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DOJ Preserves Its Options in Cooperation Credit Guidance

Last month, the Civil Division of the Department of Justice (DOJ) announced the release of formal guidance to DOJ civil attorneys on how to award “cooperation credit” to defendants who cooperate with the Department during a False Claims Act (FCA) investigation. The formal policy, added to the Justice Manual Section 4-4.112, identifies the type of cooperation eligible for credit.

As announced by Assistance Attorney General Jody Hunt, DOJ believes the guidance reflects “important steps to incentivize companies to voluntarily disclose misconduct and cooperate with our investigations … False Claims Act defendants may merit a more favorable resolution by providing meaningful assistance to the Department of Justice—from voluntary disclosure, which is the most valuable form of cooperation, to various other efforts, including the sharing of information gleaned from an internal investigation and taking remedial steps through new or improved compliance programs.”

Under the policy, cooperation credit in FCA cases may be earned by 1) voluntarily disclosing misconduct unknown to the government, 2) cooperating in an ongoing investigation or 3) undertaking remedial measures in response to a violation. The first type of cooperation is straightforward: self-disclosure before a government investigation begins.

The second type of cooperation has two flavors. First, where the government has already initiated an investigation, a company may receive credit for disclosing other misconduct uncovered by the company through the course of its internal investigation that is unknown to the government. Second, DOJ lists 10 examples of other cooperative activities for which a company may earn credit for undertaking during an investigation, including

  • Identifying individuals substantially involved or responsible for the conduct;
  • Admitting liability or “accepting responsibility” for the conduct; or
  • Assisting the government in its investigation by, for example, preserving relevant documents and information beyond existing business practices or legal requirements, identifying individuals who are aware of relevant information or conduct, and facilitating review and evaluation of data or information that requires access to special or proprietary technologies.

The third type of cooperation involves taking into account remedial actions that a company has taken in response to a FCA violation. Such remedial measures may include

  • Undertaking a thorough analysis of the root cause of the misconduct;
  • Implementing or improving an effective compliance program designed to ensure the misconduct or similar problem does not occur again;
  • Appropriately disciplining or replacing those responsible for the misconduct;
  • Accepting responsibility for the violation; and
  • Implementing or improving compliance programs to prevent a recurrence.

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First of Its Kind: Drug Wholesaler Accepts DPA and Two Executives Face Criminal Charges in SDNY For Illegal Distribution of Opioids

On April 23, 2019, the US Department of Justice (DOJ) announced it has entered into a deferred prosecution agreement with Rochester Drug Co-Operative, Inc. (RDC), one of the 10 largest wholesale distributors of pharmaceutical products in the US, and filed felony criminal charges against two of RDC’s former senior executives for unlawful distribution of controlled substances (oxycodone and fentanyl) and conspiring to defraud the US Drug Enforcement Agency (DEA). During the relevant time period (2012-2016), RDC’s sales of oxycodone increased by approximately 800 percent (from 4.7 million to 42.2 million tablets) and fentanyl increased by approximately 2,000 percent (from 63,000 to over 1.3 million dosages). The two charged executives are RDC’s former chief executive officer, Laurence F. Doud III, and the company’s former chief compliance officer, William Pietruszewski.

Geoffrey S. Berman, the US Attorney for the Southern District of New York, noted in a press release that the prosecution is “the first of its kind,” with RDC and its former chief executive officer and former chief compliance officer charged with “drug trafficking, trafficking the same drugs that are fueling the opioid epidemic that is ravaging this country.” Keeping the focus on the C-suite, Mr. Berman emphasized that his office “will do everything in its power to combat this epidemic, from street-level dealers to the executives who illegally distribute drugs from their boardrooms.”

Ray Donovan, the DEA Special Agent in Charge of the investigation, underscored this sentiment:

Today’s charges should send shock waves throughout the pharmaceutical industry reminding them of their role as gatekeepers of prescription medication.  The distribution of life-saving medication is paramount to public health; similarly, so is identifying rogue members of the pharmaceutical and medical fields whose diversion contributes to the record-breaking drug overdoses in America . . . . This historic investigation unveiled a criminal element of denial in RDC’s compliance practices, and holds them accountable for their egregious non-compliance according to the law.”

