The U.S. Sentencing Commission (Commission) recently proposed a series of changes to the Federal Sentencing Guidelines (Guidelines) that are used to determine a defendant's punishment for federal crimes, including healthcare fraud. The Guidelines focus primarily on two factors -- the criminal conduct and the defendant's criminal history. The proposed changes, if enacted, may require providers to re-evaluate their ethics and compliance policies, their compliance officer's reporting relationships and how the organization responds to detected violations.

Remediation of Harm

The proposed amendment would change the Guideline's commentary to clarify the remediation efforts needed to satisfy the requirement for an effective compliance and ethics program. The amendment would require that an organization's response to detected criminal conduct include remedying the harm caused to identifiable victims and paying restitution to victims. The clarification also suggests that organizations consider, in light of the offense, whether any modifications to the compliance plan should be made and whether an independent monitor should be engaged to assure implementation of the modifications.

Compliance Officer Board Reporting

The proposal also requested comments on whether compliance officers should be encouraged to report directly to an organization's governing body. In most instances, this change should not be as significant for providers who have followed the Office of Inspector General's recommendation that comprehensive compliance programs should include designating a chief compliance officer and other appropriate bodies, e.g., a corporate compliance committee that reports directly to the CEO and the governing body. See, e.g., OIG Compliance Program Guidance for Hospitals, 63 Fed. Reg. 8987, 8989 and 8993 (Feb. 23, 1998) and Supplemental Compliance Program Guidance for Hospitals, 70 Fed. Reg. 4858, 4875 (Jan. 31, 2005).

Probation Terms

The proposed amendment to Guideline Section 8D1.4 eliminates the current distinction between conditions of probation imposed solely to enforce a monetary penalty and conditions of probation imposed for other reasons, and eliminates preconditions for the implementation of certain probation requirements. Under the revised rule, a court may consider, if appropriate (1) employee and shareholder notification of the conduct; (2) imposition of an independent monitor with appropriate qualifications; (3) reporting of financial condition, subsequent criminal prosecutions, material civil litigation or administrative proceedings, and any governmental investigation or inquiry and material adverse business changes; and (4) conducting unannounced examinations of the entity's books, records and facilities and "interrogation[s]" of knowledgeable individuals.

The proposed amendment also clarifies that the independent monitor must be independent and properly qualified. This change was proposed in response to complaints regarding the use of politically-favored monitors, such as former Attorney General Ashcroft's reputed 18-month, $52 million engagement for monitoring orthopedic supplier Zimmer Holdings of Indiana and proposed legislation, including the Accountability in Deferred Prosecution Act of 2009 (H.R. 1947).

Document Retention Policy

The proposed amendments will require that high-level personnel and employees be aware of their organization's document retention policies and conform those policies to meet the goals of an effective compliance program.

Effect of Board and High Level Management Involvement

This proposed amendment questions whether the Guidelines should be expanded to provide punishment mitigation where high-level personnel are complicit in a violation in which (1) the compliance officer reports directly to the Board; (2) the compliance program detected the violation; and (3) the organization promptly reported the offense to appropriate authorities.

These changes to the Guidelines should be monitored as they may, if implemented, require modifications to providers' ethics and compliance policies, their compliance officer's reporting relationships and how the organization responds to detected violations. Providers cannot simply pay lip service to compliance by relying on a written code of ethics that is not vigorously implemented. The Commission is accepting comments on the proposals until March 22, 2010.