Over the last four years, the U.S. Department of Justice (DOJ) along with the U.S. Department Health and Human Services (HHS) has recovered over $13.9 billion in healthcare fraud settlements through their joint Health Care Fraud Prevention and Enforcement Action Team (HEAT). “DOJ alone initiated over 1,100 new criminal health care fraud investigations in 2012 and convicted over 800 defendants of health care fraud-related crimes during the year,” recovering $7.90 for each dollar spent—the highest three-year average return on investment since the Health Care Fraud and Abuse (HCFAC) Program began 16 years ago.
Part of the increased enforcement comes from DOJ and HHS coordinating activities with State and local officials, “including several leading private health insurance organizations.” As a result, “the environment is ripe for continued focus on health care fraud enforcement making it critical that compliance officers and in-house counsel understand how to properly handle both internal and governmental investigations,” according to a recent article written by Kirk Ogrosky, partner at Arnold & Porter LLP, published by the Health Care Compliance Institute.
Previously, Ogrosky was the head of healthcare fraud enforcement in the Criminal Division of DOJ, where he created and managed the Medicare Fraud Strike Force. He also served as an Assistant U.S. Attorney in the Southern District of Florida from 1999 to 2004, and as an Assistant Attorney General in Kentucky from 1996 to 1998.
Governmental healthcare investigations “disrupt operations, impair business initiatives, exhaust resources and expose organizations to negative public relation campaigns”, and “[t]hese costs occur even prior to ascertaining whether there will be consequential administrative, civil or criminal liability.” Companies must have a proactive plan to respond to allegations of wrongdoing because the “consequences of criminal prosecution are so severe”—such as exclusion. Thus, “When issues arise—whether through a hotline complaint, internal report, civil subpoena, grand jury subpoena, search warrant or a simple request—organizations and their counsel need to have a basic understanding of the investigatory process and how to communicate with agents and prosecutors.”
“Regardless of the origin of the investigation, or the depth of the organization’s potential involvement in the matter, the first priority should always be to get the facts”, Ogrosky wrote. Why? Since the government typically proceeds “with limited information while it collects additional information,” an organization that fully understands the facts can “develop a relationship with the investigating agency” and “can influence the way the government perceives the case by guiding investigators through documents and witnesses.” In addition, compliance officers and counsel need to establish personal credibility because losing “credibility internally or with the government will draw added scrutiny to their organizations, whereas individuals who establish credibility may receive the benefit of the doubt.”
To build credibility, counsel and officers must develop “a complete understanding of the investigatory process and the facts at issue.” Accordingly, the article provides an overview of the investigative process “to assist compliance officers and counsel so that they may seek to reduce the negative impacts of investigations.” The article outlines how compliance officers and counsel can improve on how they conduct internal investigations and how to respond to subpoenas, search warrants and interview requests. The former DOJ healthcare leader maintained that, “well-conceived and managed internal inquiries are critical for organizations to ameliorate the negative consequences of investigations.”
THE START OF GOVERNMENTAL INVESTIGATIONS
Ogrosky noted that “Governmental investigations typically begin when a source of information, usually an employee or former employee, reports allegations of wrongdoing to a Zone Program Integrity Contractor (“ZPIC”), Medicare Administrative Contractor (“MAC”), HHS Office of Inspector General (“OIG”), Federal Bureau of Investigations (“FBI”) or Medicaid Fraud Control Unit (“MFCU”). More recently under the direction of HEAT, investigations are being started when anomalies in claims are detected by HHS-OIG and FBI agents working with a Medicare Fraud Strike Force (“MFSF”) and through an increased focus on data-mining and sharing among various government agencies.” Other agencies that may join in healthcare fraud investigations include the Internal Revenue Service (“IRS”), the Postal Inspection Service, Department of Defense (“DOD”), Veterans Administration (“VA”), Railroad Retirement Commission and State Insurance Departments (“DOI”). Relators in qui tam cases brought under the False Claims Act (FCA) lead to almost identical investigations.
“In most cases, the first sign of an investigation is agent contact with a current or former employee or a letter requesting information,” which is “often followed by administrative, civil or criminal subpoenas. Less often, organizations learn of an investigation during the execution of a search warrant,” which happened recently when an MFSF coordinated a single-day takedown across seven cities in May 2012 that resulted in over 100 individual arrests and 20 executed search warrants. Whatever the initiating government contact, organizations must (1) seek to understand how the government views the allegations; (2) quickly ascertain their status in the investigation—target, subject or witness; and (3) must understand their rights and those of their employees.