A consistent theme across the three cases is the alleged deficiency in RDC’s compliance program—as well as the role that the former CEO and compliance chief allegedly played in directing RDC to ignore its obligations to maintain “effective control[s] against diversion of particular controlled substances into other than legitimate medical, scientific, and industrial channels” under 21 USC § 823(b)(1) and reporting suspicious orders under 21 CFR § 1301.74(b). The criminal pleadings include allegations that:

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DOJ Settlement with Home Health Providers Underscores Strategic Considerations for Self-Disclosure

Eventually, any health care organization with an effective compliance program is very likely to discover an issue that raises potential liability and requires disclosure to a government entity. While we largely discuss False Claims Act (FCA) litigation and defense issues on this blog, a complementary issue is how to address matters that raise potential liability risks for an organization proactively.

On August 11, 2017, a group of affiliated home health providers in Tennessee (referred to collectively as “Home Health Providers”) entered into an FCA settlement agreement with the US Department of Justice (DOJ) and the US Department of Health and Human Services Office of Inspector General (OIG) for $1.8 million to resolve self-disclosed, potential violations of the Stark Law, the Federal Anti-Kickback Statute, and a failure to meet certain Medicare coverage and payment requirements for home health services. This settlement agreement underscores the strategic considerations that providers must weigh as they face self-disclosing potential violations to the US government. (more…)




Breaking Down the 2017 DOJ and OIG Compliance Guides

Earlier this year, DOJ and OIG independently issued guides focused on evaluating compliance program effectiveness. The guides approach the topic from different perspectives but cover overlapping themes and work well in tandem. We reviewed the guides and compiled the reference tool to aid organization executives and boards of directors to measure compliance program effectiveness and, in turn, wisely invest resources.

Read the full article “Breaking Down the 2017 DOJ and OIG Compliance Guides.”




How to Use the New OIG-HCCA Compliance Resource Guide in Your Compliance Program

Released on March 27, 2017, the Compliance Program Resource Guide (Resource Guide), jointly prepared by the US Department of Health and Human Services Office of Inspector General (OIG) and the Health Care Compliance Association (HCCA) reflects the result of a “roundtable” meeting on January 17, 2017, of OIG staff and compliance professionals “to discuss ways to measure the effectiveness of compliance programs.” The resulting Resource Guide document catalogues the roundtable’s brainstorming discussions to “…provide a large number of ideas for measuring the various elements of a compliance program…to give health care organizations as many ideas as possible, to be broad enough to help any type of organization, and let the organization choose which ones best suit its needs.”

Here are a few main takeaways from the Resource Guide:

  • Ideas for Auditing: The Resource Guide contributes to the critical conversation about how to evaluate compliance program effectiveness by listing additional ideas on what to audit and how to audit those areas. The items listed in the Resource Guide generally center on ideas on auditing and monitoring compliance program elements, such as periodically reviewing training and policies and procedures to ensure that they are up-to-date, understandable to staff and accurately reflect the business process as performed in practice. Legal and compliance can use this document to identify those particular elements that may be most applicable to their individual organization.

Organizations would also benefit from considering the questions listed in the new compliance program guidance issued in February by the US Department of Justice (DOJ) Criminal Division’s Fraud Section, “Evaluation of Corporate Compliance Programs” (DOJ Guidance), as part of examining compliance program effectiveness. (We covered the DOJ Guidance previously.) Health care organizations may also use the various provider-specific compliance program guidance documents created by OIG over the years as another source for ideas on what to measure.

  • Not a Mandate: The Resource Guide is very clear that it is not intended to be a “best practice”, a template, or a “‘checklist’ to be applied wholesale to assess a compliance program.” This clarification is an important one since there is the potential for the Resource Guide to be (incorrectly) viewed by qui tam relators or others as creating de facto compliance program requirements or OIG recommendations.
  • How to Measure: The Resource Guide does not delve into how or who should undertake or contribute to the effectiveness review. Who conducts the review is a question that may have legal significance given the nature of a particular issue. General counsel and the chief compliance officer should consider this issue as part of the organization’s ongoing compliance program review. It may be valuable to include the organization’s regular outside white collar counsel to comment on such critical, relevant legal considerations as the proper conduct of an internal investigation; preserving the attorney-client privilege in appropriate situations; coordinating communications between legal, compliance and internal audit personnel; and applying “lessons learned” from the practices of qui tam relators and their counsel. Outside consultants may [...]

