In February 2024, the Department of Justice ("DOJ") announced the results of its 2023 False Claims Act ("FCA") enforcement efforts. Through those efforts, the government obtained more than $2.6 billion in overall recoveries, and of that amount, $1.8 billion came from health care and life sciences ("HCLS") stakeholders alone.
This White Paper—first in a three-part series—focuses on FCA enforcement in the HCLS industry. We will examine the 2023 results, how they differ from previous years in terms of monetary recoveries and DOJ's case mix, as well as the evolution of DOJ's priorities and judicial decisions impacting this area. In particular, Part I provides an overview of the 2023 recoveries; analyzes enforcement trends and priorities relating to the Anti-Kickback Statute and Stark Law, Medicare Advantage, cybersecurity, pandemic fraud, and private equity; and looks ahead to what we can expect to see in 2024.
Parts II and III, to be issued separately, will cover case highlights for notable 2023 FCA resolutions in the HCLS space and in-depth discussions of key FCA developments from the bench.
OVERVIEW: 2023 HEALTH CARE FRAUD FALSE CLAIMS ACT RECOVERIES
In the last two years, health care fraud FCA recoveries by DOJ have reverted to the mean.1 The year 2021 was a high- water mark when DOJ secured more than $5 billion in health care fraud-related FCA recoveries—$3 billion of which came from manufacturer settlements. In 2022, we saw a significant decline in health care recoveries from $5 billion to $1.7 billion, and 2023 largely continued the pattern. Without high-dollar manufacturer settlements to drive outsized results, the annual health care FCA recoveries for the last two years settled back into familiar territory— around $2 billion a year.
Like the monetary recoveries, the types of FCA-health care cases resolved by DOJ in 2023 cover familiar ground—with the Anti-Kickback Statute ("AKS"), Stark Law, and Medicare Advantage (Part C) enforcement leading the pack. Specific initiatives, like application of the FCA to pandemic-related fraud and cybersecurity issues affecting the federal government, are ongoing but not yet showing substantial results in terms of FCA recoveries. Non-health care FCA recoveries saw an uptick, but, as usual, health care fraud constituted the lion's share of FCA recoveries. Below, we summarize these enforcement trends and will cover case highlights in Part II, our second installment of this White Paper.
2023 also brought significant FCA developments from the bench. The U.S. Supreme Court has weighed in on two high-stakes FCA issues: scienter and DOJ's power to dismiss qui tam complaints over relator objections. In United States ex rel. Schutte v. SuperValu Inc., the Supreme Court reversed the Seventh Circuit; the Court ruled that a defendant's subjective state of mind can be sufficient to establish scienter under the FCA and rejected the view that scienter could be precluded simply by showing the defendant's actions were "consistent with any objectively reasonable interpretation" of the regulatory requirements underlying an FCA claim.
The Supreme Court also resolved questions relating to DOJ's authority to dismiss qui tam complaints over the relator's objection: In United States ex rel. Polansky v. Executive Health Resources, Inc., the Court confirmed that the government may dismiss over the relator's objection even if the government has initially declined to take over the case. At the same time, the Court ruled that the standard to be applied to a government motion to dismiss should be the standard that governs voluntary dismissal of suits in ordinary civil litigation (i.e., Rule 41(a) of the Federal Rules of Civil Procedure). Finally, the circuit split over causation in AKS-based FCA cases has widened, with the Supreme Court declining to take up the issue in last year's Term. Schutte, Polansky, the growing "causation" circuit split, and other notable decisions will be discussed in detail in an upcoming installment of Jones Day's series on FCA litigation and enforcement in 2023.
Finally, in 2023 federal officials have signaled coordinated investigations concerning the role of investor-owned entities, including private equity in the health care space, as well as notable changes in various DOJ and HHS-OIG policies and practices affecting FCA enforcement—such as how DOJ accounts for cooperation credit in FCA matters, the incidence of admissions in various FCA resolutions around the country, and updated HHS-OIG compliance guidance.
Looking Ahead: DOJ Priorities for FCA Enforcement in 2024
In February 2024, Principal Deputy Assistant Attorney General Brian Boynton previewed DOJ's FCA enforcement priorities for the coming year.2 If predictions hold true, 2024 will likely look similar to 2023 with perhaps a few twists. As before, DOJ's stated top priorities include COVID- and cyber-related fraud, as well as a number of health care-specific initiatives.
Within health care, Principal Deputy Boynton highlighted DOJ's ongoing interest in pursuing cases concerning alleged financial inducements for providers (i.e., AKS and Stark Law violations), reported misconduct in connection with nursing homes and elder care, and Medicare Part C. Medicare Part C and the role that purportedly inflated diagnosis codes play in terms of the capitation rates paid by the Centers for Medicare & Medicaid Services ("CMS") are likely to be an increasing focus, given the growth of that program. However, in addition to focusing on insurers, DOJ also promises to include an examination of the role that vendors and providers play in the diagnoses that are submitted to the government.
DOJ also announced that it anticipates pursuing matters against "third parties that cause the submission of false claims"—including such actors as electronic health record vendors, coding consultants, private equity, and venture capital. While DOJ acknowledged that third-party actors can play "positive roles" in the health care industry, the crux of its message was that it will be scrutinizing the conduct of such non-traditional health care actors.
It is noteworthy that drug pricing was omitted in the Principal Deputy's forecast for 2024 FCA enforcement. While much of the current DOJ enforcement in this area appears to favor competition-related theories, given the ongoing attention to this topic and the ever-present interest from the relators' bar, it is likely we will see more activity in this space as well.
2024 may also prove eventful for FCA rulings. With cases on causation making their way up to the courts of appeal, the circuit split on causation may continue to grow, perhaps setting up opportunities for the Supreme Court to tackle this long-simmering issue. The Supreme Court will also weigh in on the Chevron doctrine, which could have a wide-ranging impact on arguments regarding the legal construction of regulations underlying FCA cases.
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