Top Reasons for 2022’s Downward Trend in False Claims Act Recoveries

Following the US Department of Justice’s (DOJ) release of statistics regarding FCA settlements and judgments for the 2022 fiscal year, Law360 spoke with attorneys on both sides of the FCA bar to discuss figures and the litigation landscape that lies ahead.

As we previously reported here, DOJ emphasized that the government and whistleblowers were party to over 350 FCA settlements and judgments, representing the second-highest number of settlements and judgments in a single year. And, according to Brian Boynton, head of DOJ’s Civil Division, “The large number of settlements and judgments this past year demonstrates that the [FCA] remains one of the most important tools for ensuring that public funds are spent properly and advance the public interest.”

On Monday, February 13, 2023, Law360 reported that this emphasis has “struck some lawyers as sleight of hand.” Indeed, one attorney characterized DOJ’s focus as “a seeming act of recalcitrance or obfuscation,” while another noted that “a discernible pattern” has emerged as FCA recoveries trend down.

Since FCA cases often take years to close, the downward trend is not necessarily a result of the current administration. Nonetheless, Law360 noted that “the Trump administration’s leadership and policymaking often appeared less than ideal for anyone hoping to maximize FCA recoveries.” Another attorney stated that DOJ has continued to “devot[e] or prioritiz[e] its resources to make it more difficult to bring [an FCA] case.”

On the flip side, numerous attorneys assert that “the soaring case volume belies the characterization of DOJ dropping the ball.” One attorney noted his belief that the volume of FCA cases will increase over the next few years, “especially in the health care space,” further positing that many cases will likely involve personal protective equipment and other COVID-19 pandemic‑related products. Per Law360, large pandemic-related cases may take “an especially long time” to develop, given the sheer number of leads.

Finally, Law360 theorized that the FCA may be “increasingly a victim of its own success.” (i.e., because FCA liability and accompanying penalties have become more widely known, corporations have stepped up their compliance culture). In the end, the future of FCA enforcement actions and recoveries remains to be seen.

Diagnostics Company Reaches $19 Million FCA Settlement

On Monday, February 6, 2023, counsel for two whistleblowers released details regarding a settlement with Laboratory Corporation of America, Inc. (Labcorp) that resolved a 10-year qui tam suit. The press release follows a November 2022 court order announcing the settlement, issued shortly before trial was slated to begin in January 2023.

Relators alleged that Labcorp participated in a conspiracy to violate the False Claims Act (FCA) in which kickbacks were paid to healthcare providers in exchange for referrals. Specifically, relators alleged that “[Health Diagnostics Laboratories and/or Singulex] paid referring providers kickbacks disguised as ‘draw fees’ or ‘process and handling’ . . . fees to induce lucrative referrals for lab testing, and that Labcorp had participated in this conspiracy to violate the FCA by providing blood draw services for kickback-receiving providers in exchange for referrals to Labcorp.” Relators further alleged that Labcorp engaged in this scheme with the knowledge and approval of company senior executives.

Relators — a small business owner and a nurse — came forward with these allegations after they discovered that the family practitioner for whom they worked was receiving payments from Health Diagnostics Laboratories and/or Singulex while Labcorp’s in-office phlebotomist drew the blood samples that were exchanged for kickbacks.

The US government declined to intervene in the case in 2018, leaving it to relators and their counsel to pursue the allegations. The executed settlement provided for a $19 million payment from Labcorp, but contained no admission of liability from the company. Per the press release, relators and their counsel received 29.5% of the settlement amount — over $5.6 million — which is just shy of the maximum 30% permissible under the FCA. The remainder of the settlement will go to the Medicare Trust Fund for the benefit of Medicare beneficiaries.

The press release from relators’ counsel is available here.

11th Annual Healthcare Fraud & Abuse Review Released

On Tuesday, February 14, 2023, Bass Berry & Sims PLC published their 11th annual Healthcare Fraud & Abuse Review, which covers significant enforcement developments of the prior year.

Per the review, “the filing of qui tam lawsuits under the [FCA] involving healthcare providers has continued to dominate the landscape from a civil enforcement standpoint.” The review noted that 652 qui tam suits were filed in the last year, reflecting a nearly 10% increase over the year before that. The Department of Justice (DOJ) civil enforcement actions have additionally increased, with 296 filed in 2022—amounting to a nearly 40% increase over the number filed in 2021. DOJ criminal enforcement efforts related to COVID-19 relief funds and related fraud schemes have increased as well.

The review noted the following key issues as having “a significant impact on how healthcare fraud matters are prosecuted and defended in the coming year:”

• CARES Act / COVID-19 relief-related fraud

• The fate of the proposed amendments to the FCA

• The intersection of enforcement and private equity, as private equity firms increasingly invest in the healthcare industry

• Opioid-related enforcement

• Enforcement actions against “schemes involving companies and individuals that purport to provide telehealth services and exploit the increased adoption of telehealth”

The review additionally included updates on noteworthy settlements over the past year, the FCA, Stark Law/Anti-Kickback Statute, managed care/Medicare Advantage, and developments in the pharmaceutical and medical device industries.

The 11th annual Healthcare Fraud & Abuse Review is available for download here.