On May 7, 2019, the United States Department of Justice (DOJ) delivered new guidance on how potential False Claims Act (FCA) defendants can receive leniency in exchange for proactively disclosing misconduct and taking other cooperative actions (the New Guidelines).  The New Guidelines are set forth at new Section 4-4.112 of the Justice Manual and stress the importance of taking FCA-related accusations seriously and being proactive in evaluating potential FCA violations. 

Section 4-4.112 of the Justice Manual states that the New Guidelines “identify factors that will be considered and the credit that will be provided by [DOJ] attorneys when entities voluntarily self-disclose misconduct that could serve as the basis for False Claims Act (FCA) liability and/or administrative remedies, take other steps to cooperate with FCA investigations and settlements, or take adequate and effective remedial measures.” press release, the most important of these factors is the voluntary disclosure of false billing practices, which Assistant Attorney General Jody Hunt stated is the “most valuable form of cooperation.”

The New Guidelines state that entities that make proactive, timely, and voluntary self-disclosure to the DOJ about misconduct will receive credit during the resolution of an FCA case.  Entities may also receive credit if they take certain steps, other than self-disclosure, to cooperate with an ongoing investigation. The DOJ provides the following actions as examples of cooperation:

• Identifying individuals substantially involved in or responsible for the misconduct;
• Disclosing relevant facts and identifying opportunities for the government to obtain evidence relevant to the government’s investigation that is not in the possession of the entity or individual or not otherwise known to the government;
• Preserving, collecting, and disclosing relevant documents and information relating to their provenance 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 available for meetings, interviews, examinations, or depositions an entity’s officers and employees who possess relevant information;
• Disclosing facts relevant to the government’s investigation gathered during the entity’s independent investigation (not to include information subject to attorney-client privilege or work product protection), including attribution of facts to specific sources rather than a general narrative of facts, and providing timely updates on the organization’s internal investigation into the government’s concerns, including rolling disclosures of relevant information;
• Providing facts relevant to potential misconduct by third-party entities and third-party individuals;
• Providing information in native format, and facilitating review and evaluation of that information if it requires special or proprietary technologies so that the information can be evaluated;
• Admitting liability or accepting responsibility for the wrongdoing or relevant conduct; and
• Assisting in the determination or recovery of the losses caused by the organization’s misconduct.

In considering the value of any voluntary disclosure or additional cooperation, the DOJ will consider the following factors: (1) the timeliness and voluntariness of the assistance; (2) the truthfulness, completeness, and reliability of any information or testimony provided; (3) the nature and extent of the assistance; and (4) the significance and usefulness of the cooperation to the government.

DOJ attorneys will also consider whether an entity has taken appropriate remedial actions in response to an FCA violation. Such remedial actions may include:

• Demonstrating a thorough analysis of the cause of the underlying conduct and, where appropriate, remediation to address the root cause;
• Implementing or improving an effective compliance program designed to ensure the misconduct or similar problem does not occur again;
• Appropriately disciplining or replacing those identified by the entity as responsible for the misconduct either through direct participation or failure in oversight, as well as those with supervisory authority over the area where the misconduct occurred; and
• Any additional steps demonstrating recognition of the seriousness of the entity’s 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.

The types of credit an entity may receive for disclosing, cooperating, and remediating include (but are not limited to):

• A reduction in penalties or damages;
• Notification of relevant agencies about the entity’s cooperation so that the agency may consider this factor in evaluating administrative actions such as suspension, debarment, or a civil monetary decision;
• Public acknowledgment of the entity’s cooperation; and/or
• Assistance with resolving qui tam litigation.

Healthcare entities are advised to take internal allegations of potential FCA violations seriously and to thoroughly investigate the facts surrounding such allegations.  If misconduct has taken place, entities that act swiftly to assist the government in its investigation of the misconduct may receive significant benefits from the government, such as the types of credit listed above.  While entities are not necessarily required to take the actions outlined in the New Guidelines, doing so in response to alleged FCA violations may make favorable outcomes, such as a reduction in penalties and positive media coverage, more likely.