If an employee reports that government agents approached them, “counsel should talk with the employees and attempt to ascertain the nature of the government’s investigation.” Since a “witness is the property of neither the government nor the organization, both sides have equal access to the witness.” Accordingly, Ogrosky said it is “appropriate for an organization to apprise its employees of their rights and obligations should they be contacted by agents and asked to submit to an interview.”
Ogrosky noted that, “Organizations should assure individual employees that they are free to answer questions from government agents and that all answers must be truthful if they elect to answer questions.” However, employees that meet first with counsel “will better understand the government’s methods and objectives.” He recommended that organizations inform individual employees to request an agent’s name, agency and phone number if investigators approach them, and “all contacts should be handled immediately and as confidentially as possible.”
Organizations must also inform employees to treat government agents seriously and accord them with respect because “prosecutors who sense obstructive conduct will respond by escalating the investigation, and may open new investigations into additional criminal conduct such as obstruction of justice.”
“Individuals may elect to be represented by counsel during the interview. For those individuals, the organization must determine whether the employee requires separate counsel and whether the organization will assume the cost of such representation.” Ogrosky noted that, counsel for the organization must always keep in mind the ethical rules and “make clear to individuals that they represent the organization,” and “not cross the line of representing an individual in a personal capacity.” Informing employees of their rights “necessarily will vary depending on the circumstances of the case, including the number of employees involved, their positions and locations, and the likelihood that the government may contact them before they can be interviewed by the organization.” Thus, Ogrosky recommended that organizations “consult counsel regarding the preparation of a contact letter or before initiating any other contact.”
B. Subpoenas and Search Warrants
After the government’s initial contact, organizations may receive an administrative, civil and/or criminal subpoena, which they should refer to counsel. Once the subpoenas validity is established, and to ensure that responsive communications are retained, counsel may issue a memorandum or “hold notice” to employees, which explains “in plain English … what documents should be retained, who will be collecting the documents, and contain instructions on how to collect documents for those participating in the collection.”
Ogrosky recommended that counsel evaluating a subpoena “should have their client detail the state of its records and its ability to comply with the request,” and should convey this information to the government “to discuss compliance issues.” He noted that counsel for the government “will entertain reasonable requests to narrow subpoenas” that may be overbroad, vague, cover expansive time periods, or request privileged materials and recommended that counsel for the organization exhaust “all avenues with the government” before pursuing a motion to quash the subpoena.
Although search warrants are “rarely” used in healthcare matters that involve organizations that are in the business of providing real care, the government will use such warrants “when it believes there is a substantial risk that evidence will be destroyed.” If a search warrant is obtained, the former DOJ leader recommended that employees “contact counsel or a designated employee immediately.” An organization employee served with a warrant “must inspect the warrant for facial sufficiency (location, time, date and scope) and comply with its terms.”
Ogrosky also recommended that non-essential employees (those not involved in patient care) be sent home “immediately to assure that their actions are not misinterpreted as interfering with the search,” minimize the number of interviews, and “assure that employees do not expand the scope of the search by consent.” The responsible organization employee, if counsel is not on-site, should communicate with the agent in charge of the search “to ascertain the nature of the allegations” and counsel should seek a copy of the affidavit filed in support of the warrant. Counsel for the organization may want to assist the government locate the items listed to speed up the process and reduce its scope.
Finally, because warrants permit the government to seize original documents, Ogrosky recommend that counsel “request copies of items seized and/or the return of critical documents.” At a minimum, “the senior person on the scene should keep track of the areas searched, questions asked and items taken” and at the end of the search, “counsel should request an inventory and attempt to assure that the inventory fully describes the items seized.”
CONDUCTING INTERNAL INVESTIGATIONS
When an organization learns of a government investigation or a serious internal issue, Ogrosky recommended that counsel “perform a thorough [internal] investigation if the organization may be involved in the alleged misconduct or may have direct exposure (criminal, civil or administrative), or when the government’s claims may involve senior management, board members or employed providers.”
Before commencing an internal investigation, counsel must understand the allegations, the nature of the investigation and the organization’s exposure, which is critical to “designing and implementing a thorough internal investigation plan.” To do so, Ogrosky recommended that counsel ask the government or source of information to describe the role of the organization and its key employees in the alleged misconduct. “If the matter is a government investigation, the organization should ask whether they are a target or subject of a criminal investigation.” The former prosecutor noted that although the government might not always accommodate the request, there is no harm in seeking such information as long as the inquiry is a genuine attempt to understand the investigation and done professionally.
Where there is an active criminal investigation, “organizations should not conduct an internal review until the parameters of the review have been discussed with agents and prosecutors, as it might compromise on-going law enforcement activities,” Ogrosky maintained.
