This transcript has been auto generated
00;00;00;00 - 00;00;29;23
Jonathan Porter
Welcome to another episode of Husch Blackwell's False Claims Insights podcast. I'm your host, Jonathan Porter. There's a lot of confusion in investigations about the difference between criminal law and the False Claims Act. We teased this out a little bit on our last episode with Bryan Nowicki, talking about some egregious fraud, things that are in the news and how the criminal fraud things in the healthcare world lead to False Claims Act enforcement.
00;00;29;25 - 00;00;51;04
Jonathan Porter
We're going to unpack that a little bit more today on the podcast to talk about why there is this False Claims Act that deals with civil things, when there's also DOJ's ability to prosecute things criminally. That's what we're going to unpack today, is the difference between the civil False Claims Act and healthcare fraud laws on the criminal side.
00;00;51;06 - 00;01;12;10
Jonathan Porter
Joining me to talk about the difference between the False Claims Act and criminal laws is my law partner, Jody Rudman. Jody leads Husch Blackwell's white collar group. She also leads the firm's Austin, Texas, office. And she's a very good friend of mine. Regular listeners will know Jody from past podcast episodes. She's super bright on all things. She's former DOJ like me.
00;01;12;10 - 00;01;26;28
Jonathan Porter
And so who best to go to then? My law partner and boss, Jody Rudman. Jody, welcome to the podcast. Thanks for coming on and telling our listeners a little bit about the differences between the False Claims Act and criminal fraud laws.
00;01;27;01 - 00;01;28;10
Jody Rudman
Thank you so much for inviting me.
00;01;28;11 - 00;01;52;18
Jonathan Porter
So the False Claims Act is a civil statute, but a lot of healthcare fraud, especially a lot of the healthcare fraud, maybe our listeners are used to reading about in the papers or seeing on the news is criminally prosecuted. So why does DOJ have two sets of healthcare fraud enforcement mechanisms, and how does enforcement differ between civil False Claims Act and criminal healthcare fraud?
00;01;52;20 - 00;02;41;29
Jody Rudman
So both sets of laws of course, are on the books as passed by Congress. And DOJ actively uses both sets. Sometimes, of course, simultaneously against the same folks. It can depend, Jonathan so much on the conduct at issue and on what aspect of the conduct at issue is being addressed. And what I mean by that is the criminal enforcement scheme is meant to punish intentional or sometimes willful and intentional knowing and intentional conduct that, you know, violates the fraud statutes, wire fraud, mail fraud, healthcare fraud, and other types of fraud.
00;02;42;01 - 00;03;21;16
Jody Rudman
The burden of proof is higher when you are prosecuting a criminal case. The jury, in order to convict, has to find that the case has been proven beyond a reasonable doubt. Criminal laws, of course, have consequences that can include loss of freedom and the way that the criminal enforcement scheme punishes wrongdoers in terms of its financial consequences are kind of in one for one restitution ways and the whole restitution mechanism works very differently than how it works in the civil enforcement landscape.
00;03;21;16 - 00;03;52;23
Jody Rudman
So if we turn then to the civil False Claims Act, that being a civil statute, the burden of proof is lower in order for a jury to find civil False Claims Act liability. If the case goes to trial, there will not be a loss of freedom as a consequence of a civil FCA enforcement action that results in either a settlement or a verdict, and the financial consequences under the civil False Claims Act are not one for one.
00;03;52;23 - 00;04;23;27
Jody Rudman
Restitution. Rather, the FCA entitles the government to treble damages. So for every dollar in FCA liability, the defendant may pay as many as $3 because that's treble damages. And of course, those numbers add up significantly, but also penalties. The penalties scheme under the civil False Claims Act is quite significant. It's a there's a false claim penalty and and the penalties are quite large.
00;04;23;27 - 00;04;36;12
Jody Rudman
And they have increased over the years. So the financial consequences on the civil side of the world are far more significant than the financial consequences on the criminal side of the world.
00;04;36;15 - 00;04;57;14
Jonathan Porter
Thanks, Jody. And it makes sense to me, if we're thinking about this, how should we set up this big structure of criminal statutes and then this civil False Claims Act thing that you and I live and breathe so much? If we're thinking about that, it makes sense. If we're depriving someone's liberty, you got to make sure that it's someone who knows that what they're doing is is criminally wrong.
00;04;57;17 - 00;05;22;21
Jonathan Porter
You got to make sure that there's no defense that is reasonable, that where a jury would say, okay, well, I have reason to doubt the prosecution's story, but still, there's these and you're talking about Jody, these huge consequences for people who have False Claims Act problems, not necessarily criminal problems with False Claims Act problems. And I think there's a lot of confusion where we get into this spot of what we're doing here is not criminally investigating them.
00;05;22;21 - 00;05;46;24
Jonathan Porter
And so, you know, it's fine. But I still always go back to all of these Supreme Court cases in the False Claims Act space that say the False Claims Act still is not for garden variety conduct. This is still a statute that is supposed to go after knowing fraud. It's not for just regulatory disagreement. So Jody, one of the reasons I enjoy working with you so much is that we both been on the prosecution side.
00;05;46;27 - 00;06;02;24
Jonathan Porter
We understand that the DOJ has a lot of power. It's important that we push back on that when we're getting into these regulatory disagreements, when we start talking about some regulatory guidance. Well, what does the LCD say? It's really not what we're supposed to be doing when it comes to the False Claims Act. So Jody, thanks for unpacking.
