On February 22, 2024, the U.S. Department of Justice (DOJ) announced its False Claims Act (FCA) statistics for fiscal year (FY) 2023. Using DOJ’s FY 2023 Data Table and our analysis from previous years, MoFo’s FCA team highlights the following key takeaways:

• DOJ reached the highest number of settlements and judgments ever recorded in a single year in FCA history during FY 2023. At 543, the DOJ’s end-of-year total marks a 50% increase from the 351 settlements and judgments that it obtained in FY 2022.
• DOJ also initiated the highest number of new FCA matters in its history, breaking last year’s record. At 500 new matters brought in by DOJ investigations, the DOJ’s FY 2023 performance marks a more than 60% increase in DOJ-initiated matters from last year (305). In addition, the DOJ collected more than $2.68 billion in settlements and judgments, an increase from the $2.2 billion recovered in the previous year. Over $1.8 billion came from the healthcare industry alone.
• Whistleblowers filed 712 qui tam suits, the third highest in history and were paid over $349 million for their share of recoveries in FY 2023.
• While healthcare continues to lead most FCA activity, including DOJ’s focus on fraud in pandemic relief programs as a key enforcement priority, FY 2023 saw remarkably expanded DOJ and whistleblower activity on contracts involving the Department of Defense (DoD).

Key FCA Enforcement Trends

Healthcare Fraud

Healthcare fraud remains the top source of recoveries for DOJ, accounting for almost 70% or $1.8 billion of the $2.68 billion total. These recoveries came from insurance companies, hospitals, healthcare groups, diagnostic companies, pharmacies, and physicians. Spanning federal and state healthcare programs, a renewed interest in the opioid epidemic and actions against medical software companies. DOJ reinforced its wide activity across the healthcare field in FY 2023.

DOJ indicated that false claims enforcement in the Medicare Advantage program, also known as Medicare Part C, may continue to rise. While the claims in the settlement are allegations only and did not have a determination of liability, DOJ reached a $172 million settlement with the Cigna Group for unlawful billing to a federal program. DOJ also continued its strong enforcement under the Anti-Kickback Statute, reaching a $85.5 million settlement with Cardiac Imaging that resolved allegations that the company made payments to medical professionals for diagnostic referrals.

Maintaining a sustained focus on healthcare, DOJ recovered $240 million in settlements and judgments from all healthcare actions that it initiated in FY 2023 (non-qui tam suits), compared with last year’s $110 million. DOJ’s efforts also signaled continued enforcement for unnecessary services and substandard care, including a $21 million settlement involving a long-term acute care facility that performed medical services using unlicensed and unauthorized students. Likewise, DOJ intervened in a whistleblower suit against the Rite Aid Corporation for allegedly filling unlawful prescriptions, confirming that opioid distribution remains an area of intense scrutiny. Interestingly, DOJ highlighted recoveries for state Medicaid programs, perhaps signaling greater collaboration with State Attorney Generals Offices.

Government Contractors

DOJ reached the highest amount in recovered settlements from FCA cases involving the DoD in over a decade. At more than $550 million, DOJ’s FY 2023 recovery marks a 400% increase from the amount it obtained in FY 2022 ($103 million).

Led by cases in which DOJ intervened or otherwise pursued recovery ($388 million), the massive amount obtained by DOJ in FY 2023 reveals the expanded DOJ interest in FCA enforcement around DoD contracts. In our Jan. 2023 FCA Quarterly Newsletter, we predicted, “more aggressive efforts across the board by DOJ and DoD to investigate and prosecute procurement fraud” due, in part, to the focus by Congress and regulators on the DoD for continuing to fail its audits.

Significantly, FCA settlements and judgments obtained by whistleblowers in FY 2023, acting on their own in cases where DOJ declined to participate, reached a historic high. Amounting to more than $110 million, the private recoveries in FY 2023 alone represents 30% of the total dollar amount that FCA whistleblowers have recovered since 1987 in DoD-related cases in which DOJ did not intervene. While we reported last year that FY 2022’s whistleblower recovery in DoD cases at $28 million marked, “a nearly 20-year peak,” the numbers from this year have set a new record in the field.

DOJ highlighted a $377 million settlement that it obtained with Booz Allen, which has led FY 2023 numbers. The settlement resolved allegations that the company charged the government for costs unrelated to its government contracts and that the company failed to disclose the accounting methods used in its cost assessments. DOJ also highlighted a $8.1 million settlement with a major defense contractor for allegedly failing to comply with quality control specifications on materials used to build military aircraft.

