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LEVICK Crisis

October 24, 2017

FCA Puts Healthcare in DOJ Crosshairs

Media coverage of violations under the False Claims Act– a regulation guiding corporate behavior enacted back in 1863 – may feel like old news. The Department of Justice recovers billions of dollars annually from companies that have allegedly violated the FCA. The team at Vinson & Elkins LLP estimated that the DoJ recovered $3.44 Billion in FY 2017 – more than 70 percent of which was the result of intervened qui tams – in other words, whistleblowers. Further, the Vison & Elkins team found that “[o]f the top 50 recoveries in DoJ FY 2017, only 8 were initiated on the government’s own steam.”

Healthcare organizations are firmly in the crosshairs of the FCA. In fact, nearly 70% of the total amount was recovered from the health care industry.

One health care organization, Med-Fast Pharmacy, has been positioned as a sort of poster child for the DoJ’s Yates Memo, which allows the Department to hold individuals, not just organizations, accountable for corporate wrongdoing under the FCA. MedFast agreed to a $2.66 million settlement in response to allegations brought by two whistleblowers that the company submitted claims for medications not covered by federal health care programs. But the settlement did not afford protection to the employees involved. As part of the agreement, DoJ dropped civil charges against the company, but not the criminal charges, against the employees that were involved. This adds an extra layer of executive risk that companies may need to consider.

Like most things in our world, how the DoJ applies FCA has and will continue to evolve and, in this case, it’s not going away. It is dangerous to think of it in terms of the same regulation, and the same risk, that you always have in the past.

But it’s not all doom and gloom. Unlike major incidents and crises companies face –oil spills, data breaches, or workplace violence – you have a warning. You may not have all the facts, but you do have a general idea of what the issue is, who you need to talk to, and what steps you’ll have to take to protect your reputation. In other words, you’ll have time to prepare for the storm, put a communications plan in place, and maybe even find a way to fight back.

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