On February 7, 2023, the U.S. Department of Justice (DOJ) announced its fiscal year (FY) 2022 False Claims Act (FCA) statistics. Utilizing DOJ’s FY 2022 Data Table and comparing back to our FY 2021 coverage, MoFo’s FCA team highlights the following key takeaways:
- DOJ collected $2.2 billion in settlements and judgments in fiscal year (FY) 2022, and as we have seen over the last several years, a majority of these settlements involve the healthcare industry.
- While the total financial recovery is down—in large part due to the prior year’s inclusion of the $2.8 billion settlement with Purdue Pharma—the critical takeaway is that FY 2022 saw 351 FCA settlements and judgments, the second-highest annual total ever.
- In addition, DOJ initiated the most new FCA matters in almost two decades (296), and the number of qui tam lawsuits filed increased by 9% from last year (652).
- While healthcare continues to be the basis for most FCA activity, the numbers also reflect DOJ’s focus on new enforcement priorities, including violations of cybersecurity requirements in government contracts and grants and COVID-19 fraud.
Key FCA Enforcement Trends
Healthcare Fraud
Healthcare fraud remains the leading source of recoveries for DOJ, accounting for 80% or $1.76 billion of the $2.2 billion total. These recoveries came from drug and medical device manufacturers, durable medical equipment suppliers, home health and managed care providers, hospitals, pharmacies, hospice organizations, and physicians. Healthcare recoveries and awards in qui tam cases in which the U.S. declined to intervene rose dramatically to an all-time high—although it should be noted that this was driven largely by the $900 million Biogen settlement.
DOJ announced that its main areas of focus in FY 2022 were fraud and abuse in the Medicaid Program, unnecessary services and substandard care, Medicare Advantage, drug pricing, and unlawful kickbacks. In contrast to FYs 2020 and 2021, opioid abuse was not prominently featured in the announcement, while large settlements in unlawful kickback cases received significant attention. For example, the announcement highlighted that $843 million from the Biogen settlement resolved allegations regarding kickbacks allegedly paid to physicians in the form of fees, and a $260 million settlement with a different company resolved allegations that included using a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies. (See our Life Sciences Blog regarding a development in cost-sharing programs.) DOJ also reported the resolution of matters involving medically unnecessary care and artificially inflated wholesale prices for drug ingredients.
Government Contractors
DOJ reported on several cases involving government contractors engaged with the U.S. military and federal law enforcement. The number of new cases based on contracts with the Department of Defense (DoD) increased to 66, matching FY 2020 and representing a slight increase over prior years. In line with other qui tam trends, DOJ reported an increase in DoD-related cases and realtor awards in which the U.S. declined to intervene. In fact, recoveries in these cases reached a nearly 20-year peak and were dramatically higher in FY 2022 than in the prior seven years. DOJ highlighted cases involving fraudulent performance incentive fees for military housing management, kickbacks from Army logistics subcontractors, and defective bullet proof vests. While still a small percentage of the overall FCA picture, this sector will likely attract renewed attention due to the increases in recoveries and the recent announcement of yet another failed audit at DoD. (See our FCA Newsletter for more DoD audit coverage).
Cybersecurity Initiative
DOJ announced the resolution of several matters generated through the Civil Cyber-Fraud Initiative it launched in October 2021 (see our October 2021 Client Alert for more coverage), including a $930,000 settlement of allegations that a government contractor failed to store patients’ electronic medical records securely for the U.S. Air Force and the State Department, despite submitting claims for the cost of maintaining a secured medical record system. (Allegedly, the contractor maintained some records on an unsecured network drive, rather than on a secured medical records system.) Readers of the MoFo FCA Newsletter will not be surprised to see that the cyber-security initiative generated—and will continue to generate—cases against contractors who provide substandard cybersecurity.
COVID-19-Related Fraud
DOJ continued its aggressive prosecution of frauds on the Paycheck Protection Program (PPP), one of several loan/grant programs enacted as part of the government’s COVID-19 relief efforts. In FY 2022, DOJ resolved 35 PPP-related FCA matters, recovering $6.8 million and avoiding more than $1.5 million in losses for the Small Business Administration, which oversaw the program. DOJ also notably obtained its first-ever FCA settlement with a bank that allegedly made a PPP loan to a customer that the bank knew was ineligible. Before this settlement, FCA liability did not include intermediary banks that issued PPP loans. Thus, this new bank settlement signals potentially expanding liability associated with PPP fraud.
Individual Accountability
DOJ recently signaled (yet again) that it intends to hold individuals accountable for wrongdoing. To emphasize the point, DOJ reported that a number of resolutions or lawsuits against corporations included claims against individuals and highlighted a $9.5 million recovery from a physician to resolve allegations of false claims to Medicare and Medi-Cal for procedures and tests never performed.
Whistleblower Suits
Lawsuits filed under the qui tam provisions of the FCA accounted for $1.9 billion of the $2.2 billion recovered in all FCA actions in FY 2022, a slight increase from FY 2021 and a significant increase as a percentage of the total recovery. The total number of new qui tam suits filed increased modestly from 598 in FY 2021 to 652, which is close to the average of 671 new qui tam suits annually over the last decade. During FY 2022, the government paid out $488 million to qui tam realtors, more than doubling the payouts from FY 2021 and reaching a level not seen since 2017. With case volume returning to pre-pandemic levels and payouts significantly increasing, there is substantial incentive for qui tam plaintiffs to increase their efforts in the coming year.
FCA recoveries in FY 2022 were down from FY 2021, but the critical takeaway is that the total number of FCA settlements and judgments in FY 2022 was the second highest on record. DOJ and qui tam relators continue to use the FCA as a flexible and powerful tool to advance government priorities and seek substantial settlements against corporations and individuals. Companies can reduce FCA risk by investing in responsive whistleblower programs that investigate claims and remediate problems in a timely and reasonable manner. That is the best first step to avoid costly civil suits and DOJ actions under the FCA. In the FCA context, as with compliance more generally, companies that remain diligent in their compliance programs, maintain strong internal controls, and keep up to date on the most recent pronouncements from DOJ are best positioned to avoid risk.
Read our most recent FCA newsletter, True Facts About False Claims: MoFo’s FCA Newsletter.
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