Disclosing known or suspected fraud to regulators can have its benefits. As reported in a previous post, the Department of Justice (DOJ) issued policy guidance in 2019 on providing credit in False Claims Act (FCA) settlements to corporations for “disclosure, cooperation, and remediation” (the Policy Guidance). Since then, the industry has been watching to see how DOJ implements this Policy Guidance.

Two settlements announced earlier this month seem to demonstrate that DOJ is applying the Policy Guidance in resolving FCA cases. Although the facts of these two settlements differ significantly, they highlight the benefits of self-disclosure, cooperation with the government in its investigation, and proactive efforts to remediate non-compliance.

Weirton Medical Center Settlement

Weirton Medical Center (WMC), a hospital located in West Virginia, paid $1.5 million to settle FCA allegations predicated on alleged violations of the physician self-referral law, which is commonly known as the Stark Law. The Stark Law prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has a financial relationship, unless that relationship satisfies an exception. The government contended that WMC paid its physician referrers in excess of fair market value and/or based on the volume or value of the physicians’ referrals, which meant that the arrangements could not meet any potentially applicable exceptions.

While most FCA cases are brought by whistleblowers under the FCA’s qui tam provisions, this particular matter began with a voluntary self-disclosure in 2019 to the United States Attorney’s Office for the Northern District of West Virginia. Specifically, WMC reported that it had commenced an internal investigation into possible Stark Law violations and that it planned to share its findings upon completion of the process. WMC hired a third-party consultant to conduct the investigation, which ultimately led to the identification of financial relationships with referring physicians that potentially violated the Stark Law.

WMC did not admit any liability in the settlement agreement, but it did agree to pay $1.5 million to resolve FCA claims premised on the potential Stark Law violations uncovered during the internal investigation. While the press release noted that the settlement amount took into account WMC’s financial condition, DOJ highlighted the fact that the settlement stemmed from a voluntary self-disclosure, which presumably means that DOJ took that fact into account when resolving the matter.

MSC Advantage, Inc. Settlement

MSC Advantage, Inc. (MSC) is a Medicare Advantage plan operating in Puerto Rico. On July 1st, MSC paid $4.2 million to settle allegations that a gift card incentive program targeting provider staff (the Gift Card Program) violated the federal Anti-Kickback Statute (AKS) and the FCA. Under the Gift Card Program, MSC distributed over 1,700 gift cards to administrative staff of providers (the average value of the gift card was $25). The government alleged that these gift cards were intended to induce the administrative staff to refer or recommend patients newly eligible for Medicare to an MSC Medicare Advantage plan. These gift cards resulted in administrative staff recommending nearly 1,650 beneficiaries to MSC plans.

DOJ’s press release specifically stated that the settlement “took into consideration the company’s voluntary termination of the gift card program in December 2020, the disclosure of relevant facts concerning the program, and the implementation of controls and revisions to its internal policies to promote and help ensure future compliance.” This language is similar to that used in the Policy Guidance, which states that DOJ will consider “implementation of measures to reduce the risk of repetition of such misconduct.”

Conclusion

These two settlements provide welcome evidence that DOJ is providing credit in FCA settlements to corporations for “disclosure, cooperation, and remediation,” consistent with the Policy Guidance. We will continue to monitor and report on implementation of the Policy Guidance.