Providers can voluntarily disclose potential fraud with respect to Federal health care programs—Medicare, Medicaid, and potentially private insurers to the extent Federal or state funds are involved—by following the Provider Self-Disclosure Protocol ("Protocol") issued by the Department of Health and Human Services, Office of the Inspector General ("OIG"). (See 63 FR 58399 (Oct. 30, 1998).) Before embarking on the Protocol journey, providers must understand that although there are concrete benefits to disclosure, it is not a panacea.
The purpose of the Protocol is not meant to address mistakes, errors, or negligence. Thus, a crucial threshold issue is determining whether the conduct involves erroneous claims or fraudulent claims. Liability under the civil False Claims Act (“FCA”), the primary Government enforcement tool against health care fraud, and the Civil Monetary Penalties Law (“CMPL”), an administrative remedy similar in scope and effect to the FCA, requires claims to be intentionally false or made with reckless disregard or deliberate ignorance of falsity.
Where a provider has reason to believe that a fraud scheme is ongoing within the organization, the OIG advises that the provider should immediately contact the OIG without first conducting an internal investigation to avoid a substantial risk that proceeding without prior coordination with the Government will compromise the Government's subsequent investigation.
There is no deadline by which a disclosure must be made. Consequently, once the provider has knowledge of qualifying misconduct, deciding when to disclose will depend on the circumstances. It is not, however, necessary to wait for completion of a comprehensive internal investigation. A less detailed initial submission can be sufficient for entry into the Protocol. The provider then has three months within which to submit a full internal investigation report, including a "self-assessment" to estimate the monetary loss to Federal health care programs.
Advantages and Limitations of Voluntary Disclosure
Although the OIG does not guarantee a particular result, advantages of voluntary disclosure can include:
Lower damages payments—The civil FCA provides for mandatory treble damages. The CMPL provides for “not more than 3 times the amount claimed for each such item or service in lieu of damages.” The OIG has “committed to settling liability under the OIG’s authorities generally for an amount near the lower end of the damages continuum, i.e., a multiplier of the value of the financial benefit conferred.” (Daniel R. Levinson, Inspector General, An Open Letter to Health Care Providers, April 15, 2008.) In our experience, the very best available from the OIG is a 1.5 multiplier.
Avoidance of penalties—penalties are generally not included in settlements; in litigated cases, mandatory penalties under the civil FCA range from $5,500 per claim (i.e., invoice) to $11,000, and under the CMPL are $10,000 for "each item or service."
Avoidance of exclusion from Federal health care programs. The risk of exclusion, especially for smaller providers, is real and as Government involvement in health care increases, it will be difficult for any provider to survive without participation in Federal health care programs.
Less likely imposition of corporate integrity agreements. This is a significant benefit given the typically onerous conditions of such agreements.
Potential to obtain a global resolution with other interested agencies, including the Department of Justice ("DOJ"), although this can delay and complicate matters. Even if the DOJ is not part of the settlement, in our experience it is the OIG’s policy to obtain a declination from the DOJ before entering into a CMPL settlement.
Avoidance of the disruption of a formal Government investigation. In our experience, providing the OIG with a comprehensive and credible internal investigation report can result in a resolution without the Government seeking employee interviews or subpoenaing documents.
Blunting the impact of whistleblowers—The potential for a disgruntled employee or contractor to trigger a federal investigation can be lessened by contacting the OIG as soon as practicable after learning of potential fraud and seeking entry into the Protocol. Nevertheless, making a disclosure would not necessarily preclude a whistleblower action from being subsequently filed by a person who is an “original source.” (See 31 U.S.C. § 3730(e)(4).) And although making a disclosure to the OIG would not necessarily be foreclosed where an FCA action has already been filed under seal or an investigation has commenced without the provider’s knowledge, judicial discretion in that action to reduce the damages multiplier (from treble to double) would be eliminated.
Given the Government’s enforcement priorities continuing to focus on health care fraud and the prevalence of whistleblower actions, providers should be prepared to take advantage of the OIG’s voluntary disclosure program. Ultimately, whether or not to make a voluntary disclosure is a serious decision that depends on the totality of circumstances. Consequently, before proceeding down the voluntary disclosure path, prudent providers should consult with counsel experienced in this area.
A court has discretion to reduce civil FCA damages (from treble to double) where a “person” [the defendant] furnishes appropriate officials "with all information known to such person about the violation within thirty days after the date on which the person first obtained the information" and “fully cooperated with any Government investigation of such violation,” but only where “no criminal prosecution, civil action, or administrative action” had already “commenced” and “the person did not have actual knowledge of the existence of an investigation.” (31 U.S.C. § 3729(a)(2)(A)-(C).)