The US Department of Justice (DOJ) Civil Division released its annual fraud statistics on February 22, highlighted by False Claims Act (FCA) settlements and judgments exceeding $2.68 billion in fiscal year 2023. DOJ released these annual fraud statistics, detailing its wins in the prior fiscal year, in conjunction with remarks delivered by DOJ Principal Deputy Assistant Attorney General Brian Boynton at the Federal Bar Association Qui Tam Section Conference. In his remarks, Mr. Boynton outlined DOJ’s enforcement priorities for fiscal year 2024 and beyond, including priorities for the health care industry.

Mr. Boynton and DOJ touted the record number of FCA settlements and judgments, which shows the continued driving force of whistleblowers and the plaintiffs’ bar, but DOJ’s total FCA recoveries remained comparatively stagnant if not below pre-pandemic levels.

FY 2023 Recoveries See Slight Increase from FY 2022

The FCA is perhaps the most powerful tool the government possesses to prosecute fraud and abuse in Federal health care programs such as Medicare and Medicaid and other government-funded activities and initiatives. The FCA provisions imposing treble damages and per-claim penalties allow the government, and its whistleblower counterparts, to recover substantial sums. With fiscal year 2023 now in the books, DOJ’s financial recoveries under the FCA total over $75 billion since 1986. While much appears the same, a close look at the data reveals the enforcement potential of this powerful statute.

Qui tam filings modestly increased by 54 filings under seal over FY 2022 data, going from 658 to 712 filings, but the percentage of recoveries attributable to whistleblower actions is an astounding 86%. Notably, recoveries focused on the health industry are reported as $2.3 billion—67% of the total annual recoveries. In contrast, US Department of Defense recoveries represented only 20% of the recoveries at slightly over $550 million. The imbalance in enforcement recoveries related to small and large federal agencies is a troubling and persistent characteristic of FCA recoveries.

DOJ’s announcement states that the government and whistleblowers were party to 543 settlements and judgments, the highest number in a single year on record and a 54% increase from FY 2022. DOJ also indicated that there are presently over 500 DOJ-initiated FCA matters, and over 1,500 civil investigative demands (CIDs) for documents, interrogatories, and testimony issued by DOJ’s Fraud Section, suggesting highly active investigations. DOJ also pointed out that the department was “instrumental” in obtaining additional recoveries for state Medicaid programs.

Qui Tam Actions Constitute Vast Majority of Recoveries

The driving force behind these FCA recoveries remains whistleblowers and the plaintiffs’ bar. FCA settlements and judgments that arose under the qui tam provisions of the FCA statute accounted for $2.3 billion in recoveries, nearly 86% of FY 2023’s total. Whistleblower recoveries amounted to $349 million from these matters, mostly reflecting intervened case where DOJ drove the recovery. Where DOJ did not intervene, the recoveries were much more modest at a little over $61 million.

The extent to which whistleblower cases, focused significantly on the health industry, drive DOJ enforcement resources raises questions on DOJ’s own enforcement agenda. While these recoveries in whistleblower suits are notable, the fact that filed whistleblower suits stay under seal for years before 80% are declined by DOJ suggests a structural inefficiency and unfair imbalance in the statute.

Health Care Remains #1

The health care sector once again made up the majority of recoveries in FY 2023, as it has for many years in the past. DOJ’s announcement highlighted recoveries and judgments in four specific areas: Medicare Advantage, nursing homes, the opioid epidemic, and kickbacks. But more broadly, DOJ’s recoveries under the FCA involved a range of industries within healthcare, including managed care organizations and providers, hospitals, pharmacies, laboratories, long-term acute care facilities, and physicians. These recoveries were driven by various regulatory issues, including the following:

• Medicare Advantage diagnosis code reporting
• The provision of unnecessary services
• Kickback violations
• Substandard patient care
• Inaccurate FDA pre-market approval applications
• Billing impropriety
• Violations of cybersecurity requirements in government contracts and grants

Of the list above, while many of these areas are traditional sources of FCA recoveries, Medicare Advantage fraud represents an area of significant growth, primarily due to the growth in the popularity of these plans. We anticipate seeing a growing number of FCA cases in the Medicare Advantage space in the coming years related to misreporting and other actuarial concerns.

DOJ Looks to 2024 Enforcement Priorities

DOJ’s announcement dovetailed with Mr. Boynton’s remarks at the FBA Qui Tam Section Conference. He articulated DOJ’s wins from FY 2023 and described its enforcement priorities for 2024. The focus of FCA enforcement remains health care fraud, which Mr. Boynton outlined in detail. Mr. Boynton specifically mentioned financial inducements for referrals under both the Anti-Kickback Statute and Stark Law, schemes involving nursing homes, protecting the Medicare Advantage Program, and schemes led by “third parties” but involving health care companies.

Of note, Mr. Boynton stated that DOJ would be expanding its focus on Medicare Advantage to examine the roles of stakeholders such as vendors and providers, even though he acknowledged that Medicare Advantage is a program based on capitated risk payments rather than traditional “fee-for-service” programs like Medicare Parts A and B. He also reiterated DOJ’s concern of “third parties,” such as private equity investors, electronic health record software providers, and coding consultants and their respective involvement in the patient care continuum.

Key Takeaways

• DOJ’s FY 2023 FCA recoveries show a sustained increase in investigations, including whistleblower actions. DOJ enforcement activities through CIDs for documents and depositions is substantial and ongoing.
• Whistleblower allegations are driving the vast majority of FCA recoveries, compelling companies to focus on compliance initiatives and whistleblower management strategies. Encouraging a “report-to-us-first” environment may well avoid a CID in a company’s future.
• Stakeholders in the health care and life sciences industries, particularly Medicare Advantage organizations, private equity investors and other “third parties” as described by Mr. Boynton, should anticipate being a focal point of the DOJ’s and plaintiffs’ bar FCA enforcement efforts for FY 2024 and beyond.

Questions related to DOJ’s enforcement priorities, the impact of the FCA on your healthcare organization, or compliance concerns? Contact the authors or your Morgan Lewis lawyer. For additional coverage of DOJ’s press release as it applies to all industry sectors subject to the FCA’s reach, please refer to our Morgan Lewis LawFlash.