office of Inspector General (OIG) is currently considering a number of Anti-Kickback Statute safe harbors related to care coordination and value-based care initiatives. And the U.S. Department of Justice (DOJ) has issued multiple provider-friendly pronouncements to its U.S. Attorneys on handling and litigating False Claims Act (FCA) cases. Specifically, in late January 2018, DOJ authored two memoranda; the first (intended to be internal to DOJ only) concerned the factors DOJ should use in considering dismissal of non-intervened qui tam suits (the Granston Memo), while the second addressed DOJ’s discontinuance of using sub-regulatory guidance documents in civil enforcement cases, such as the FCA (the Brand memo).2 While both memos are, facially, welcome relief for health care providers routinely exposed to FCA liabilities, have these memos had a practical effect on the health lawyer’s defense of FCA matters?
The Granston MemoRecognizing the tremendous resource drain of defending an FCA suit, particularly one in which DOJ has declined to intervene, the Granston Memo sets forth seven non-exhaustive factors that an AUSA should consider when deciding whether to not only decline, but also to completely dismiss, a relator-led FCA action. The Granston Memo notes that an increasing number of qui tamactions are filed each year, but DOJ’s “rate of intervention has remained relatively static.”3 Whereas a DOJ declination a decade ago would have signaled the end of a case, relators are more frequently litigating FCA matters without DOJ’s help (entitling them to up to 30% of any judgment or settlement).4 Although qui tam relators are permitted to litigate to judgment an FCA matter even if DOJ declines to intervene, DOJ has the authority (albeit rarely used) to dismiss an FCA case outright. The seven factors articulated in the Granston Memo are:
- curbing meritless qui tam suits;
- preventing parasitic or opportunistic qui tam actions that duplicate pre-existing government investigations;
- preventing interference with agency policies and programs;
- controlling litigation brought on behalf of the United States;
- safeguarding classified information and national security interests;
- preserving government resources; and
- addressing egregious procedural errors, such as when relators fail to properly serve the government or when relators breach the FCA’s seal requirement.5
Particularly as the Medicare program enters a period of substantial evolution from volume to value, conduct that the government may view favorably may nonetheless remain a technical violation of the law. Although FCA defendants may ultimately be relieved of liability by the Escobar materiality standard,6 the Granston Memo enables discerning AUSAs to end a case before it begins. Particularly when DOJ signals that it is considering declination of an FCA case, defense counsel should be sure that the deciding AUSA is also weighing Granstonfactors in favor of dismissal.
The Brand MemoLike the Granston Memo, the Brand Memo also portends a favorable enforcement environment for FCA defendants. Subsequent to comments by Attorney General Jeff Sessions that DOJ would no longer rely on agency guidance documents to bind the public, Associate Attorney General Rachel Brand issued a memorandum explaining that, “effective immediately,” DOJ “may not use its enforcement authority to effectively convert agency guidance documents into binding rules.”7 Documents such as CMS Frequently Asked Questions, National and Local Coverage Determinations (LCDs), and perhaps even a Federal Register preamble that is not codified into regulation may be subject to the Brand Memo’s proscription. Nevertheless, there are important caveats in the Brand Memo-DOJ may continue to use guidance documents to “simply explain or paraphrase legal mandates from existing statutes or regulations.”8 In addition, DOJ may use such informal guidance as evidence that “the party had the requisite knowledge of the [particular] mandate.”9 Furthermore, the Brand Memo applies only to DOJ-led actions. It cannot control how courts will analyze the import of guidance documents or how relators, OIG, or CMS will approach sub-regulatory guidance in both FCA and administrative sanction matters. While the Brand Memo may have important implications for handling FCA matters before DOJ, there is no indication that this approach will be accepted in other venues.
Practical ImplicationsFor health care providers, the burden of the FCA has been steadily increasing since the 2009 Fraud Enforcement and Recovery Act amendments.10 This apparent softening of the FCA is welcome relief. But have these memos had a practical effect? It is still too early to tell for certain the full effect. In the context of AUSA discussions, the Brand Memo appears to be an important, but not overwhelming, tool for defense counsel. Given some of the caveats of the memo and the confusion that those caveats can generate, DOJ attorneys have been hesitant to fully ignore agency guidance, particularly if that guidance is crucial for building a case. In many instances, there may be an underlying regulation that is vague, such as a requirement that documentation necessary to support a claim be included in a medical record. In clarifying what it believes to be necessary to support a particular service, CMS or its contractors later clarified through guidance (think LCDs) as to the documentation expected. DOJ may continue to assert that documentation is insufficient to support a claim or similar allegations because a requirement itself is regulatory, while pointing to an LCD to color or, in the words of the Brand Memo, “simply explain” the existing legal mandate. If DOJ takes this approach, the import of the Brand Memo may be significantly reduced.
Although the Brand Memo presents a powerful opportunity for defense counsel that cuts to the heart of agency guidance being used as law, widespread adoption and concurrence with the Brand Memo may take more time. Nevertheless, health care counsel should vigorously assert that agency guidance-whether from CMS, the Food and Drug Administration, OIG or otherwise-cannot be relied upon in supporting a false claim allegation. In addition, to the extent an AUSA is considering declination, defense counsel should consider highlighting the applicable Granston factors that weigh in favor of full dismissal.
*AHLA thanks the Fraud and Abuse Practice Group for sharing this Bulletin with the Academic Medical Centers and Teaching Hospitals; In-House Counsel; Payers, Plans, and Managed Care; Physician Organizations; and Regulation, Accreditation, and Payment Practice Groups.
1 See CMS, Patients Over Paperwork, available at https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/PatientsOverPaperwork.html.
2 For further discussion, see Remarks of Deputy Associate Attorney General Stephen Cox, Feb. 28, 2018, available at https://www.justice.gov/opa/speech/deputy-associate-attorney-general-stephen-cox-delivers-remarks-federal-bar-association.
3 Granston Memo, at 1.
4 31 U.S.C. § 3730(c) and (d).
5 Granston Memo, at 3-7.
6 Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).
7 Brand Memo, at 2.
10 Pub. L. No. 111-21, 123 Stat. 1617 (May 20, 2009).
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