The Department of Justice (“DOJ”) has a long-stated goal of encouraging companies to engage in what the author refers to as “compliant behaviors”—maintenance of an effective pre-existing compliance program, post-enforcement adoption of an effective compliance program, cooperation with a government investigation, and self-disclosure of misconduct. Substantial DOJ guidance over the past two decades, along with the concrete incentive structure of the United States Sentencing Guidelines, have increasingly made clear to organizations when and how such behaviors will be rewarded in criminal matters. Recently, DOJ has made transparency and clarity regarding the benefit of compliant behaviors a priority in calculating and announcing criminal resolutions. With respect to civil False Claims Act (“FCA”) settlements, however, meaningful formal DOJ guidance on the effect of compliant behavior only arrived in 2019. More significantly, DOJ’s treatment of compliant behavior in civil cases, in contrast to that in the case of criminal resolutions, has appeared inconsistent and certainly opaque. This lack of clear implementation philosophy is particularly problematic in the area of health care, an industry for which the FCA is the primary tool for government action in response to misconduct. While much has been written on the systemic efficiencies—or lack thereof—that DOJ’s enforcement practices bring to the activities of regulated industries, this is the first article to use data to ask whether DOJ has a governing practice concerning civil settlements, or whether instead, its settlement practices fail to match its stated principles.
For decades, even as resources devoted to health care compliance by market participants have skyrocketed and DOJ has pressed corporate entities to engage in compliant behaviors, the health care industry and the defense bar have expressed skepticism regarding the actual payoff they might realize by engaging in those behaviors. DOJ’s response has been a series of public statements amounting to, “trust us, they matter.” Until now, the health care industry has been without any mechanism to test those assurances.
In response to changes in the tax code, however, DOJ made adjustments in 2018 to its practice of disclosing information regarding FCA settlements—changes that have shaken loose data that provides an opportunity to test DOJ’s claims of rewarding compliant behaviors in civil cases. The author is the first and thus far the only person to have identified and analyzed this newly available data. Examination of this data demonstrates that wide-ranging, structural changes are necessary. The data raises substantial questions about: the quantum of credit given for cooperation; conduct DOJ values in resolving FCA cases; and the degree of consistency in cases settled by U.S. Attorney’s Offices across the country. For example, analysis of the data reveals inconsistent benefits for cooperation. Cases where defendants self-disclosed misconduct or cooperated were often not treated more leniently than cases where defendants did not self-disclose or cooperate, and a review of more than 100 settlements did not find a single instance in which DOJ purported to give an entity a reduction based on its pre-existing compliance program. At the same time, DOJ appears to be greatly rewarding defendants for agreeing to settle—highlighting concerns both with regard to whether DOJ is achieving adequate deterrence and with regard to whether the FCA’s potential penalties are coercing settlements. And the data appears to show significant variation in settlement positions depending on the identity of enforcing DOJ component, with cases handled by DOJ’s Civil Division in Washington, D.C. treated more leniently than cases handled solely by U.S. Attorney’s Offices across the country.
With the data now public—and at a moment in time when DOJ is emphasizing transparency and clarity in rewarding compliant behaviors in the resolution of criminal cases—DOJ’s corporate health care enforcement regime is at a crossroads. Without change in this area, DOJ risks undercutting its efforts at encouraging compliant behaviors in one of DOJ’s primary enforcement areas. No longer left in the dark about the impact of compliant behaviors in calculating FCA resolutions, the health care industry may be less likely to continue investing in compliance programs at the same rate, to cooperate with government investigations, and especially to self-disclose misconduct to the government. The analysis reveals that a detailed structure of DOJ’s calculations in FCA settlements, with calculations transparent in each FCA resolution, is needed to accomplish DOJ’s goal of encouraging cooperation and investment in compliance programs, as well as to provide an assurance that like cases are treated alike.
Elberg, Jacob T.
"A Path to Data-Driven Health Care Enforcement,"
Utah Law Review: Vol. 2020
, Article 2.
Available at: https://dc.law.utah.edu/ulr/vol2020/iss5/2