DOJ Guidance Memo Focusing on Individual and Executive Prosecution

In September 2015, the United States Department of Justice (DOJ) issued a memo focusing on the increased prosecution that will target individuals and executives involved with crimes. The DOJ memo, commonly known as the Yates memo, is significant because it indicates what the DOJ believes the focus of corporate cases will be in the future, and many experts agree that healthcare fraud cases fall under this guidance.

While the Yates memo is applicable to all industries, how exactly it will affect the healthcare space is unique. When this information from the DOJ is combined with the Department of Health and Human Services Office of Inspector General’s June, 2015 Fraud Alert entitled “Physician Compensation Arrangements May Result in Significant Liability” and the recent Stark and Anti-Kickback cases, it indicates prosecution of healthcare cases is entering a very active phase. The significance of the DOJ memo is that individuals, particularly executives and board members, may be individually prosecuted and liable going forward for involvement in schemes to commit fraud against the federal government.

Why is the DOJ Memo Significant?

Historically, in healthcare fraud cases, the executives involved with or steering the fraudulent behavior or actions in an organization were often left standing virtually unscathed while their organizations faced heavy fines, penalties, sanction periods of compliance, etc. If the government follows through on this new path as described in the DOJ memo, where U.S. Deputy Attorney General Yates states companies must now disclose “all relevant facts relating to the individuals responsible for the misconduct (emphasis ours)” in order to qualify for “cooperation credit” – less severe penalties as described in the U.S. Sentencing Guidelines; companies will now be “incentivized” to provide any and all documentation on who was behind the culture of corruption and non compliant decision-making in the organization.

It is unclear how this will affect protections under “Attorney-Client Privileged” documents and work products, which many counsel and organizations historically rely on to protect their interests as permitted by the law. However, it does appear that this requirement will bolster the government’s attempts to attack healthcare fraud. It should make for some interesting fraud investigations and defensive actions and decisions by healthcare leadership (including boards) in the coming months and years.

Healthcare Leaders Must Reinforce Independence of Compliance and Audit Efforts

One thing is for sure, with the announcement of this new initiative, all leaders of healthcare organizations, including board members, should reinforce their independent compliance and internal audit efforts. In fact, they should demand that these programs find problems and fix them proactively and make sure that these programs have the resources and tools to perform their mandated activities. The elements of an effective compliance program should all be in place and functioning without interference from anyone in the organization.

A great example of how compliance programs and their organization should function is illustrated by a recent quote from a Big 10 football coach. Reacting to an assessment performed on the university, which stated that there was a “tension” between the compliance program and the football program the coach commented that it was a “healthy tension.” That description is appropriate for many healthcare organizations today. All executives should be feeling a healthy tension with their chief compliance officers to ensure all matters that are problematic are identified (regardless of who is involved) and fixed proactively as part of a healthy compliance culture.

Compliance should be viewed as a necessary investment in the organization and not as an expense.  Unfortunately some healthcare executives still believe compliance programs are not an important part of their corporate culture. The need for this viewpoint to change is especially true as the new DOJ memo indicates that not only is the organization being targeted, but also a new focus on the individual(s) involved.

What Does the Future Look Like Under the DOJ’s New Focus?

If the government will be able to prosecute more executives, physicians and board members, or if defense attorneys will be able to protect and insulate their clients from these fines, penalties, etc. without harming the institution remains to be seen. However, these events should certainly be the catalyst to bolster the compliance efforts inside our nation’s healthcare organizations. After all, creating a healthy, robust compliance program and culture of compliance is a personal issue, now more than ever for healthcare executives and physicians.

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