On February 22, 2024, the U.S. Department of Justice (“DOJ”) released its Fiscal Year 2023 False Claims Act (“FCA”) statistics showing recoveries of almost $2.7 billion. Last year’s recoveries exceeded 2022’s $2.2 billion but are still one of the lesser collections of FCA settlements and judgments in the past 10 years. DOJ also had to do a lot more work to get paid: it reported a record 543 settlements and judgements in 2023, almost 200 more than 2022. This likely is due to DOJ’s focus on COVID-19 related fraud, which can implicate individuals and small businesses with less money to pay.
The healthcare industry paid out the majority of 2023 FCA settlements and judgments, but there was a jump in Department of Defense related recoveries to almost $552 million, the highest number since 2006. The majority of the $552 million likely came from DOJ’s $377 million settlement with Booz Allen Hamilton in July 2023 over alleged improper allocation of indirect costs to its government contracts between 2011 and 2021. Large consulting firms like Booz Allen have been targets for both DOJ and Congress in the past few years. From cost accounting inquiries to scrutiny of the firms’ perceived organizational conflicts of interest, the firms seem to be under a microscope. But Booz Allen’s settlement is a reminder to all government contractors that the consequences for cost accounting errors can be bigger than just DCAA audits and government claims; contractors could face FCA treble damages and penalties.
On the same day DOJ released its 2023 statistics, Brian Boynton announced that DOJ’s FCA enforcement priorities for 2024 will continue to be Cybersecurity, COVID-19, and Healthcare fraud. Our takeaways for the year ahead follow.
For all companies doing business with the government, data security should be a priority this year. DOJ is paying close attention to data security on government contracts and in the healthcare space, including electronic health record (“EHR”) management. In the fall of 2021, DOJ announced a civil cyber fraud initiative using the FCA to pursue cybersecurity related fraud by government contractors and grant recipients. DOJ’s 2023 FCA press release highlights some of the results of this initiative: two settlements based on alleged inadequate cybersecurity in connection with government contracts and two settlements with EHR software vendors.
Under the FCA, even reckless disregard of cybersecurity requirements in a government contract can result in liability for treble damages and penalties. Now is the time to ensure that you understand and are complying with the data security requirements in your government contract, that you are training personnel to handle sensitive data properly, and that you know the procedures to follow if your company experiences a security breach.
For healthcare companies, this is a good time to refresh policies and training on handling health and other sensitive data, choosing proper diagnosis and treatment codes, and guidelines for marketing and referrals. DOJ continues to scrutinize Medicare Advantage billing and reimbursements, and many of its settlements last year stemmed from allegations of inaccurate diagnosis coding. Internal compliance reviews with appropriate refunds of discovered overpayments can demonstrate to DOJ that any problems were isolated, not systemic to the organization. Likewise, all companies operating in the healthcare space must be careful to avoid perceived kickbacks, another DOJ focus in 2023 and 2024.
Targeted compliance programs and training on these topics not only can help avoid legal problems, but can also serve as evidence negating knowledge or reckless disregard under the FCA. Further, government FCA investigations can be very costly and burdensome, so retaining experienced counsel as soon as possible is crucial to minimizing costs and liability risk. Our team has deep experience with FCA enforcement and government contracting requirements and can help you tailor the most effective compliance program for your business, as well as quickly and effectively respond to a government inquiry.
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