For decades, even as the Department of Justice has pressed for corporate cooperation
and self-disclosure, the health care industry and the white-collar defense bar have
expressed skepticism regarding the actual impact of engaging in those behaviors. When
it comes to the resolution of civil False Claims Act (FCA) cases – the primary tool
for government action in response to corporate misconduct in the health care industry,
through which the Department of Justice generates more than $2 billion annually –
DOJ’s response has been a series of public statements amounting to, “trust us, we
reward those things.”
Until now, the health care industry has been without any mechanism to test those assurances.
While the tax Cuts and Jobs Act’s more controversial provisions are what made it the
largest overhaul to the tax code in decades, it is a barely noticed provision that
is having the incidental effect of changing how FCA resolutions are negotiated and
transforming the discussion about DOJ’s treatment of “compliant behaviors” (cooperating
with a government investigation, self-disclosing misconduct to the government, having
an effective pre-existing compliance program, and adopting an effective compliance
program as a remedial measure).
The False Claims Act Statute provides that a person who violates the FCA, “is liable
to the United States Government for a civil penalty [per claim], plus 3 times the
amount of damages which the Government sustains because of the act of [the person
violating the FCA].”
This leaves a significant range between single damages (which make the government
whole) and the maximum recovery available under the statute. And this multiplier range
provides a clear opportunity for the government to motivate business organizations
to engage in compliant behavior – it is here where DOJ has asked the health care industry
and the defense bar to trust that an impact exists.
Until 2018, DOJ needed only announce a settlement figure and leave everyone guessing
as to how “tough” the settlement was – even the settling company frequently didn’t
know the multiplier DOJ used to resolve the case. That changed, however, with the
2017 passage of the Tax Cuts and Jobs Act.
Section 13306 of the Act made clear that business organizations can deduct only those
portions of settlements paid to the government that they can establish were paid as
restitution or expended to come into compliance with the law and that the government
has an obligation to provide notice to the Internal Revenue Service and to the settling
party of the restitution amount contained within civil settlements. In response, DOJ
has been including the “restitution” figure in FCA Civil Settlement Agreements (CSAs)
since early 2018, from which the multiplier used in each particular case can be calculated.
I have been collecting and reviewing the CSAs between health care business organizations
and DOJ, and the initial trends are concerning. For example, the data reveals no consistent
benefit for cooperation – those cases where defendants cooperated were frequently
not treated more leniently than cases where defendants did not cooperate, or even
cases where defendants refused to accept responsibility for the misconduct. As just
one recent example, a DOJ press release from February 2019 noted the defendant had
voluntarily self-disclosed the misconduct.
The U.S. Attorney in that case went so far as to note that “[the defendant’s] proactive
approach in [the] case sets a good example for other providers who might find themselves
facing similar issues.”
Yet DOJ required the entity to pay double the value of the false claims – higher than
the mean multiplier of 1.75 for settlements over the past year. At least without further
information from DOJ, it is difficulty to square that result with DOJ statements such
as, “[DOJ is] committed to taking into account the disclosures and other cooperation
provided by defendants and to resolve matters for less than the matters would otherwise
have settled for based on the applicable law and facts.”
That is not necessarily to say DOJ has not been giving adequate credit for cooperation.
It is possible the cooperating defendants, including in that case, would have had
to pay more if not for their cooperation and that an impact truly exists. If that
is the case, however, lack of transparency makes it impossible to see, providing no
guidance to industry and the defense bar of the existence and extent of the supposed
That mean multiplier of 1.75 itself was, to many, a surprising result. When I published
my initial findings along with my methodology on Law360 (and here, for those who don’t
subscribe), I heard from current and former DOJ prosecutors, defense attorneys, and
in-house counsel whose reactions were as varied as the data. Some thought the standard
multiplier was surprisingly low (one U.S. Attorney recently claimed that triple damages
are the “typical” liability under the False Claims Act, while my data analysis has
found 66 out of 74 CSAs had multipliers at or below double damages), while others
found it surprisingly high.
And in what should be of concern to DOJ, a number of defense attorneys said they were
not surprised the data fails to reveal an impact for cooperation/self-disclosure,
and that it was consistent with their experience and a reason they rarely counsel
their clients to voluntarily disclose or cooperate. The data is consistent with their
assumptions that the benefits are disproportionately a reward for agreeing to settle
rather than for engaging in compliant behaviors.
(Separately, the data also provide reason to be concerned about inconsistent enforcement
by U.S. Attorney’s Offices across the country – another long-time complaint of industry
and defense counsel.)
With the data now public and the details of each resolution facing potential scrutiny,
DOJ’s corporate health care enforcement regime is at a crossroads. No longer left
in the dark about the impact (or lack thereof) of compliant behaviors in calculating
FCA resolutions, health care companies may be less likely to cooperate with government
investigations, and especially to self-disclose misconduct to the government.
Recognizing similar concerns in Foreign Corrupt Practices Act cases, DOJ recently
enacted an FCPA Corporate Enforcement Policy with the benefits for engaging in compliant
behaviors, particularly cooperation and self-reporting, transparent in each FCPA resolution.
The FCPA policy makes the lack of transparency and uniformity in the FCA context even
Now more than ever, there is a need for an open and consistent DOJ policy for resolving
FCA cases. Without one, DOJ risks undercutting its efforts at encouraging compliant
behaviors in one of DOJ’s primary enforcement areas.
Jacob T. Elberg is an Associate Professor at Seton Hall Law School, where he teaches in the areas
of Health Law, Health Care Fraud and Abuse, Evidence, and Data Analytics. Prior to
joining Seton Hall Law School, Professor Elberg served for 11 years as an Assistant
U.S. Attorney at the U.S. Attorney’s Office for the District of New Jersey. As Chief
of the Office’s Health Care and Government Fraud Unit for five years, Professor Elberg
directed all of the Office’s criminal and civil investigations and prosecutions of
health care fraud offenses. Professor Elberg received his B.A., cum laude and with
honors, from Dartmouth College and his J.D., magna cum laude, from Harvard Law School.