Neither Carrots nor Sticks: DOJ's Unfulfilled Commitment to Corporate Health Care Compliance (preprint)

The Department of Justice (“DOJ”) has for decades sought to encourage four compliant behaviors in corporate actors: maintenance of an effective pre-existing compliance program, post-enforcement adoption of an effective compliance program, cooperation with a government investigation, and self-disclosure of misconduct. While DOJ’s public statements reflect a claimed commitment to all four, analysis of DOJ policy and resolved cases makes clear that as DOJ has increasingly prioritized and incentivized the latter three behaviors, the first—maintenance of an effective pre-existing compliance program, the only one aimed towards stopping fraud before it occurs—has been cast aside in one of DOJ’s highest-profile enforcement areas. In criminal prosecutions, both DOJ policy and the United States Sentencing Guidelines (“USSG”) consider pre-existing compliance programs in determining whether a business entity should be prosecuted and the amount of a fine if a prosecution does occur. DOJ’s Criminal Division has hired compliance experts and enthusiastically publicized internal training aimed at improving prosecutors’ ability to evaluate corporate compliance programs. For the health care industry, however, the civil False Claims Act (“FCA”) is DOJ’s primary enforcement tool, and neither that DOJ policy nor the USSG apply. Instead, in civil cases DOJ guidance has been opaque or non-existent, offering little clarity as to how, if at all, DOJ will consider pre-existing compliance programs when resolving FCA cases. This is particularly surprising given that health care compliance has evolved over decades into a major industry not only with sophisticated and expensive corporate programs, but the subject of increasingly frequent and hands-on DOJ public statements and guidance. This article is the third in a series analyzing civil FCA resolutions, looking not only at DOJ’s stated policies but at actual outcomes through review of a data set of resolved cases against health care entities. Until now, those analyzing the extent of benefits for corporate compliance programs have focused on criminal cases, particularly those under the Foreign Corrupt Practices Act and primarily focused on the potential for a compliance defense to criminal liability. Surprisingly, the literature has to-date failed to analyze the question in the context of the FCA and thus the health care industry despite its supremacy as a DOJ enforcement target and although the FCA’s mens rea standard is more likely to sweep in cases where applying a compliance benefit would further DOJ’s enforcement goals. With health care enforcement gaining increased attention in the wake of government spending relating to COVID-19, and additional visibility into DOJ settlement policy now possible due to a change in the tax code, DOJ’s current failure to reward pre-existing compliance programs in FCA resolutions puts DOJ’s enforcement goals at risk, potentially demotivating corporate actors and adding to skepticism about DOJ’s motivations and the legitimacy of the enforcement regime, as it prevents DOJ from separating the most culpable corporate actors from those less worthy of condemnation. It is also a missed opportunity, as the large quantity of health care resolutions provides the potential for industry to learn from others’ compliance successes and failures, and for DOJ to encourage advancements as it claims to desire to do.