Health Care Fraud Means Never Having to Say You’re Sorry
June 01, 2021 | 96 Wash. L. Rev. 371
Jacob T. Elberg
Abstract: For decades, the Department of Justice (DOJ) has issued a steady flood of press releases announcing False Claims Act (FCA) settlements against health care entities and extolling the purportedly sharp message sent to the industry through these settlements about the consequences of engaging in wrongdoing. The FCA is the primary mechanism for government enforcement against health care entities engaged in wrongdoing, and it is expected to be DOJ’s key tool for addressing fraud arising out of government programs in response to the COVID-19 pandemic. DOJ has pointed to three key goals of its enforcement efforts (deterrence, incentivizing cooperation, and building a culture of compliance in the health care industry). However, careful examination of the settlements touted in those DOJ press releases calls into question whether DOJ’s settlement practices are conveying the message DOJ seeks to impart or having the impact it hopes to achieve.
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Virtually all FCA cases resolve without requiring the defendant to admit wrongdoing, and many defendants issue explicit public denials of wrongdoing when the resolution is announced. The absence of any need to admit wrongdoing has fueled a cost-of-doing-business narrative in which health care entities are required periodically to pay inconsequential settlements to the government regardless of their conduct. DOJ thereby risks both diminishing the general deterrence value of resolutions and lending credence to the vocal skepticism among industry and the defense bar that DOJ could, in fact, prevail at trial.
DOJ’s willingness to allow settlements in health care fraud cases without admissions is diametrically contrary to DOJ’s policy in criminal cases, which is against permitting resolutions without defendants’ clear and unequivocal acceptance of responsibility for violating the law. Permitting no-responsibility settlements in the civil FCA context suggests both that DOJ pursues, illegitimately, weak cases it cannot prove at trial, and potentially weakens the general deterrence value of civil FCA claims in general. New defendants may be left with cover that they are not wrongdoers but are merely ensnared in an illegitimate money grab. Even defendants who frankly recognize that they are in violation of the statute may be comforted that they likely face paying little more than restitution, and no significant penalties or social opprobrium. These practices suggest that DOJ rewards willingness to settle, and the monetary recovery it brings, above all other factors. DOJ’s focus on settling and monetary recoveries in turn lends credence to the widespread belief that civil health care fraud settlements simply do not signal wrongdoing.
There is no law, policy, or practice that prevents DOJ from requiring admissions in FCA settlements. Yet an in-depth review of nearly 200 FCA resolutions involving health care entities over the past two years reveals that approximately 92% did not include defendants’ clear acceptance of responsibility, and approximately 37% involved defendants actively denying responsibility.
The absence of any DOJ policy favoring admissions has important negative consequences, undermining DOJ’s goals of deterrence, incentivizing cooperation, and building a culture of compliance. First, when corporate actors believe DOJ will pursue claims regardless of wrongdoing and the consequences of even a settlement will be relatively painless from a financial and reputational perspective, those actors have reduced incentive to put in place compliance structures dedicated to preventing wrongdoing. Second, and perhaps more importantly, when corporate actors diminish the force of settlements with DOJ by denying responsibility, they undermine the system’s legitimacy vital for DOJ to encourage cooperation and for the government and well-meaning corporate actors to cultivate an industry-wide culture of compliance. This Article examines DOJ policy both from an economic incentive perspective and in light of research surrounding the psychology of legal authority, concluding that under both lenses DOJ undercuts its own goals. With DOJ actively reforming FCA policy and the FCA poised to take center stage in the government’s fight against COVID-19 program abuse, it is beyond time to address this gap in DOJ’s enforcement policy.