The U.S. Department of Justice (DOJ) announced recoveries of more than $5.6 billion in False Claims Act settlements and judgments in fiscal year 2021. This amount is a staggering increase from the $2.2 billion recovered during fiscal year 2020 and the second-highest total ever recorded since the FCA was enacted in 1986.
Although a rebound from pandemic-related constraints may explain part of the substantial jump in recoveries, the near record-setting number also reflects the success of various recently implemented DOJ strategies, including using large-scale data mining and AI to identify high-value cases, a targeted approach in deciding when to intervene, and a focus on combating the opioid epidemic.
The healthcare industry continues to be the biggest target, with more than $5 billion, or close to 90 percent, of the awards relating to matters that involved drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians.
Substantial recoveries from prescription opioid manufacturers comprise more than half of this total, including a $2.8 billion settlement obtained from Purdue Pharma in fiscal year 2021. With the war on prescription opioids continuing in full force on multiple fronts (including the recent criminal conviction of ex-Rochester Drug Co-operative CEO Laurence Doud for drug trafficking), expect to see more FCA recoveries in this area in fiscal year 2022.
The DOJ’s announcement also shows a shift toward sophisticated use of large databases to identify and pursue substantial FCA claims.
For example, the DOJ has utilized CMS billing records to go after healthcare providers that manipulated the risk adjustment process used for Medicare Part C patients by submitting unsupported diagnosis codes to make their patients appear sicker than they actually were, thereby obtaining overpayments. Investigations of this nature led to multimillion dollar settlements with Sutter Health and Kaiser Foundation Health Plan of Washington. The DOJ has intervened in pending similar litigation against Independent Health Corporation and members of the Kaiser Permanente group.
Healthcare providers should be aware of this developing trend and pay careful attention to their billing and coding practices in light of increased DOJ scrutiny in this area.
Of the $5.6 billion recovered in fiscal year 2021, only $1.6 billion derives from qui tam suits by relators, down slightly from $1.7 billion in fiscal year 2020.
The proportion of new actions brought by relators is down also from last year to 33.9 percent (203 out of 598) from 38.3 percent (259 out of 675), suggesting that the DOJ may be shifting toward identifying the most lucrative actions and bringing them itself in the first instance. However, according to DOJ statistics, recoveries in which the DOJ declined to intervene totaled approximately $479 million in 2021, compared to a mere $193.8 million in 2020. Thus, even if the DOJ declines to intervene in a particular action, many relators are proceeding.
Finally, 2021 saw the first FCA claims relating to COVID-19 fraud. Two companies entered into settlements to resolve claims of improper procurement of Paycheck Protection Program loans and improper diversion of PPP funds for personal use. Claims of this nature are expected to rise in 2022 as the pandemic winds down and an accounting comes due for the $2 trillion in federally expended COVID emergency relief funds.
2022 is shaping up to be another near-record year for FCA litigation as the DOJ aggressively pursues its priorities using data mining technology and targeted intervention. Recipients of COVID-19 relief funding may also expect increased DOJ scrutiny. It is crucial to ensure robust and up-to-date compliance policies and procedures are in place, along with whistleblower protections.