Getting credit for cooperation in federal fraud investigations could drive a wedge between organizations and their top executives.
The government, in the form of the Department of Justice, wants healthcare organizations to investigate themselves.
At least, that's the substance of the Department's so-called Yates memo, released last fall. But hospital and health system executives are on their own as to how to interpret it.
The reason can be found in the government's expectation and definition of "corporate cooperation" in any fraud investigation in which an organization may find itself, says Bill Jordan, a former senior official at the Department of Justice and now partner and co-leader in Alston & Bird's Health Care Litigation Group in Atlanta.
If organization leaders consider "cooperation" to entail providing the documents the government has requested in a subpoena for a fraud investigation, they're still falling way short of the expected standard, says Jordan.
"To the government, that's part of it, but not at all that would give you cooperation credit," he says.
"That means you go in and do an investigation. You essentially do the government's work for them, and identify the culpable individuals and the problems. For lawyers who represent healthcare companies, that's really a change."
If activity by the organization's employees bring federal fraud charges, it's up to the organization to get credit for cooperation. That may lessen corporate penalties resulting from misconduct, says Jordan.
Antagonistic Relationships
That guidance, he says, wreaks havoc on the relationship between healthcare companies and their senior executives, and with counsel assigned to represent the organization.
The memo, nicknamed for its author, U.S. Deputy Attorney General Sally Quillian Yates, further puts firms such as Alston & Bird in a potentially antagonistic relationship with its clients, the executives who hire them, and the companies they represent.
In the case of investigations into misconduct, the Department of Justice itself will determine whether the level of cooperation is sufficient, he says.
"There's no black robe who will determine that," he says. "It's the Department of Justice badges."
That puts law firms and healthcare executives in a position that is awkward at best and diabolical at worst, Jordan explains.
Number of Fraud Investigations Rising
"The government's perception of who a bad apple is may be completely different from that of others, so that's why there is so much consternation," he says.
"The government can say, 'you can defend yourself, but don't do it and think you're at the same time cooperating with our review.'"
That guidance surrounding the Yates memo has created heightened tension on how to respond to government healthcare fraud investigations, which are growing quickly.
In 2016, Jordan says, there will be more than 800 false claims actions brought by the Justice Department. Just last week, more than 300 suspects were charged with defrauding Medicare in one of the largest nationwide fraud raids in history.
Five years ago, there were only 200 such actions in the entire calendar year.
The implications of the Yates memo can be dealt with prophylactically to a degree, he says.
But the true test of the organization's level of cooperation with the government will come only when the compliance program is put to the test in an actual fraud investigation, he says.
"Even for healthcare companies and hospitals who have really robust compliance programs, [the Yates memo has] created this need for an upfront assessment on how the company is going to be perceived in terms of cooperation with the government," he says.
He says the memo is a reaction to the perception that during the financial crisis, companies had to pay exorbitant fines for their actions.
Meanwhile, executives and other employees responsible for the fraud that precipitated the crisis largely escaped prosecution, with much of their ill-gotten wealth intact.
3 Ways to Prepare
If prosecutors are looking at a False Claims Act case, "they have to evaluate whether there's been criminal conduct and whether there's been individual culpability," Jordan says.
"By putting that procedure in place, [DOJ has] forced healthcare companies to evaluate individual liability too."
Jordan says organizations should prepare differently in light of the memo for an investigation that hopefully never comes. Here are three actions to take prophylactically:
- Evaluate compliance programs to determine they aren't just "paper programs," and that they are reflective of the values the company wants to have.
At the same time, it has to have real procedures the company follows. The worst thing that can happen is if OIG looks at your compliance program and says you have 15 policies. Did you follow them? So that's the daily blocking and tackling that's very important.
- When an allegation comes to the attention of legal counsel or the compliance office, all allegations should be treated seriously and investigated.
Those investigations are documented so that when the OIG comes in, there's documentation that proves allegations were investigated, and details of the mitigation that was put in place as a result. Documentation is where hospitals have time and again fallen down on the job.
- Communication about these issues should be frank, but should not agitate fear. For most hospitals, Medicare, Medicaid, and Tricare are easily the largest payers. If your biggest customer says you should follow certain rules, you need to do it.
You have to treat the government as a customer. That's a different mindset than treating it as an antagonist or opponent. That mindset helps executives get in the position to deal with these things.
"The government doesn't want to put you out of business," says Jordan. "Many hospitals have 5,000-10,000 employees. Even if you assume, 99.9% of people are good, you'll have maybe 10 bad apples. Even Mayberry had a jail. You hope for the best and plan for the worst and in the meantime, track everything."
Philip Betbeze is the senior leadership editor at HealthLeaders.