[authors: Jillian Willis and Jordan Brunson*]
Compliance Today (February 2024)
The U.S. Department of Justice’s (DOJ) Criminal Division launched its Corporate Whistleblower Awards Pilot Program (“Criminal Whistleblower Program”) in August of 2024 to encourage tips for various types of fraud, including fraud on private health insurance programs.[1] This program purportedly “fills gaps,” covering conduct not included in other whistleblower programs like the False Claims Act (FCA). Healthcare compliance teams must now consider this new incentive for company employees to report “federal health care offenses and related crimes involving private or other nonpublic health care benefit programs.”
Key differences between whistleblowers (“relators”) and criminal corporate whistleblowersd
Healthcare compliance programs around the country are likely already familiar with the FCA, which rewards relators who report fraud against government healthcare payers like Medicare and Medicaid.[2] The FCA itself imposes treble damages and penalties against any person or organization who knowingly submits, or causes to submit, false claims to the government. A relator who successfully prevails in a qui tam suit on behalf of the government receives a percentage of the recovery. While the FCA can provide a framework for considering how the criminal corporate whistleblower may operate, there are important distinctions.
Program eligibility requirements may limit those reporting information
Under the Criminal Division program, an individual or group may be eligible for a whistleblower award if they provide original, truthful information pursuant to DOJ’s specific procedures and such information ultimately leads to criminal or civil forfeiture exceeding one million dollars in net proceeds in connection with a successful prosecution, alternative resolution, or civil forfeiture.[3] DOJ describes original information as information that “is derived from the individual’s independent knowledge or independent analysis.”
Individuals in certain roles do not qualify; DOJ’s limitation on who is eligible to submit a whistleblower report may save private entities from defending against reports by individuals who are in the position to know the most: employees and officers in compliance-related roles. DOJ advises that an individual continues to be eligible for an award even in certain situations where the whistleblower participated to some degree in fraud. If DOJ finds that the individual’s role is “plainly among the least culpable of those involved in the conduct of a group,” the whistleblower may seek and receive a Non-Prosecution Agreement, through the Criminal Division Pilot Program on Voluntary Self-Disclosures for Individuals.[4] Relators, on the other hand, may have their reward decreased based on their involvement with a particular scheme, but the barrier to providing the information is not as strict.
FCA qui tam actions are civilfnote-[5]
Though defendants may face criminal liability for the same conduct that underlies a qui tam action, the standard for proving wrongdoing in the context of a civil action is different. Criminal prosecution requires a higher burden of proof and a heightened proof of mens rea. Whistleblower tips in the criminal context versus civil may be viewed with more scrutiny with this in mind. The government must evaluate whether the reported wrongdoing is serious enough to move forward with a criminal investigation. Moreover, investigating criminal conduct also requires law enforcement resources, and the government may ultimately face a greater challenge in marshalling evidence to prove a higher standard. Finally, a criminal whistleblower, unlike FCA relators, cannot proceed with a case if the government does not intervene.
FCA limited to false claims involving the government
The Criminal Whistleblower Program encourages reporting information about a subject previously not rewarded: fraud on private payers. The Criminal Whistleblower Program, in filling gaps, opens the door to rewards for information about private insurance and signals that the government is willing to dedicate resources to a space previously not enforced. By encouraging reports of “original and truthful information” about corporate misconduct that the government would likely not have discovered otherwise, this program is welcoming a new frontier in healthcare fraud enforcement.
The Program has likely already produced multiple criminal healthcare whistleblower reports of alleged misconduct. Government officials warned that in the first month of the Criminal Whistleblower Program, more than 100 tips came in. While there is no way to know how many of these tips involve allegations of healthcare fraud, if the FCA is any indicator, a substantial number may surround fraud on private healthcare payers. In the 2023 fiscal year alone, over $1.8 billion of the more than $2.68 billion in FCA settlements and judgments related to matters involving the healthcare industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities, and physicians.[6]
Companies can still benefit from Voluntary Self-Disclosure even if misconduct is reported
To support voluntary disclosure, DOJ amended the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy to incorporate the new Whistleblower Program.[7] The policy provides that when a whistleblower makes an internal report to a company and submits the report to the department, the company may qualify for a “presumption of a declination” if the company “(1) self-reports the conduct to the Department within 120 days after receiving the whistleblower’s internal report, and (2) meets other requirements“ under the policy. However, this amendment is not foolproof—certain aggravating circumstances will lead to ineligibility.
