Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

The US Department of Justice’s (DOJ’s) Civil Division released its annual fraud statistics on February 7, covering fiscal year 2022. Settlements and judgments under the False Claims Act (FCA) exceeded $2.2 billion in the fiscal year ending on September 30, 2022. Consistent with previous years, a significant portion of the recoveries related to the healthcare industry.

The government uses the FCA as a powerful tool to prevent fraud and abuse in federal healthcare programs and other government programs. Under the statute, the government may seek treble damages and per-claim penalties, and whistleblowers filing qui tam lawsuits may recover substantial bounties (between 15% and 30%). Since 1986, FCA recoveries have amounted to more than $72 billion, and DOJ touts an increase in recoveries each fiscal year.

2022 Recoveries Decreased

In FY 2022, however, DOJ recovered a mere $2.2 billion from FCA settlements and judgments, far less than the $5.6 billion recovered in FY 2021 and the recoveries in other recent years.

DOJ buried the headline by releasing the data on the same day as the State of the Union Address and leading off its press release by noting that the government and whistleblowers were party to the second-highest number of settlements and judgments in absolute terms in a single year. DOJ also pointed out that the $2.2 billion reflects only the federal share of FY 2022 FCA recoveries and that the department was “instrumental” in obtaining additional recoveries for state Medicaid programs.

Healthcare Industry Recoveries

Of the $2.2 billion recovered, more than $1.7 billion in FCA settlements and judgments related to matters that involved the healthcare industry, including medical device and pharmaceutical manufacturers, durable medical equipment suppliers, home health and managed care providers, hospitals, pharmacies, hospice organizations, and individual healthcare professionals. Of this $1.7 billion, almost half—$843.8 million—came from a single settlement with a whistleblower involving a declined qui tam case against a biopharmaceutical manufacturer.

In addition to the traditional FCA theories based on alleged kickbacks, substandard patient care, and billing irregularities with respect to federal healthcare programs, other recoveries in the healthcare space reflected new enforcement priorities involving fraud in pandemic relief programs and alleged violations of cybersecurity requirements in government contracts and grants. (See Morgan Lewis thought leadership on DOJ’s COVID-19 fraud enforcement and Civil Cyber-Fraud Initiative.)

By the Numbers

In FY 2022, 652 whistleblower qui tam suits were filed (an average of more than 12 new cases every week), and the government and whistleblowers were party to 351 settlements and judgments resulting in $1.9 billion in FY 2022 recoveries involving these and earlier-filed cases. Whistleblowers took home $488 million in qui tam recoveries in FY 2022, thereby ensuring the continuing flood of often meritless claims against the healthcare industry originated by the plaintiffs’ bar.

DOJ highlighted the following types of healthcare fraud that occurred last year:

  • Fraud and abuse in the Medicaid program
  • Unnecessary services and substandard care
  • Medicare Advantage matters
  • Drug pricing
  • Unlawful kickbacks

DOJ made a point of noting that many of its enforcement actions were initiated against individuals, including, but not limited to, actions against two laboratory CEOs, one hospital CEO, and nearly 40 physicians accused of FCA violations arising from underlying violations of the federal Anti-Kickback Statute and the Stark Law.

How We Can Help

Morgan Lewis lawyers have represented various clients in the healthcare space: managed care organizations, hospitals, Medicare Advantage organizations, health plans, pharmaceutical and medical device manufacturers, revenue cycle management companies, data-driven healthcare companies, medical groups, certifying actuaries for Medicare Advantage bids, and healthcare management consulting firms. As such, we are very familiar with the FCA issues healthcare entities face and can advise on how best to address those issues.