Defending Health Care Investigations Bart Daniel Cory Manning North Carolina Healthcare Association South Carolina Annual Meeting October 28, 2019 1
Introduction to Health Care Fraud Investigations • Why such aggressive health care fraud enforcement? o Healthcare spending today = 18% of GDP ▪ $3.5 Trillion or more than $10 G per person o 2018: Civil fraud recoveries more than $2.5 Billion o Since the 1986 Amendments to False Claims Act, health care fraud recoveries have exceeded $38 Billion 2
Intro to Health Care Fraud Investigations • Since HIPAA & ACA were enacted, civil and criminal enforcement has increased exponentially • ROI more than $9.00 for every $1 Congress invested 3
Intro to Health Care Fraud Investigations • Difficult to separate Civil from Criminal health care fraud investigations o Most begin as both o Civil AUSA’s work closely with criminal counterparts o OIG & FBI Agents are same in both investigations o Agents & Prosecutors have formed well-trained teams with enhanced weapons 4
Intro to Health Care Fraud Investigations • Prosecutors, Agents & Auditors employ a holistic approach: o Criminal Prosecution o Civil Judgments o Payment Suspensions o Restitution o Forfeiture o Exclusion 5
How an Investigation Begins • Early Warning Signs: o Independent Audit under the Recovery Audit Contractor Program (RAC’s) o Administrative Demands o Civil Investigative Demands o Agent Interviews o Grand Jury Subpoenas o Target or Subject Letters o Execution of Search Warrants 6
How an Investigation Begins • Federal Grand Jury Investigations o Powerful investigative tool o Can compel witness testimony & document production o Power and limitations o Who may be present 7
Investigation Basics • Whether to perform an investigation • Investigative scope • Developing a plan • Documents and electronically stored information • Interviewing witnesses • Dialoguing with regulators • Documenting the process 8
Whether to Investigate • Should we conduct an internal investigation? • Possible bases for such an inquiry: o Notice from DOJ or regulator — FBI, OIG, IRS, SEC, DOD, EPA, OSHA, FDIC, OCC, DOR (state), DHEC (state) ▪ Target or Subject letter ▪ Administrative Demand ▪ Civil Investigative Demand ▪ Grand Jury Subpoena ▪ Execution of Search Warrant 9
Whether to Investigate • Should we conduct an internal investigation? • Possible bases for such an inquiry: o Finding from an internal audit o Whistleblower — noisy resignation letter, exit interview, hotline message, complaint to human resources 10
Whether to Investigate • Determine next steps by reference to facts rather than assurances or pledges about the existence and efficacy of compliance programs or controls. • A sound factual basis is critical in showing that the company’s response to allegations was appropriate, reasonable, and informed. 11
Investigative Scope • Make the scope broad enough to capture all relevant facts to allow the board to make an informed and reasonable conclusion and response to the allegations. 12
Investigative Scope: Considerations • Expense o Both in terms of disruption and hard dollars o This is often the first thing companies consider, which can result in an overly narrow scope. o Expanding the scope later almost always costs more. 13
Investigative Scope: Considerations • Cooperation Optics o Scope limitations are often considered by regulators in determining the level of cooperation provided by a subject or witness in an investigation. o Avoid artificial limitations. o Consider communicating with the regulator on the front end with respect to scoping decisions. 14
Investigative Scope: Considerations • Timing o Time constraints work against making a final scoping determination at the outset of an investigation. o Determine the scope at the outset and consider it an initial scope. o Identify certain events, facts, or findings that could affect the scope. 15
Investigative Scope: Considerations • Geographic and Temporal Scope o Identify all offices and individuals that may have documents and other electronic information. o Determine a timeline of events related to the investigation and use that timeline to define the scope. o This will inform what documents to collect and which individuals to interview. 16
Investigative Scope: Considerations • Geographic and Temporal Scope o Even if the regulator identifies a particular time frame, such a communication is almost always followed the question, “Did you find anything else?” o There is no substitute for the nimble exercise of good judgment to go beyond (as appropriate) a time frame suggested by a regulator. 17
Investigative Scope: Considerations • Documentation o Internally document the scoping decisions that are made, including any events that may change the scope of the investigation. o Such documentation will be subject to the attorney- client privilege and/or the work product doctrine. 18
Developing a Plan • Inform the Board o Inform the entire board if a committee alone made the decision to move forward with an investigation. o Every investigation may not require board involvement. o Any significant investigation (e.g., those involving senior management or allegations that may have a material affect on the company’s financials) will almost always require board involvement and/or approval. 19
Developing a Plan • Stop the Alleged Conduct or Practice o This seems obvious, but it can be overlooked in the rush to get the investigation started or the desire to perform the investigation (at least initially) behind the scenes. o This directive is most effective when it comes from the board or similar authority. 20
Developing a Plan • Select an Oversight Committee o This depends on the issue(s) being investigated. o Selection should be driven by independence and disinterestedness. o Guidance from the Securities and Exchange Commission suggests a committee made up solely of outside directors. o Best practice is to have all but the most minor of investigations overseen by a committee of outside directors, often from the audit committee. 21
Developing a Plan • Who’s the client? o This is usually the company as an entity rather than any specific individual. o In situations involving derivative claims, the “client” is often defined as the oversight committee designated by the board. o Yates Memo considerations will often be part of this “client identification” discussion. 22
Developing a Plan • Identify and Engage Investigation Leaders o External or internal counsel? ▪ Certain matters may be appropriate for in-house counsel in coordination with the audit committee or selected persons from human resources. o Corporate counsel or another firm? ▪ Depends on the nature of the allegations — common refrain ▪ If related to disclosures in public filings (in which corporate counsel would have been involved), it is often better to select other independent counsel. o Who will assist outside counsel? o What does the flow of information and chain of command look like internally? 23
Developing a Plan • Identify and Inform “Need to Know” Individuals o Those individuals critical to the fact-gathering process — e.g., the CFO or controller if the allegations are focused on financial irregularities. o These individuals will be part of the core investigative team and will assist outside counsel in conducting the investigation. 24
Developing a Plan • Determine Internal/External Messaging Strategies o At the appropriate time, the internal message needs to inform employees without paralyzing the organization. ▪ Factual information with the requisite emphasis on confidentiality are critical elements of this message. ▪ The message should also convey that total cooperation is expected and that the information should not be discussed with anyone other than the general counsel or other need-to-know persons who are part of the core investigative team. ▪ Caution favors notifying company auditors as soon as possible about any issues that may raise material questions about the company’s financial statements. 25
Developing a Plan • Determine Internal/External Messaging Strategies o The external strategy needs to consider several factors: 1. Materiality — from a disclosure standpoint 2. Confidentiality concerns 3. Commercial reputation 4. Cooperation optics 26
Developing a Plan • Early consideration of a strategy (as opposed to early external disclosure) is important, because any comments made by company spokespersons may be treated as admissions by the company or cross-examination fodder against the speaker. • The baseline external message should convey the company’s commitment to honesty, a full investigation, and a desire to remedy any violations that might be uncovered by the investigation. 27
False Claims Act • False Claims Act (FCA) imposes liability for submitting a False Claim to the government o Treble Damages o $10,781 - $21,563 per claim 28
False Claims Act • Background of FCA o Enacted during Civil War due to defective munitions sold to the Union 29
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