Jacob Elberg on Why Health Care Fraud Means Never Having to Say You’re Sorry

Virtually all False Claims Act (FCA) cases resolve without requiring the defendant to admit wrongdoing, and many defendants issue explicit public denials of wrongdoing when the resolution is announced.

Jacob Elberg

This is fueling a cost-of-doing-business narrative in which health care entities are required periodically to pay inconsequential settlements to the government regardless of their conduct. 

The Department of Justice thereby risks both diminishing the general deterrence value of resolutions, and lending credence to the vocal skepticism among industry and the defense bar that the Department of Justice could, in fact, prevail at trial.

That’s the take of Jacob Elberg of Seton Hall Law School in a new paper – Health Care Fraud Means Never Having to Say You’re Sorry.

How many of these cases are being brought a year? And of those cases, how many require the defendant to admit wrongdoing?

“We are talking about a lot of cases, but very few that involve admissions of wrongdoing,” Elberg told Corporate Crime Reporter in an interview last month. “To give a sense, I pulled around 195 cases over a two year period. Of those, only in 16 cases, or eight percent of the 195, were there admissions being made by the defendants.”

“At the same time, the number of denials were much larger. There were some cases where the denials were in the actual settlement.” 

“There were also cases where the settlement document didn’t say anything one way or another. But when the defendant would issue a press release explicitly denying wrongdoing – or they would deny wrongdoing when contacted by a reporter – that number was much larger than the denials in the settlement agreement. More than a third of cases had that happen.”

In an ideal system, Elberg would require admissions in all False Claims Act settlements.

“The most important thing is to eliminate the denials,” Elberg said. “If there are actually cases where the defendant entity did not engage in wrongdoing, those cases shouldn’t be brought. The Department of Justice shouldn’t accept, even if it is offered, an amount of money just to make a case go away.”

“If there is no wrongdoing, charges shouldn’t be brought. So the first thing I would like to see is the elimination of denials. What would be ideal would be admissions in all cases. But taking into account the practical realities, it does make some sense to allow for neither admit nor deny resolutions in many cases. And we would move to a system where defendants are foreclosed from denials in all cases. The Department of Justice is then looking at cases where it is most appropriate for a variety of reasons to require admissions.”

“You would require admissions in some cases and prevent denials in all of them.”

When you talk about denials, is it explicit denials in the settlement agreement?

“There is a mix. Overall, around 37 percent of health care False Claims Act cases against entities involve denials. And of those, it’s a mix of where they come from.” 

“Of the 195 I looked at, 25 percent had explicit denials in the civil settlement agreement. On top of that we are seeing more cases beyond that where the agreement is silent, but the defendants are issuing press releases the same day saying – we may have paid this money, but we actually didn’t do anything wrong. We are paying this money to make it go away, to avoid the costs of litigation and the distraction.”

“Some of these are worse than the denials in the settlement agreements because they are frequently taking shots at the prosecution. They say things like – we believe we would have prevailed but we just needed this to go away because it was a distraction. That’s the precise type of suggestion that these cases are cost of doing business settlements and maybe they are not all that the Department of Justice says that they are. And it feeds that cynicism about the system.”

There are a couple of great corporate crime databases. One is Violation Tracker. The other is the Corporate Prosecution Registry. 

Is there a public database that tracks all False Claims Act settlements?

“There is not. Before writing this article, I wrote an article titled – A Path to Data-Driven Health Care Enforcement. Until a couple of years ago, the information just wasn’t public at all. You couldn’t find out what multiplier the government was applying to an False Claims Act case. If the government determined that $10 million had been taken that shouldn’t have been taken, what amount of money was the government going to require as part of the settlement? Were they going to have the company just pay back the $10 million? Or $20 million? Or $30 million?”

“Until recently, the only thing knowable was the total amount paid. There was no ability until recently to track how that total amount was related to how much was actually taken.”

“Was the company just putting the cookies back in the jar? Or were they paying some substantial multiplier on top of that?”

How did you come across the information on the multiplier in each case?

“The 2017 Tax Cuts and Jobs Act made clear that business organizations can deduct only those portions of settlements paid to the government which were paid as restitution or expended to come into compliance with the law.”  

“The statute also required the government, for the first time, to identify the restitution figure. The result has been the Department of Justice regularly including the restitution figure in False Claims Act settlement agreements since early 2018.  Since that time, I’ve been researching and collecting the settlement agreements and calculating the multipliers based on that research.”  

“So it’s an analysis that was only made possible in the last few years. And because the Department of Justice doesn’t publicize the multipliers or most settlement documents, it’s a time-consuming analysis.”

[For the complete q/a format Interview with Jacob Elberg, 35 Corporate Crime Reporter 20(12), May 17, 2021, print edition only.]

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