As we detailed in a previous blog, on October 3, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) published a strategic plan to “safeguard[] the integrity of HHS grants and contracts.” The plan comes after the HHS-OIG found “gaps in HHS oversight of grants and contracts—gaps that allow HHS funds to be misspent, programs to fall short of their promise, and people to be put at risk.”
The strategic plan follows several recent enforcement actions showcasing the efforts of the Department of Justice (DOJ), working in conjunction with HHS-OIG, to hold individuals accountable for defrauding HHS programs. In this post, we explore three recent enforcement actions and discuss how contractors and grant recipients should be preparing for increased scrutiny going forward.
Doctor Agrees to Pay $3.8 Million to Settle False Claims Act Allegations
On October 11, the DOJ announced that Dr. Janette Gray agreed to pay $3.8 million to settle allegations of violating the False Claims Act (FCA). The allegations revolve around the submission of false claims to the Medicare and TRICARE programs from 2012 to 2022.
The DOJ alleges Dr. Gray engaged in deceptive billing practices where she misrepresented the services provided, disguised the rendering provider, “unbundled services” where certain procedures were billed in different parts, and billed for services not medically necessary. The settlement was the result of a coordinated effort between various agencies including the U.S. Attorney's Office of the Southern District of California, the Department of Health and Human Services, and the Federal Bureau of Investigations. In addition to the $3.8 million settlement, Dr. Gray will be excluded from participating in Medicare, Medicaid, or any other Federal health care programs for a five year period.
Two Kansas Men Plead Guilty to Fraud
Todd and Bradley Eck, two brothers from Kansas, pleaded guilty to conspiring to defraud a federal healthcare program. The brothers created four healthcare companies and enrolled them in the Medicare program. However, they were ineligible to enroll due to their licenses to practice chiropractic medicine having been revoked. Bradley Eck had his license revoked by the Kansas Board of Healing Arts in 2013 due to gross negligence, professional incompetency, and dishonesty.
Similarly, Todd Eck's license was revoked in 2018 for multiple violations, including fraud during license renewal and maintaining fraudulent medical records. The brothers omitted important background information about themselves and obfuscated their ownership on the Medicare enrollment forms. As part of their plea agreement, the Eck brothers are required to pay $3.4 million in restitution and are scheduled to be sentenced on January 13, 2025. Each faces a maximum of five years in prison.
Doctor Pays $160,000 to Settle Grant Misrepresentation Allegations
On July 18, Dr. Timothy Niewold reached a $160,000 settlement with the HHS OIG. The settlement addresses allegations that Dr. Niewold made false statements, omissions, and misrepresentations of material fact in four grant applications submitted to the National Institutes of Health (NIH). Specifically, Dr. Niewold allegedly falsely claimed that an academic research center had agreed to provide over 1,600 healthy control blood samples and misrepresented the availability of PNP-floxed mice where he stated they were in his possession and prepared for use in his research.
Lessons Learned
High Penalties Associated with Violations
Violations relating to HHS awards can lead to substantial financial penalties and even jail time, as evidenced by the enforcement actions above. For example, in addition to be being excluded from federal healthcare programs for five years, Dr. Gray agreed to pay more than $3.8 million for her actions. Similarly, Dr. Niewold agreed to pay over $150,000 to settle allegations he made misrepresentations on grant applications.
Implement Strong Compliance Programs
Organizations that participate in the heavily regulated federal government sector, whether through contracts or grants, must implement strong compliance programs, as effective programs help prevent, detect, and address potential fraud and abuse. Robust compliance controls, coupled with a commitment of compliance from leadership and frequent training, can foster a culture of ethical behavior where compliance is prioritized.
In addition, companies that proactively identify risk areas and implement confidential reporting mechanisms to uncover potential violations can mitigate legal exposure. A reporting mechanism for whistleblowers is particularly important given qui tam provisions that allow private individuals to share in the monetary recovery.
Keep Accurate Documentation
Accurate document retention is critical for contract and grant compliance. Maintaining accurate and comprehensive records of transactions, communications, and compliance efforts may serve as evidence to support claims made to the government and demonstrate compliance with regulations. It may also aid in cooperation efforts following a government audit. Easily accessible and accurate records can also be used to defend against allegations of fraud. Additionally, established retention policies can allow businesses to respond quickly to inquiries and contribute to the overall culture of compliance.
Understanding Regulatory Requirements
It is vital that participants in the government marketplace fully understand the regulatory and contractual requirements applicable to their agreements. Among other potential penalties for violations of these requirements, the FCA imposes penalties on individuals who, among other potential violations, “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval [or] knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” Businesses can run afoul of the FCA by submitting a material false claim related to many of the host of regulations applicable to federal contracts and grants as well as the terms and conditions of a specific contract. Misrepresenting compliance with any of these requirements can result in penalties. Understanding the nuances of the law is critical to avoiding penalties and allows businesses to implement effective compliance requirements.
Going Forward
HHS-OIG has outlined its plan for intensifying scrutiny of compliance with the terms of HHS grant and contract awards. Organizations that do business with the federal government should immediately update compliance programs and relevant policies and procedures to ensure they comply with federal obligations and can identify and remediate violations quickly. As these three cases demonstrate, contractors should prepare for heightened oversight on HHS grants and contracts.
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.
