In recent years the federal government has aggressively investigated and prosecuted pharmaceutical companies and health care providers for possible violations of anti-fraud, anti-kickback and other laws. These efforts have resulted in massive fines and financial penalties.
In the face of these dangers, participants in the health care market need to consider various ways to forestall or at least mitigate possibly crippling sanctions. One important means is to investigate and voluntarily disclose wrongdoing before the start of an investigation – of course, in the hope of convincing the authorities to forego charges altogether or at least substantially reduce the penalties that would otherwise be sought and imposed.
As logical as this approach seems, the results of self-reporting often fall short of expectations. In “Dilemma of Self-Reporting: The FCPA Experience,” Elkan Abramowitz and I describe how federal authorities seek to give companies an incentive to self-report misconduct. But, with the possible exception of the Department of Justice, Antitrust Division’s Leniency Program and the Internal Revenue Service’s Offshore Voluntary Disclosure Program, the benefit of self-reporting remains uncertain in many contexts.
The benefits of self-reporting are certainly similarly uncertain in the health care context, in which the U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) and the Centers for Medicare and Medicaid Services (“CMS”) have established protocols that offer incentives to health care providers that self-report.
The Voluntary Self-Referral Disclosure Protocol
(“SRDP”) – established by CMS in 2010 in response to a Congressional mandate in the Affordable Care Act
– sets forth a process for Medicare services providers and suppliers to self-disclose actual or potential violations of the physician self-referral statute
, commonly knows as the “Stark Law.” That law prohibits physicians from making referrals for certain health services payable by Medicare to an entity in which the physician or a member of the physician’s family has a financial relationship. In exchange for a potential
reduction in overpayments and penalties, the SRDP requires detailed disclosures, including an explanation of why the violation occurred and a “complete legal analysis.” Yet, the SRDP makes no guarantees. It lists factors that CMS may
consider in reducing the amounts owed by a disclosing party, but states: “CMS is not obligated to reduce any amounts due and owing.” CMS also may refer disclosed matters to the OIG or the Department of Justice for further investigation and possible prosecution.
The OIG Provider Self-Disclosure Protocol (“SDP”), issued in April 2013, sets forth the process for health care providers to voluntarily disclose self-discovered evidence of potential fraud involving federal health care programs, which, according to OIG “gives providers the opportunity to avoid the costs and disruptions associated with a Government-directed investigation and civil or administrative litigation.” The SDP offers several benefits, including a presumption against requiring corporate integrity agreements because good-faith self-disclosure is an indication of a robust and effective compliance process. OIG generally imposes a lower damages multiplier on self-disclosing parties, although it determines in individual cases whether a higher multiplier may be warranted. And, participation suspends the obligation to return Medicare or Medicaid overpayments.
On the flipside, a self-disclosing party must acknowledge that the conduct is a potential violation and cannot simultaneously seek an advisory opinion from OIG as to whether an actual violation occurred. A disclosing party must conduct an internal investigation rapidly, report the findings to OIG or certify that the investigation will be completed within 90 days, and take any necessary corrective action. Finally, disclosure could trigger a criminal review because OIG refers potentially criminal conduct to the Department of Justice. OIG “will advocate that the disclosing parties receive a benefit from disclosure under the SDP,” but can offer no guarantee.
In sum, in health care, like other industries, it is important for companies to weigh the risks and rewards of self-reporting misconduct. The right decision is often quite difficult to reach, especially given the uncertainty of federal policy that, in theory, seeks to encourage voluntary disclosure, but in practice leaves much to chance.