Healthcare Fraud Self-Disclosure Protocol: You Discovered Misconduct… What Now? – Food, drugs, health, life sciences


United States: Healthcare Fraud Self-Disclosure Protocol: You Discovered Misconduct… What Now?

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When a company decides to self-disclose misconduct (or conduct that could be interpreted as such) to government, that decision triggers a series of additional questions. In the heavy deliberations on whether and What To disclose, entities often overlook another important decision: or disclose.

On November 8, 2021, the OIG-HHS updated its Supplier Self-Disclosure Protocol, including a name change to Health Care Fraud Self Disclosure Protocol (OIG-SDP or Protocol). The majority of the updates were of a technical nature and did not change the substance of the Protocol. Foley’s main observations from the updated OIG-SDP can be found here.

The decision to self-disclose misconduct through the OIG-SDP should not be taken lightly. Indeed, many service providers, entities, suppliers, etc. unaware that there is another option: voluntary self-disclosure to the Department of Justice (DOJ). There are pros and cons to each self-disclosure route that should be considered when making this decision.

The benefits of voluntary self-disclosure of healthcare fraud directly to DOJ include:

  • Disclaimer under the False Claims Act (FCA). A disclaimer of conduct from the FCA means the government will not sue the whistleblower for the alleged conduct, including damages and treble penalties. The DOJ regularly releases the FCA from responsibility. On the other hand, OIG does not offer the same comfort; OIG-SDP instructions indicate a disclosing party may seek release under the FCA, but this is not a standard settlement condition. To obtain the release, the OIG must coordinate with the DOJ, which can then deny the request. The DOJ, on the other hand, gets the approval and signature from the OIG at the time the case is resolved.
  • Potentially lower settlement amount. While it is general practice and OIG’s preference to require a minimum multiplier of 1.5 times the single damages for settlement, the DOJ does not resolve self-disclosed cases for a defined multiplier. See for example, DOJ Commercial Litigation Manual, Section 4-4.112 (“The maximum credit a defendant can earn cannot exceed an amount which would result in the government receiving compensation less than the full amount of losses caused by the defendant’s misconduct ( including government damages, lost interest, investigative costs and interlocutor’s share “)). The DOJ has published factors he considers when evaluating the resolution including cooperation and accepting responsibility worthy of a multiplier less than 1.5 times the loss, and the GM has indeed settled cases for a multiplier less than 1.5. See Elberg, Jacob T., 5 Utah Law Review 2, “A Path to Data-Driven Health Care Enforcement” (2021).

DOJ whistleblowers can pay less (lower multiplier) and get more (FCA publication). However, voluntary healthcare fraud directly affects the DOJ (rather than the OIG-HHS) also comes with certain risks and uncertainties, including:

  • The 60-day report and return obligation is not automatically billed.Unlike the OIG-SDP, which automatically suspends the obligation to report and return an overpayment within 60 days of identifying an overpayment, the voluntary self-disclosure of a matter to DOJ does not affect the obligation. See 81 Fed. Reg. 7653, 7678 (“We decline to extend this treatment to self-disclosure to entities outside of SRDP and SDP in this final rule. Both SRDP and SDP are formal processes managed by agencies within the ministry, CMS and OIG respectively. As such, we believe it is appropriate to include these processes in this rule. However, the DOJ is a separate service and we are not aware of any formal processes of self – DOJ disclosure that is analogous to SRDP or SDP. Additionally, we are not aware of a similar MTCU process and, more importantly, Medicaid is not covered by these regulations. “). Instead, the DOJ must seek approval from CMS / OIG to suspend the 60-day report and return obligation.
  • The BIG-SDP is a formal process specific to healthcare fraud.The OIG-SDP is a formal process specially adapted for the healthcare sector. Submissions to the OIG-SDP are reviewed by individuals who understand the complexity and challenges faced by healthcare entities.

Under one or the other consideration, or Disclosure should also involve an examination of where the conduct occurred and to whom the disclosure will be made. Some components of the DOJ themselves are more cooperative than others and will work more easily with a discloser on the extent of the rejects, the amount of losses, and any multipliers. Others are more rigid. Selecting a recipient agency more interested in negotiating will improve results for the discloser.

Legal advisers, especially those familiar with the OIG and DOJ, can play a vital role in advising a whistleblower on the path of disclosure that best matches individual circumstances and broad goals. Experienced and knowledgeable lawyers can also improve results by becoming familiar with relevant government agencies and their components and also knowing how to strategically interact with and respond to government follow-up requests following self-disclosure. All of these special considerations determine whether the identified conduct should be self-disclosed in the first place, and of course, to whom.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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