The program gives opportunity to create stronger compliance programs
The new criminal whistleblower may arm compliance professionals with another tool to encourage colleagues and company executives to rally around a culture of compliance. Compliance professionals may be able to point to the increased risk of criminal company liability if wrongdoing goes undetected or unreported. According to program guidance, providing incentives to report a crime may motivate robust compliance programs; “[s]trong compliance programs can prevent, identify, and remediate misconduct before it begins or expands, and enable companies to report misconduct to the Department when it occurs.”[8]
The program may be temporary
As its official name itself suggests, the Criminal Whistleblower Program is a “pilot program.” For now, compliance professionals must be aware of the increased risk of fraud being enforced on private payers. This program is a three-year plan that is directed by the Criminal Division’s Money Laundering and Asset Recovery section.
Even if the program’s plans were not self-described as temporary, a new administration may decide to take a different approach to corporate crime. The Criminal Whistleblower Program is not required by statute, and it is possible that another set of decision-makers could change course. That said, other predecessor policies involving corporate misconduct have been around for decades across multiple jurisdictions. What’s more, companies cannot put the proverbial “genie” back in the bottle; DOJ will be aware of tips made during the period the award is in place and investigations into those reports may long outlive the official program.
Conclusion
Allegations of fraud against private payers have always carried the risk of criminal or civil liability; the federal healthcare fraud statute expressly covers private health insurance plans and plans themselves could also have a private right of action in the civil context. But the likelihood that the federal government (largely charged with protecting the public fisc) would investigate claims that only centered on private insurers or that someone would provide a tip about a nongovernment program for which they could receive no monetary benefit was lower. If Medicare, Medicaid, or another government payer was not implicated in an alleged fraud, compliance professionals may have taken some (albeit small) comfort in the risk of a large payout being mitigated. As DOJ investigates the tips that have come in, companies should take this time to refine their compliance programs and inform themselves of actions that are considered misconduct within the private healthcare space to mitigate potential investigations.
Takeaways
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The U.S. Department of Justice (DOJ) has recently broadened its enforcement efforts and may now reward whistleblowers for reporting fraud on private health insurance programs.
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As the program is enforced, those who engage with private healthcare programs may see an increase in whistleblower reports.
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The program provides an alternative route to remediation through the amendment to the Voluntary Self-Disclosure Policy, which allows those who self-report the misconduct to DOJ within 120 days to qualify for a presumption of declination if certain requirements are met.
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Private healthcare programs should ensure that all employees and officers are abreast of current rules and regulations governing private health insurance companies to ensure full compliance.
Entities should utilize guidance from the Criminal Whistleblower Program to strengthen their compliance programs to encourage early and accurate reporting amongst their employees.
*Jillian Willis is a Partner at Nelson Mullins Riley & Scarborough LLP in Washington, DC., and Jordan Brunson is an Associate at Nelson Mullins Riley & Scarborough LLP in Washington, DC.
1 U.S. Department of Justice, Criminal Division, “Department of Justice Corporate Whistleblower Awards Pilot Program,” August 1, 2024, https://www.justice.gov/criminal/media/1362321/dl?inline.
2 31 U.S.C. §§ 3729–3733 .
3 U.S. Department of Justice, “Department of Justice Corporate Whistleblower Awards Pilot Program.”
4 U.S. Department of Justice, Criminal Division, “The Criminal Division’s Pilot Program on Voluntary Self-Disclosures for Individuals,” April 15, 2024, https://www.justice.gov/criminal/media/1347991/dl?inline.
5 31 U.S.C. §§ 3729–3733 .
6 U.S. Department of Justice, Office of Public Affairs, “False Claims Act Settlements and Judgments Exceed $2.68 Billion in Fiscal Year 2023,” news release, February 22, 2024, https://www.justice.gov/opa/pr/false-claims-act-settlements-and-judgments-exceed-268-billion-fiscal-year-2023.
7 U.S. Department of Justice, Criminal Division, “Temporary Amendment to the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy,” August 1, 2024, https://www.justice.gov/criminal/media/1362316/dl?inline.
8 U.S. Department of Justice, Criminal Division, “Department of Justice Corporate Whistleblower Awards Pilot Program.”
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