Perhaps the single most appropriate word to describe the current state of the civil and criminal healthcare fraud enforcement environment is uncertainty. From changes in personnel and policy at the highest levels of government to a myriad of state and federal legislative developments, healthcare providers face an unsettled landscape as they move into the coming year.

Healthcare Fraud Recoveries Again Exceed $2B

To be sure, statistics would suggest that it was business as usual for the government’s healthcare fraud enforcement efforts. While civil fraud recoveries by the Department of Justice (DOJ) dipped to more than $2.8 billion in the fiscal year ending September 30, 2018 (FY 2018) as compared to $3.7 billion in FY 2017, recoveries attributable to the healthcare industry were $2.5 billion in FY 2018 – up from $2.1 billion in FY 2017. This is the ninth consecutive year where recoveries associated with the healthcare industry exceeded $2 billion.

Whistleblowers filed 645 new qui tam lawsuits under the False Claims Act (FCA) in FY 2018, which represented a slight drop-off compared with prior years, but brought the total number of FCA qui tam lawsuits filed since 2010 to more than 6,000. For their efforts, whistleblowers recovered more than $300 million in relator share awards, bringing the total awards to relators to more than $2.5 billion in the last five years.

Opioid Crisis Continues to Be Major Focus

In June 2018, DOJ and HHS-OIG announced the largest ever national healthcare fraud takedown, resulting in charges against more than 600 individuals responsible for more than $2 billion in alleged losses. Healthcare providers were charged in 58 federal districts, and those charged included 165 doctors, nurses, and other licensed medical professionals. Of particular note were the charges filed against those involved in prescribing and distributing opioids, and the takedown also aggressively targeted schemes billing government and commercial payors for medically unnecessary prescription drugs and compounded medications that allegedly were not purchased and/or not distributed to beneficiaries.

In addition to traditional enforcement efforts, regulators and legislators also found other ways to keep the opioid crisis squarely in their sights. In October 2018, DOJ announced the creation of the Appalachian Regional Strike Force to bolster criminal enforcement efforts aimed at healthcare fraud schemes in the Appalachian region and surrounding areas with particular focus on targeting medical professionals and others involved in the illegal prescription and distribution of opioids. Anchored in Nashville, Tennessee, the Strike Force will be made up of prosecutors and data analysts from DOJ’s Healthcare Fraud Unit, along with prosecutors from the nine U.S. Attorney’s Offices in the region. And, in that same month, Congress passed sweeping legislation – the Substance-Use Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act – aimed at the opioid crisis, which importantly included an all-payor kickback provision, which prohibits kickbacks in exchange for referrals to recovery homes, clinical treatment facilities, and laboratories.

New Leadership and Policies Meant Change in 2018

But for all of the business as usual that statistics, press releases, and reports might suggest, there were plenty of developments warranting a closer look. The year started with new leadership at HHS with the confirmation of Secretary Alex Azar in January and ended without confirmation of anyone to replace U.S. Attorney General Jeff Sessions following his resignation in November. The current nominee to replace General Sessions, William Barr, has been pressed on past arguments challenging the constitutionality of the FCA’s qui tam provisions, in which he asserted that those provisions “violate the Appointments Clause, infringe on the President’s core Article II authority to execute the law, and violate Article III standing doctrine.” It remains to be seen whether confirmation of Mr. Barr will have any significant impact on FCA enforcement efforts by relators.

The year also began with the issuance of two key DOJ memoranda, referred to as the Granston Memo and the Brand Memo after their respective authors. The Granston Memo sets forth considerations for DOJ attorneys to evaluate in regards to dismissal of declined qui tam lawsuits. The Brand Memo prohibits DOJ attorneys from using noncompliance with agency guidance documents in affirmative civil enforcement cases to establish violations of applicable laws, including the FCA. Both memos are likely to have a significant impact on the manner in which FCA cases are litigated.

Escobar Is Still Influencing FCA Litigation

Finally, the Supreme Court’s opinion in Universal Health Servs., Inc. v. U.S. ex rel. Escobar continued to have a profound impact on the litigation of FCA cases. Escobar upended more than $1 billion in jury verdicts in FCA qui tam lawsuits after courts determined that the relators in those cases had failed to come forward with evidence to satisfy Escobar’s materiality requirement. Year’s end also saw the intersection of the Granston Memo and Escobar, as DOJ filed an amicus brief in connection with the petition for certiorari in Gilead Sciences Inc. v. U.S. ex rel. Campie, which sought review of the Ninth Circuit’s reversal of the district court’s dismissal of a relator’s FCA lawsuit filed in 2011 for failure to plead materiality. While DOJ expressed its support for the Ninth Circuit’s interpretation of Escobar’s materiality requirement, it also stated that it would seek dismissal of the relator’s lawsuit if the case were remanded back to the district court because of its view of the merits of the relator’s allegations and the likely burdensome nature of the discovery that would be sought from the government if the case were to proceed. The petition for certiorari filed in Campie joined at least two other such petitions seeking review of Escobar-related appellate decisions by the Supreme Court. The petition in Campie, however, was denied earlier this year following the government’s filing.