A. Who Should Conduct the Internal Investigation
Because legal questions related to whether the conduct at issue constitutes a violation are the heart of any investigation, Ogrosky noted that “counsel should conduct or supervise the investigation” as a general rule, particularly since DOJ’s revised corporate prosecution guidelines offer counsel conducting such investigations certain protections under the attorney-client privilege and the work product doctrine. Nevertheless, choosing in-house or outside counsel to conduct the investigation “is subject to a number of general considerations.”
In-house counsel “may be better acquainted with the company’s history, structure, procedures and operations,” and “company employees are more likely to be open with in-house counsel because employees are more familiar with them. However, the government may view in-house counsel “as lacking independence due to their status within the management structure. This is true particularly where alleged wrongdoing implicates an individual who has regular contact with in-house counsel.” Thus, the organization should seek outside counsel.
Companies may also prefer using outside counsel because “it may be more difficult for in-house counsel to establish and maintain privilege because they are frequently called upon to provide business advice. This problem is exacerbated when information obtained in the internal investigation is shared by in- house counsel with auditors, accountants, underwriters and corporate officials not involved in defending the organization.” The sharing of this information may waive the privilege, which could extend to civil litigation (e.g., product liability).
Moreover, outside counsel will be more experienced in defending government investigations and “may be more objective in assessing practices” because they “are less familiar with the company’s activities and personnel.” Because of their experience with subtle problems that often arise during internal investigations, outside counsel “may be better able to avoid unfounded allegations of witness interference and obstruction of justice.” Using outside counsel is also preferable where “the government perceives a conflict between the interests of a company’s management and the interests of its employees.” Accordingly, Ogrosky recommended using outside counsel for internal investigations, in close coordination with in-house counsel.
B. Documents &Witnesses
“The two principal components of an internal investigation are: (i) an analysis of relevant documents; and (ii) interviews of employees who may be able to provide relevant information. Generally, it is preferable to review documents prior to commencing interviews. The documents are a source of the identities of the individuals who will need to be interviewed as the internal investigation progresses. The government also identifies the employees it would like to interview based upon the documents. Further, the documents often raise questions which can be answered only through interviews of employees. The documents also may help refresh the recollections of the individuals being interviewed and avoid mistaken responses that may throw the internal investigation off course.”
When interviewing employees, Ogrosky noted that counsel should advise “each interviewee: (i) that the government is conducting an investigation; (ii) of the nature of the problem being investigated; (iii) that counsel has been retained to provide advice to the organization; and (iv) that the interview is necessary in order for counsel to obtain the information needed to provide appropriate advice.” Interviewers must advise employees that they are “not counsel to the employee, that any privilege belongs to the organization,” and that the organization may waive the privilege and disclose the substance of the interview to company officials or the government. During interviews, counsel should avoid “characterizations of an organization’s position on issues” that may be “misconstrued as an attempt to influence the witness’s testimony.”
“After any interview, it should be reduced to a memorandum. As the organization may ultimately decide to waive the attorney-client privilege and work product protection, counsel should draft fact-based summaries without opinion.” With regard to the potential of waiver, Ogrosky cited former director of the Executive Office of United States Attorneys (“EOUSA”) Mary Beth Buchanan who previously noted that “[t]o avoid any such disclosure unnecessarily, experienced attorneys will refrain from including mental impressions and strategy in their notes of witness interviews.”
C. Determining Who Needs Counsel
Ogrosky noted that “where an organization is the subject of a criminal investigation, there often is a serious potential for the existence of a conflict between it and its employees”—particularly in light of the increased use of exclusion by HHS-OIG and the Park doctrine by FDA against corporate executives. “For example, an employee may have taken a questioned action based upon information or direction received from a supervisor. Even if contrary to company policy, the action would in all likelihood be attributable to the company, and the company could be held vicariously liable if the individuals involved possessed the requisite knowledge and intent. In such a situation, the interests of the company, the supervisor and the employee may vary. Accordingly, counsel for the company should refrain from saying anything that may be construed as legal advice to a witness.”
Where an individual has committed a crime, the corporation has an interest in punishing and disclosing the conduct. EOUSA Director Buchanan previously advised that “a zero tolerance approach to employee crime is integral to the organizational culture of a good corporate citizen and can be based on rewards as well as punitive action . . . .Employees who have committed crimes using the corporate structure, however, cannot expect protection from their corporate employer.”
D. Finalizing Findings, Voluntary Disclosure, and Cooperation
“After counsel has reviewed the documents and interviewed those knowledgeable about the matter, it is helpful to prepare a memorandum that: (i) summarizes the facts developed through the internal investigation; (ii) analyzes applicable legal principles; (iii) identifies any weaknesses in the company’s practices or procedures; (iv) prosecution or administrative sanctions; and (v) recommends any corrective actions or other measures which would improve operations and enhance the company’s defenses.” Using this memo, counsel must advice the organization of its options, using “heavily fact-specific information.”
