In May 2014 the American Bar Association held its 24th Annual National Institute on Health Care Fraud, focusing on the latest developments in the area of healthcare fraud. Latham & Watkins partner Katherine Lauer served on the planning committee for the conference and led a workshop on healthcare fraud cases for defense and in-house counsel.

In this interview, Lauer shares some of enforcement trends that were discussed at the conference, including the impact of the implementation of the Affordable Care Act, the expanding regulatory focus on the criminal side, and the increase in False Claims Act cases on the civil side.

What impact has the implementation of the Affordable Care Act had on the scrutiny faced by healthcare companies?

Lauer: The Affordable Care Act has not really changed the areas of scrutiny so much as it has caused an increase in scrutiny overall throughout the healthcare industry for all types of providers and manufacturers.

The law itself did have some substantive changes that arguably made it easier for the government to bring False Claims Act cases and to prosecute violations of the Federal Anti-Kickback Statute. In addition, it also increased funding for fraud fighting activities at all levels of government. One of the other changes in the Affordable Care Act was making mandatory the timely return of overpayments that are made by federal healthcare programs, and establishing penalties for failure to do so.

The combination of those statutory provisions with the increased funding and the overall scrutiny by Congress and the public on the cost of healthcare have all contributed to an increase in enforcement activity both on the criminal side and on the civil False Claims Act side.

What trends are you seeing on the criminal side of enforcement?

Lauer: On the criminal side the trend we are seeing is that the Healthcare Fraud Prevention and Enforcement Action Team (HEAT), which is a combined task force composed of the Office of the General Inspector, the criminal division of the Department of Justice and the FBI, has expanded its focus. Originally, it focused on what we tend of think of as "street crime" healthcare fraud, where matters could be quickly brought and resolved because the activity was so blatantly illegal. Now, HEAT is focusing on more complex, sophisticated regulatory violations that have a potential criminal penalty. What this means is that different kinds of activities than the taskforce was initially focused on are now in its crosshairs and, accordingly, different kinds of providers and manufactures are now under scrutiny. HEAT is not just focusing on the blatant, clear criminals anymore; it is now focusing on reputable and very legitimate healthcare providers and others in the industry, and developing potential criminal cases against them based on regulatory violations.

What trends are you seeing on the civil side?

Lauer: On the civil False Claims Act side, we are seeing an increase in the number of False Claims Act cases that are filed and an increase in how active the whistleblowers' lawyers are in assisting the government and developing those cases. Even in situations where the government elects not to intervene, more and more of those realtors are going forward with their own matters and litigating the cases even without the government’s participation. This is a significant change from what we saw five to ten years ago. This means that there is a lot more case law developing in the area, as many more of these cases are unsealed and actively going to litigation. It also means that, to some extent, there needs to be a change in defense strategy and how defense lawyers and their clients think about the cases. It used to be that if you could convince the government to go away, the chances that the realtor would pursue the case were very small and the chance that the relator would succeed in the case was also very small. We are starting to see that change.

In the face of this increased scrutiny, what advice do you have for healthcare companies?

Lauer: Make sure that you have a robust and comprehensive compliance program in place — more than simply words on a page. It should be consistently disseminated and enforced throughout the organization. These compliance efforts should include routine auditing and monitoring activities, in addition to meaningful training of employees on important healthcare laws that can create potential exposure. These programs should also take care to react appropriately when problems are identified and, in particular, when there is the identification of a problem that has resulted in some sort of payment to the provider of money that the provider wasn't really entitled to, there needs to be a process to make sure that any over payments are appropriately resolved and returned to the appropriate government payer and agency.