DoJ Memo Limiting Guidance Use to Impact Healthcare Fraud Cases

February 26, 2018 - A recent Department of Justice (DoJ) memo limiting the use of regulatory guidance to pursue affirmative civil enforcement cases could alter the federal government’s approach to healthcare fraud litigation.

The document from third-in-command Associate Attorney General Rachel Brand stated that guidance documents, such as those used by CMS and CMS contractors, do not create binding requirements outside of statute or regulation.

Therefore, the DoJ cannot make agency guidance into binding rules. The memo also prohibits the DoJ from using guidance violations as proof the alleged individuals violated laws as part of affirmative civil enforcement and False Claims Act cases. The Department wrote:

“[T]he Department should not treat a party’s noncompliance with an agency guidance document as presumptively or conclusively establishing that the party violated the applicable statute or regulation. That a party fails to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying legal requirements; agency guidance documents cannot create any additional legal obligations.”

Guidance documents can only be used to prove that accused individuals had knowledge of the regulation or law prior to committing the violation.

The memo could impact how the federal government uses healthcare guidance documents when proving physicians, providers, and other stakeholders committed healthcare fraud. CMS issues guidance documents and FAQ answers to expand and clarify healthcare federal program rules, including Medicare and Medicaid billing policies.

The federal agency also sends special fraud alerts and coverage determinations to clarify what items or services federal healthcare programs will reimburse.

Additionally, CMS contractors and the HHS Office of the Inspector General release guidance documents to clarify and flesh out healthcare regulations and statutes.

Previously, the DoJ could use these healthcare guidance documents to prove physicians or other providers submitted false claims to Medicare and/or Medicaid and committed healthcare fraud. These cases frequently involve allegations that providers submitted claims for medically unnecessary or improperly documented services.

With help from guidance documents, the Department recovered about $2.4 billion from healthcare fraud schemes in 2017, accounting for 64 percent of the DoJ’s $3.7 billion total haul from across industries.

However, the memo could make it harder for the federal government to recoup Medicare and Medicaid dollars given to providers as part of a healthcare fraud scheme. But the DoJ memo could also make it easier for providers to understand how to prevent healthcare fraud, abuse, and waste investigations, explained JD Thomas, Partner at Waller Lansden Dortch & Davis, LLP.

“It will take time to see the exact impact of this Memo, but it will certainly narrow the scope of regulatory guidance that can give rise to healthcare fraud investigations and prosecutions under the False Claims Act prosecutions,” he recently told RevCycleIntelligence.com. “In the healthcare space, it’s going to give providers more clarity on what kind of documents could give rise to a False Claims Act case, and the potential for treble damages and penalties, and which could lead to simple overpayment liability, at most. That’s an important distinction and one that will make the landscape a little clearer for providers.”

Providers should be aware though that just because the DoJ is limiting the use of guidance documents to launch healthcare fraud cases does not mean that providers should not abide by the rules and clarifications detailed in the supporting documents, Thomas added.

“First, the memo does not prevent the DoJ from using a defendant’s awareness of the existence of a guidance document to prove scienter — or knowledge — under the False Claims Act,” he said. “As such, the Brand Memo is not a license to ignore agency guidance, but rather a guidepost to its application as evidence of violations in affirmative civil matters brought by the DoJ.  Second, the Brand Memo only applies to civil matters. While it is unlikely that the DoJ would rely solely on a guidance document in bringing a criminal healthcare fraud prosecution, it is free to use such documents however it sees fit in the criminal context.”

As Thomas pointed out, the exact impact the DoJ memo will have on healthcare fraud cases and investigations is still unclear at the moment. But time will tell the role that guidance documents have when pursuing a fraud case against providers.