Ogrosky pointed out differing obligations that may arise when internal investigations are conducted. “For example, the Centers for Medicare and Medicaid Services (“CMS”) requires certain disclosures for Medicare Advantage and Medicaid managed care providers, and many state laws require nursing homes to report all alleged incidents of abuse, mistreatment, neglect, and misappropriation of resident property. Such reports to state officials may implicate a false claims analysis should the quality of care be so low that DOJ considers program payments excessive.”
On the other hand, investigations that reveal evidence of illegality or misconduct may require disclosure under the Sarbanes- Oxley Act, which requires that the corporate officer signing a company’s periodic report certify that any fraud which involves management (or other employees who have a significant role in the company’s internal controls), whether or not material, be disclosed to the auditors and the audit committee.
In addition to mandatory disclosure, Ogrosky also discussed the possibility of making a voluntary disclosure under the OIG’s self disclosure protocol (“SDP”) or CMS’s Self-Referral Disclosure Protocol (“SRDP”), “which saw increased utilization in 2012.” Organizations should not make such disclosure, however, “before undergoing thorough investigation, evaluation and judgment, and seeking the assistance of legal counsel.” Accordingly, Ogrosky discussed several factors organizations should consider before self-disclosing.
For example, disclosing to OIG may demonstrate in good faith “that an organization embraces a culture of compliance and is committed to interacting with federal healthcare programs with integrity.” As a result, OIG may reduce the amount of civil monetary penalties (“CMP”) or waive the imposition of a corporate integrity agreement (“CIA”), “which can significantly burden an organization with years of costly oversight obligations.” However, OIG “makes no guarantee of leniency, benefit or immunity to those that take advantage of the SDP.”
Self-disclosure is also “expensive, time consuming and disruptive” and “may trigger a new investigation or expand an existing investigation into new territory by OIG or other agencies.” Further, “the disclosure to OIG of internal investigation reports and underlying documentation may create waiver issues related to the attorney-client privilege and work product protections, creating potentially significant issues in any subsequent civil litigation,” Ogrosky writes.
Lastly, “if criminal conduct is discovered during an investigation, an organization must decide how to proceed.” “Where the conduct poses the risk of corporate indictment, organizations have little choice but to cooperate given the risk of exclusion.” Ogrosky, however, noted that only “full cooperation is worth undertaking, and attempts at partial cooperation may be worse than none at all.” The need for full cooperation underscores the importance of counsel “conducting the investigation thoroughly” and examining key documents and witnesses to make sure that all the facts are known. In addition, cooperating will require counsel to decide whether “there will be a written or oral presentation of findings [to the government] and what impact this may have upon waiver of the attorney-client privilege and work product protections.”
E. Preparation for Interviews
Regardless of cooperation and the presentation of internal findings or reports, the government typically will conduct witness interviews to confirm findings. In addition to informal requests for interviews, “the government’s use of civil investigative demands (“CIDs”) has greatly increased with the adoption of new rules in 2010 allowing the Attorney General to delegate authority to issue CIDs to individual U.S. Attorneys and the Assistant Attorney General for the Civil Division,” Ogrosky noted. These new rules have forced “organizations to move even more swiftly in conducting its internal investigation and requiring prompt production of witnesses and documents for government inspection.”
As a result, Ogrosky emphasized the importance of preparing witnesses, who otherwise “may inadvertently make statements that confuse issues or create the impression of improprieties that do not exist,” which is “especially true when witnesses are questioned by agents with a preconceived theory of the case.” The former healthcare prosecutor added that unprepared witnesses may also unintentionally “make statements that contain inaccuracies that later can create credibility concerns or give rise to of perjury.” However, he emphasized that “preparation of individuals by counsel in advance of government interviews must be free from undue influence and misleading conduct,” and counsel (for the company or separate) “must explain the importance of answering questions truthfully and with complete candor.”
“When faced with a healthcare fraud investigation, organizations must have a plan to effectively ascertain the relevant facts and develop a strategy of open communication with the government,” Ogrosky maintained. Such communication is critical to achieving workable compromises. In addition, in order for “compliance officers and counsel to have credibility in its interactions with the government, they must understand the facts, the investigation and the potential exposure.” Ultimately, the former DOJ healthcare strike force founder asserted that “all well-grounded action plans to protect organizational interests depend upon a command of the facts and an ability to persuasively communicate the facts.”