COMPLIANCE GUIDANCE

Brief Your CEO: Explain How New DOJ Guidance Can Get Your Lab Out of FCA Hot Water

New guidance from the DOJ lays out sheds light on a crucial matter that many high-ranking lab executives are forced to confront: whether to “play ball” with the federal government when internal misconduct is discovered, in this case, False Claim Act (FCA) violations. The guidance lays out a veritable roadmap that labs can follow when they’re under investigation to obtain the best result possible. So, it’s essential that you bring it to the attention of your C-Suite.

Setting the Stage

Start your briefing by establishing the big picture context. Explain that the FCA, which makes it illegal for contractors to defraud federal government programs like Medicare, is the principal law used by the DOJ to go after labs and other health providers and that it provides for treble penalties for violations.

Although the government has extremely potent and investigative resources, it also has a policy of encouraging providers to police themselves and come clean when they discover problems rather than wait for investigators to find the problems themselves. The chief incentive the DOJ uses is reducing the penalties and damages to labs and other entities or individuals that voluntarily:

 Self-disclose misconduct that may trigger FCA liability and administrative remedies;

  • Cooperate with FCA investigations and settlements in other ways; and/or
  • Take adequate and effective remedial measures to correct problems.

Conclude the intro by noting that DOJ attorneys have wide discretion in deciding how to apply these principles in cases where the party under investigation cooperates.

Introduce the New Guidance

Next, explain that the point of the new DOJ’s new Justice Manual guidance is to set out clear criteria for DOJ attorneys to use in providing credit for voluntary disclosure, cooperation and remediation.

General Principles

The idea of credits is to reward behavior based on its value to the government in resolving point. So, the starting point for breaking down the guidance are the four general factors it instructs DOJ attorneys to consider in determining the value of voluntary disclosure and additional forms of cooperation, including:

  • The timeliness and voluntariness of the assistance;
  • The truthfulness, completeness, and reliability of any information or testimony provided;
  • The nature and extent of the assistance; and
  • The significance and usefulness of the cooperation to the government.

Make it clear to your execs that no credit should is awarded for taking steps that the person under investigation is otherwise legally required to do, such as replying to subpoenas or investigative demands.

1. Voluntary Disclosure
After summarizing the general principles, go through each of the three forms of voluntary assistance one at a time starting with voluntary disclosure. Note that labs that make proactive, timely, and voluntary self-disclosure to DOJ about FCA misconduct can expect to receive credit leading to a more favorable resolution of the case. Even if the lab is already being investigated, they can earn credits by shedding light on the matters under investigation or voluntarily self-disclosing additional misconduct going beyond the scope of the current investigation.

2. Other Forms of Cooperation
Next, talk about other forms of cooperation starting with an explanation of which activities count under the category. The guidance lists 10 examples:

  • Identifying individuals involved in or responsible for the misconduct;
  • Disclosing relevant facts and identifying opportunities for the government to obtain evidence relevant to the investigation that the government doesn’t already know about;
  • Preserving, collecting and disclosing relevant documents and information beyond existing business practices or legal requirements;
  • Identifying individuals who are aware of relevant information or conduct, including an entity’s operations, policies, and procedures;
  • Making the lab’s officers and employees available for meetings, interviews, examinations or depositions;
  • Disclosing facts relevant to the investigation gathered during the lab’s independent investigation, including attribution of facts to specific sources, timely updates on the internal investigation and rolling disclosures of relevant information;
  • Providing facts relevant to potential misconduct by third parties;
  • Providing information “in native format” and facilitating review and evaluation of that information;
  • Admitting liability or accepting responsibility for the wrongdoing or relevant conduct; and
  • Assisting in the determination or recovery of the losses caused by the lab’s misconduct.

3. Remedial Measures
The third type of conduct to cover in your briefing are actions to remedy FCA violations. Explain that remedial actions may include:

 Demonstrating an analysis of the cause of the underlying conduct and, where appropriate, remediation to address that cause;

  • Implementing or improving compliance programs to ensure the misconduct or similar problem doesn’t recur;
  • Disciplining or replacing those responsible for the misconduct, as well as those with supervisory authority over the area where the misconduct occurred; and
  • Taking additional steps demonstrating recognition of the seriousness of the misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition of such misconduct, including measures to identify future risks.

Credit for Disclosure, Cooperation & Remediation

Having explained how credit is earned, the next part of the guidance addresses how it’s applied. Explain that there’s no concrete formula and that credit earned, if any, will vary based on the unique facts of the case. One thing that is hard and fast: The maximum credit can’t exceed an amount that would result in the government receiving less than full compensation for the losses caused by the FCA misconduct, factoring in legal costs and whistleblower awards. 

If credit is earned, the DOJ may not only cut the penalty or damages for the FCA matter, but also take steps to help the lab (or individual) with its other legal issues, such as:

  • Notifying a relevant agency about the lab’s disclosure, other cooperation, or remediation, so that the agency in its discretion may consider such factors in evaluating its administrative options, such as suspension, debarment, exclusion, or civil monetary penalty decisions;
  • Publicly acknowledging the lab’s or individual’s disclosure, other cooperation, or remediation; and
  • Assisting the lab in resolving qui tam litigation with a whistleblower.

Summary

Finish your briefing by explaining the significance of the guidance. The clear message is that labs and other providers have much to gain by self-disclosing, cooperating and taking remedial steps. The first and most direct reward is the very real prospect of reduced penalties and damages for the FCA violations involved. However, the guidance also makes it clear that earning credits can also gain labs government help in resolving other legal problems as well as damage to the lab’s reputation, which could translate into huge savings in legal and public relations fees.

The other key thing your execs need to understand is that just doing what the law requires isn’t enough. The DOJ is asking for more than responding to subpoenas and standing aside to allow investigators do their jobs. To earn credits, labs must self-police in a literal sense by exercising the same determination to identify and resolve FCA problems that an investigator or whistleblower would.

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