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DOJ Releases Detailed Criteria for Evaluating Compliance Programs

The Department of Justice (DOJ) doubled-down on emphasizing corporate compliance programs with new guidance from the Criminal Division Fraud Section with the “Evaluation of Corporate Compliance Programs” (Criteria).  This document, released February 8 without much fanfare, contains a long list of benchmarks that DOJ says it will use to evaluate the effectiveness of an organization’s compliance program.  The Criteria may publicize the factors Hui Chen, the Criminal Division’s 2015 compliance counsel hire, uses to evaluate compliance programs.  The Criteria also provides practical guidance on how organizations can evaluate their compliance programs.  This document operationalizes DOJ’s Principles of Federal Prosecution of Business Organizations (knows as the “Filip Factors”), which stated that the existence and effectiveness of a corporation’s preexisting compliance program is a factor that the DOJ will review in considering prosecution decisions.

The Guidance contains 11 topics that shift the analysis among examining how the alleged misconduct could have occurred, the organization’s response to the alleged misconduct, and the current state of the compliance program.  One entire category, titled “Analysis and Remediation of Underlying Misconduct,” has an obvious focus.  But, the other categories contain questions that touch on each of the three themes.  For example, the “Policies and Procedures” category asks questions about the process for implementing and designing new policies, whether existing policies addressed the alleged misconduct, what policies or processes could have prevented the alleged misconduct, and whether the policies/processes of the company have improved today.  Other categories examine the company’s historic and current risk assessment process and internal auditing, training and communications, internal reporting and investigations, and employee incentives and discipline.  DOJ also discusses management of third parties acting on behalf of the company and, in the case of a successor owner, the due diligence process and on-boarding of the new company into the broader organization. (more…)




Old Dog, New Tricks: Fraud and Abuse in the Age of Payment Reform

The good, reassuring news about that “old dog” fraud and abuse as it enters an age of payment reform is that criminal liability for fraud still requires a specific intent to defraud the federal health care programs, anti-kickback liability still requires actual knowledge of at least the wrongfulness, if not the illegality, of the financial transaction with a referral source, and civil False Claims Act liability for Stark Law violations still requires actual knowledge, a reckless disregard for, or deliberate ignorance of the Stark Law violation. This should mean that good faith and diligent efforts to comply with law, including seeking and following legal counsel, still go a long way in managing an organization’s and individual executive’s risk under the fraud and abuse laws. The bad, unsettling news about fraud and abuse in an age of payment reform, however, is that (1) anxiety about reform and stagnating and declining physician incomes are propelling a spike in transactions between health systems and physicians at a time when qui tam plaintiffs and the law firms that represent them are aggressively challenging the legitimacy and common structures for these transactions; and (2) the Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems heavy burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to the Centers for Medicare and Medicaid Services’ (CMS) innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by the fraud and abuse/Stark waivers discussed in Part B below, there are many other common transactions and arrangements with physicians still operating in a fee-for-service environment  (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. During this period of transition to transformation of the health delivery and payment system, the key areas of risk for health systems are their burdens of proof on the ‘big three” issues of:

  • Fair market value,
  • Volume or value, and
  • Commercial reasonableness.

Each is discussed separately below, and the industry practices for managing these risks. Please note that none of these practices are necessarily “best” or “normative” practices, but are what we have observed.

Read the full article here.




Acting Associate Attorney General Remarks on Yates Memorandum and False Claims Act

On June 9, 2016, Acting Associate Attorney General Bill Baer delivered a speech regarding the impact of the Yates Memorandum’s focus on individual accountability and corporate cooperation at the American Bar Association’s 11th National Institute on Civil False Claims Act and Qui Tam Enforcement.  The focus of the speech was on the interplay between the Yates Memorandum and investigations and litigation under the False Claims Act (FCA), underscoring the fact that the US Department of Justice’s (DOJ’s) focus on individuals is not limited to the criminal context. (more…)




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