Civil Cyber-Fraud Initiative

We have previously highlighted DOJ’s focus on the Civil Cyber-Fraud Initiative in many of our FCA Quarterly Newsletters (Jan. 2023, Apr. 2023, Oct. 2023, and Jan. 2024) and expect this to continue to be an area of focus for the Department. In its FCA Highlights, DOJ referenced the $4 million settlement reached with an American wireless network operator, which involved cybersecurity failures in contracts to provide secure internet connections to government agencies. DOJ noted that the company’s cooperation and remediation, including initiating an internal and independent review alongside applying a compliance protocol, were “significant steps” that earned it credit with the government. DOJ also indicated that it would expand its cybersecurity enforcement efforts to reach smaller telecommunication operators. DOJ reached an almost $300,000 settlement with a web design company after the company failed to protect data on a federally funded child health insurance website, leading to the exposure of an estimated 500,000 applicants after a cyber-attack.

COVID-19-Related Fraud

DOJ has increased the scale of its pandemic relief enforcement matters, as investigations continue to develop in the years after the pandemic. In FY 2023, DOJ resolved 270 FCA matters involving fraud in the government’s pandemic relief programs, a leap from the 35 FCA matters that it resolved in this field in the prior year. DOJ also increased enforcement actions involving the Paycheck Protection Program (PPP). In FY 2023, DOJ recovered around $48 million in connection with fraudulent PPP loans, a massive jump from the $6.8 million amount recovered in FY 2022.

DOJ continued its enforcement activity across pandemic-related areas, including by bringing claims against a laboratory testing company for providing COVID-19 tests and other respiratory diagnostics to individuals who were not symptomatic and billing those tests to Medicare. In amounts ranging from $600,000 to $9 million. DOJ also resolved matters with companies involving fraudulent applications for PPP loans and loan forgiveness, including matters involving foreign agents who received federal dollars by misrepresenting their eligibility to the Small Business Administration (SBA), and companies that incorrectly counted the number of their employees in loan applications submitted to the government.

DOJ entered new territory by filing claims against a financial technology company for miscalculating PPP loans and causing the SBA to guarantee loan amounts in numbers far higher than the eligibility of individual applicants, resulting in $60 million in government losses. We expect DOJ will continue to scrutinize FinTech companies in an effort to recover lost pandemic relief funds.

Individual Accountability

DOJ repeated in its FY 2023 statement that it will continue to use the FCA to hold individuals accountable for fraud, consistent with its statements in prior years. DOJ highlighted cases involving individuals who billed false claims to Medicare and false loan applications to the SBA, including a $23.9 million settlement with physicians for fraudulently maximizing reimbursement claims to federal healthcare programs.

Whistleblower Suits

Lawsuits filed under the qui tam provisions of the FCA accounted for $2.3 billion of the $2.68 billion recovered in all FCA actions in FY 2023, a significant increase from the $1.9 billion in whistleblower recovery from FY 2022. During FY 2023, the government paid out over $349 million to whistleblowers, which is a decrease from FY 2022’s $496 million award, but still far higher than the $263 million received by whistleblowers in FY 2021. Importantly, the total number of qui tam actions brought by whistleblowers reached 712 in FY 2023, a level not seen since 2014. And, as noted above, whistleblowers substantially boosted recoveries on FCA claims involving DoD. With an average of 13 new FCA cases brought by whistleblowers each week, alongside generous share awards, there are substantial incentives in place for continued whistleblower activity in the upcoming year.

Conclusion

The critical takeaway from this data is that DOJ and whistleblowers are increasing their efforts. In FY 2023, DOJ initiated the largest number of new FCA matters in its history. FCA recoveries in FY 2023 include the highest number of settlements and judgments in history and increased total recoveries over the prior year. The health care industry has always been an area of focus by DOJ under the FCA and Anti-Kickback Statute, and FY 2023 was no different. New and growing activity around DoD contracts indicates greater scrutiny for government contractors more broadly. And, with the events of the pandemic now fading, DOJ and whistleblowers are well-positioned to investigate and bring claims involving the government’s pandemic relief programs. Companies can reduce FCA risk by investigating and remediating whistleblower claims in the moments they emerge and by implementing the industry’s best practices across their compliance programs.

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