The Benefits of Self-Disclosure to DOJ of Alleged FCA Violations: A Look at 3 Recent Settlements with Health Care Providers
In the past year, the U.S. Department of Justice (DOJ) announced three civil “self-disclosure” False Claims Act settlements of alleged health care fraud-violations by companies in Florida and in Texas. Judging from these settlements, health care providers who discover potential False Claims Act (FCA) violations may benefit substantially from voluntarily disclosing these potential violations directly to DOJ.
Health care providers are generally familiar with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG) “Health Care Fraud Self Disclosure Protocol” or SDP for short. HHS-OIG has successfully operated the SDP for many years. The SDP provides health care providers who obtain reimbursement from federal government health care programs such as Medicare, Medicaid and Tricare with a process to voluntarily self-report potential health care fraud-related violations to HHS-OIG and obtain leniency in the resolution of such claims as well as a release by HHS-OIG for alleged violations of civil monetary penalties laws. That leniency often includes:
- No corporate integrity agreement for the self-reporting company
- Favorable calculation of damages especially for violations of the Anti-Kickback Statute and overall damages and
- Can even provide for a payment plan.
Resolving potential health care fraud claims by the SDP process, however, does not, by itself, permit a self-reporting provider to obtain a release of FCA liabilities. Without a DOJ release of FCA liability, health care providers may be vulnerable to subsequent FCA qui tam suits brought by whistleblowers for the same alleged misconduct conduct that a provider self-disclosed to HHS-OIG. Unfortunately, the law is not clear as to whether an SDP disclosure will prevent a whistleblower from filing suit on the same conduct previously disclosed to the federal government. There are arguments both ways. Therefore, health care providers using the SDP often will voluntarily self-disclose that same conduct directly to DOJ (usually through a U.S. Attorney’s Office) and affirmatively ask DOJ to resolve any FCA liability.
DOJ Guidelines on FCA Self-Disclosures
In the last four years, DOJ has published “Guidelines for Taking Disclosure, Cooperation, and Remediation into Account in False Claims Act Matters.” Justice Manual § 4-4.112. The Guidelines acknowledge that DOJ’s “strong interest in incentivizing companies and individuals that discover false claims to voluntarily disclose them to the Government.” The Guidelines provide that entities and individuals who make “proactive, timely, and voluntary self-disclosure to the Department about misconduct will receive credit during the resolution of a FCA case.” DOJ also extends that “credit” to those who cooperate with an ongoing investigation as well as those who have taken appropriate remedial actions in responses to the FCA violation.
The “credit” refers to DOJ’s “discretion” to reduce the penalties or damages multiples sought for a potential FCA violation. Ordinarily, along with trebled damages, FCA penalties presently range from $13,946 to $27,894 per claim and represent an enormous exposure in almost every FCA case. DOJ’s Guidelines provide that the “maximum credit” a party may receive cannot exceed “full compensation for losses caused by a defendant’s misconduct,” i.e., restitution, along with loss interest, costs of investigation, and in the appropriate case, the relator’s share.
DOJ’s Guidelines spell out various factors that bear on “valuing” disclosure and cooperation credit such as:
- Timeliness and voluntariness of the assistance.
- Truthfulness, completeness, and reliability of any information or testimony provided.
- Nature and extent of the assistance and
- Significance and usefulness of the cooperation to the government.
DOJ will also consider whether an entity has “taken appropriate remedial actions in responses to the FCA violation” and the “nature and effectiveness of [an entity’s] compliance program.”
Self-Disclosure Settlements
The three self-disclosure settlements were:
- Baptist Health System, Inc, a network of affiliated hospitals and healthcare providers, in May 2024 for alleged violations of the Anti-Kickback Statute.
- Lee Moffitt Cancer Center & Research Institute Hospital in January 2024 for alleged violations of the National Coverage Determination Governing Routine Costs in Clinical Trials and
- Oliver Street Dermatology Management Inc. in September 2023 for alleged violations of the Anti-Kickback Statute and Stark Law.
Along with DOJ and HHS-OIG, the Baptist and Moffitt settlements were with the U.S. Attorney for the Middle District of Florida. The Northern District of Texas U.S. Attorney’s Office and HHS-OIG settled the Oliver Street disclosure.
Key Takeaways from These Settlements
- Resolving a self-disclosure with DOJ and HHS-OIG from initial filing till settlement took years. Baptist and Oliver Street reached a resolution in about two years. Moffitt took 3.5 years. According to the SDP manual, the “average” SDP settlement takes less than 12 months from acceptance into the SDP.
- The disputed conduct at issue took place over several years: 2016-2022 for Baptist; 2014-2020 for Moffitt; and 2013-2018 for Oliver Street.
- DOJ self-disclosure settlements appear to be much larger than typical SDP settlements. Moffitt, Oliver Street, and Baptist settled for $19.5 million, $8.8 million and $1.5 million respectively. A review of recent SDP settlements with HHS-OIG reflects most settlements were well below $1 million.
- DOJ used the same favorable formula to calculate damages as HHS-OIG uses for SDP resolutions. DOJ calculated the overall damage amount (restitution and damages) for the self-disclosure settlements using the same “minimum multiplier” formula of 1.5 times the restitution as the formula recommended by the SDP. As the FCA imposes treble damages (restitution x 3) and ruinous per-claim penalties, this is a significant benefit. Explicitly identifying 66.66% of the settlement as restitution permits the settling parties to deduct restitution on federal taxes.
- The self-disclosure settlements explicitly credited the companies for self-disclosing and cooperating with DOJ. The settlements generally describe the types and extent of each party’s cooperation with DOJ and steps at remediation. The press release by the U.S. Attorney for the North District of Texas went so far as to “applaud this company for self-reporting.”
- Keeping with DOJ’s recent practice in FCA matters, the self-disclosure settlements avoided elaborate language affirming settlements as seen in typical commercial settlements. Instead, each agreement provided that “this settlement agreement is neither an admission of liability nor a concession by the United States that its claims are not well founded.”
- Somewhat worrisome for self-disclosing parties, the Oliver Street settlement contained an admission of fact about documents and contemporaneous communications, though not liability, which alluded to conduct that may violate the Anti-Kickback Statute.
Corporate compliance programs work! They appear to have prompted each of these companies to investigate the alleged misconduct, self-disclose it to DOJ and HHS-OIG, and remediate it. As a result, each of these parties obtained what appears to be a significant benefit.
Please contact A. Brian Albritton, Raquel Ramirez Jefferson or any member of the Phelps Health Care or White Collar Defense and Investigations teams if you have questions or need advice or guidance.