The Situation: The United States Department of Justice ("DOJ") recently issued statistics and a related press release regarding its fiscal year ("FY") 2022 enforcement activity under the False Claims Act ("FCA").
The Result: The number of FCA matters resolved, as well as the number of new FCA matters initiated by whistleblowers and the DOJ, both increased slightly in FY 2022, even though the total dollar amount recovered under the FCA in FY 2022 was less than half the amount recovered in FY 2021.
Looking Ahead: The dollar amounts of recoveries under the FCA can vary widely from year to year, depending on the timing and dollar amount of the comparatively small number of large settlements that comprise the bulk of the recoveries. But healthcare providers, government contractors, and others whose conduct may implicate the FCA should take note that the overall trend is for the DOJ and whistleblowers to initiate more of these cases and for more of them to be resolved by the defendants paying money, either through settlements or as a result of judgments.
The DOJ Civil Division recently announced recoveries totaling $2.2 billion from FCA settlements and judgments in FY 2022. Notably, the number of cases resulting in settlements or judgments—351—was the second highest in the history of the FCA. At the same time, the total amount recovered represents a significant decline compared to the $5.6 billion recovered in 2021, which was the second largest annual recovery in FCA history. The overall recovery in 2022 was the smallest since 2008, even without accounting for inflation. We do not expect this lower recovery to be the new normal. As has historically been the case, the majority recovered came from enforcement in the healthcare industry.
The statistics also reflect that more new qui tam and non-qui tam matters were initiated in 2022 than in the previous year. The 296 non-qui tam and 652 qui tam new cases reported for 2022 reflect an increase over fiscal year 2021's new case numbers of 212 and 598, respectively, but are similar to those in 2020. The number of new qui tam actions has remained fairly stable since 2011, but the number of non-qui tam cases has increased markedly since the beginning of the COVID pandemic—and 2022's numbers confirm that the uptick in these DOJ-initiated cases continues.
Fiscal year 2022 also saw a difference in the share of total recoveries attributable to qui tam and non-qui tam cases compared to the prior year. In 2022, qui tam cases accounted for almost 89% of total dollars recovered—the highest percentage since 2017—and a stark contrast to the just 28% in 2021, which was the lowest percentage attributable to qui tam cases since 1991. Of those qui tam cases, for the first time in the history of the FCA, the majority—60%—of the recoveries resulted from cases led by the whistleblowers rather than by the DOJ. However, this shift resulted primarily from one very large settlement with a pharmaceutical manufacturer in a case the DOJ had declined, so it may not reflect a new trend.
Notable areas of DOJ's focus include:
Allegations of Rebate Underpayments, Kickbacks, and Medically Unnecessary or Substandard Services. As in past years, cases alleging potentially unlawful kickbacks and medically unnecessary services were a major area of FCA activity and recoveries. This past year also saw DOJ focus on allegations of knowingly underpaying Medicaid drug rebates and providing substandard medical care to patients.
Continued Attention to Medicare Advantage Program (Medicare Part C) Reimbursement. The DOJ continued to pursue Medicare managed care organizations for allegedly knowingly submitting inaccurate information, or knowingly failing to correct inaccurate information, about the health status of beneficiaries enrolled in their plans to increase reimbursement.
COVID-Related Fraud and Cybersecurity Initiatives. In its press release accompanying the release of last year's FCA statistics, DOJ highlighted its continuing efforts to prosecute fraud related to the Paycheck Protection Program and other COVID programs. However, these cases remain relatively small both in recoveries and in percentage of total dollars recovered.
The 2022 recoveries also include the first settlement under the Civil Cyber-Fraud Initiative it launched in October 2021. A government contractor paid $930,000 to resolve allegations related to its failure to properly use a secure electronic medical record system to store the patient records of U.S. service members, diplomats, officials, and contractors working and receiving medical care in Iraq.
Despite the smaller total in dollars recovered in 2022, the increased number of FCA cases both resolved and initiated in 2022 demonstrates the government's continued emphasis on enforcement with respect to government spending, particularly in the healthcare industry. This reinforces the importance of companies developing strong compliance programs well in advance of any enforcement scrutiny.
Two Key Takeaways:
- The DOJ and whistleblowers are both initiating and resolving cases against an increasing number of defendants, despite the fact that their efforts brought in lower recoveries in 2022 than in the prior year. This means that more companies than ever in the healthcare, life sciences, government contracting, and financial services industries will need to defend against FCA investigations and litigation in the near future.
- Because of the increase in attention, companies that receive federal money, directly or indirectly, regardless of industry, should re-examine the effectiveness of their compliance programs now to minimize the risk of FCA liability.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.