False Claims Act Update

february 7, 2018

By: Roger Clayton and Tyler Robinson, trobinson@heylroyster.com

Another Historic Year for the Department of Justice
Lawsuits filed pursuant to the False Claims Act (FCA) have yielded substantial recoveries in recent years. With a recovery of $3.7 billion, 2017 marked the eighth straight year that the United States Department of Justice (DOJ) has recovered more than $3 billion in FCA settlements and judgments. Recoveries since 1986, when Congress significantly amended the False Claims Act, now total more than $56 billion. Of the $3.7 billion recovered in 2017, $2.4 billion involved the health care industry, including drug companies, hospitals, pharmacies, laboratories, and physicians. This is the eighth consecutive year that DOJ has recoupments from the healthcare sector exceeding $2 billion. This figure, of course, is not counting the state Medicaid monies that were also recovered in such settlements and judgments.

Department of Justice Memorandum Leaked to the Public Sheds Light on FCA Enforcement
In early January 2018, there was an internal memorandum (Granston Memo) from Michael D. Granston, Director of DOJ’s Commercial Litigation Branch, Fraud Section, directed to DOJ Attorneys, Commercial Litigation Branch, Fraud Section and Assistant U.S. Attorneys Handling False Claims Act Cases – that was leaked to the public, setting out circumstances for when DOJ attorneys should use its authority to seek the dismissal of “meritless” FCA lawsuits. The Granston Memo notes the “record increases” in FCA lawsuits, which, in 2017, was over 700 new FCA lawsuits. While there has been a substantial increase in FCA lawsuits filed, the government has not seen a correlating increase in the number of times it intervenes in the lawsuit and takes over the prosecution of the case. Such a disparity suggests that many of the FCA lawsuits filed are without merit. The Granston Memo notes that the government should consider its dismissal authority as an “important tool” to advance government interests, preserve limited resources, and avoid adverse precedents.

The Granston Memo sets forth a number of factors to consider when determining whether to dismiss a FCA lawsuit:

• Whether the complaint is “facially lacking in merit,” either because the whistleblower’s legal theory is inherently defective, or the whistleblower’s allegations are factually frivolous;

• Whether the FCA action duplicates a pre-existing government investigation and adds no useful information;

• Whether the relevant government agency has determined the action threatens to interfere with an agency’s policies or the administration of its programs;

• Whether dismissal is necessary to protect DOJ’s litigation prerogatives;

• Whether dismissal will safeguard classified information;

• Whether expected costs of litigation are likely to exceed any expected gain; and,

• Whether the whistleblower’s action would frustrate the government’s effort to conduct a proper investigation.

The Granston Memo further underscores the need for healthcare providers to retain competent defense counsel as soon as it becomes aware of a potential FCA lawsuit or government investigation. Defense counsel should be well-versed in the Granston Memo and be able to engage the U.S. Attorney’s Office regarding the memo and its factors.

Heyl Royster’s Extensive Experience in Defending Fraud and Abuse Allegations
Our experienced attorneys have represented clients through every phase of FCA proceedings. Heyl Royster's proactive approach starts with the internal investigation and is focused on obtaining a successful result as soon as possible. Our knowledge of the intricacies that exist within the FCA provides us with the background that is necessary to develop an effective defense. Our extensive experience working with federal government officials throughout the FCA litigation process gives our attorneys a unique insight into the framework that underlies False Claims Act investigations and intervention decisions.

Our Heathcare and Qui Tam Practice attorneys also have extensive experience in Medicare and Illinois Medicaid billing and reporting requirements, including an intimate knowledge of a hospital's obligations under the amended False Claims Act. In addition, our attorneys have experience navigating the interplay between the Anti-Kickback Statute, Civil Monetary Penalty Statute, and Stark Law. When an entity or individual is subject to a False Claims Act investigation, our depth and experience become an immediate factor in addressing and engaging the federal government and relator's counsel at an early stage.