00;06;02;28 - 00;06;20;21
Jonathan Porter
And the reason I think it's important for us to do that is because there was this big takedown last month. I mean, everyone's in healthcare knows that these takedowns come about once a year and it was mostly criminal enforcement, but it still has a lot of FCA ramifications. So, Jody, do you want to tell us a little bit about what exactly is going on in these takedowns?
00;06;20;24 - 00;06;52;20
Jody Rudman
Yeah, I sure will. Let me close the loop on something you said a few moments ago. And then let's dive into the takedown from there. You are so right that whether under the criminal enforcement scheme or mechanisms or whether under the civil enforcement mechanism, in either event the prosecuting authority has to prove a particular state of mind on behalf of the person who is being pursued or the entity who's being pursued.
00;06;52;20 - 00;07;16;01
Jody Rudman
And in the civil False Claims Act world, we often use the Latin word scienter, and that can be pronounced differently in different parts of the country. But I'm in Texas and we'll call it scienter. Just like the burden of proof is higher in the criminal laws, so also is the scienter or the mental state that has to be proved in order to prove a criminal violation.
00;07;16;07 - 00;07;43;24
Jody Rudman
And you're right that a lot of False Claims Act cases on the civil side of the world often come down to whether there is the level of scienter for the person who's being sued or the entity who's being sued to have violated the False Claims Act. And garden variety regulatory violations or garden variety negligence will not rise to the level of a civil False Claims Act violation, much less a violation of the criminal laws.
00;07;43;28 - 00;08;06;20
Jody Rudman
And there is a lot of litigation every year about the scienter aspect of the civil False Claims Act moving from there into the healthcare fraud takedown. This was a very significant announcement. I think in terms of dollar amount, it might be the second largest in U.S. history in terms of number of defendants. It is the largest in U.S. history.
00;08;06;20 - 00;09;00;09
Jody Rudman
Either way, it's a fairly staggering announcement. This came out, I think, on June 25th, and the announcement by the Department of Justice indicated that 455, I believe defendants had been charged across over 50 United States Attorney's offices. And there was well over, I believe, $6 billion alleged to have been involved in this takedown. And it is a very significant announcement, and it is a sign of and really, the comments indicated that it was in an enforcement effort that was extremely well coordinated, took advantage of or utilize some very kind of cutting edge tools, data analytics and other tools to identify and root out alleged fraud.
00;09;00;17 - 00;09;36;16
Jody Rudman
It had transnational and multinational aspects to it. It was a very significant announcement, and one thing that was interesting to me, Jonathan, is that it cut across the healthcare industry in terms of involving different aspects of alleged fraud, where you had telemedicine and you had durable medical equipment and you had skincare allografts, and you had all manner of as opposed to just sort of one coordinated effort of different aspects of the healthcare industry.
00;09;36;23 - 00;09;57;25
Jody Rudman
And the final thing I'll say is that this was the year in which the Medicaid programs run jointly by the state Medicaid programs and federal government were really heavily involved in this year's takedown in a way that I think we haven't quite seen before, so significant in many respects and those being among them.
00;09;58;01 - 00;10;15;20
Jonathan Porter
Thanks. Sure. Yeah, you're absolutely right. You stole all my notes. So I very little to go on here Jody. So that's not what guests are supposed to do. You’re supposed to leave me the easy talking points, but no, you gave an excellent response, Jody. So I had a very small role in some of the past takedowns that were more targeted in terms of what exactly was being announced.
00;10;15;20 - 00;10;35;26
Jonathan Porter
So years back, brace yourself was about DME braces, double helix was about genetic testing, and then rubber stamp was about doctors rubber stamping orders. Those were very specific in terms of the type of thing that was being announced in the takedown. This is much more general. So it's cutting across a lot of different areas. And so that I think is really interesting.
00;10;36;00 - 00;10;55;24
Jonathan Porter
And you're right, Jody, that's another thing I picked up on was Medicaid. The state MFCU control units were very involved this year. That's really not something that happened a whole lot back when I was at DOJ. Medicaid FCUs would be involved in conjunction with the U.S. Attorney's offices. But here it seems like the MFCUs were being almost cultivated.
00;10;55;26 - 00;11;15;18
Jonathan Porter
And these are planned many months out, 6 to 8 months out. So I'm sure they went to the MFCUs and said, hey, we're gonna do a takedown sometime this summer. Why don't you start holding cases and planning these so that you can participate with us? There's a lot of smaller MFCU cases than ever before. I think that's why you're seeing a bunch of the numbers driven up.
00;11;15;18 - 00;11;30;23
Jonathan Porter
So, Jody, what can you tell our listeners what we can learn from this takedown? So are there any patterns or trends that you see in the enforcement activity that seem to lead to criminal problems for those in the healthcare industry? There's got to be some trends here that we can pull out.
00;11;30;26 - 00;12;09;17
Jody Rudman
Well, one thing I noticed about this year's announcement was the more proactive approach to stopping alleged fraudulent billing. In other words, what used to be a pay and chase system is now stop it before it happens, system and the Department of Justice announced, I believe the creation of or the utilization of the data fusion center. Right. And these coordinated efforts using sophisticated and up to date AI tools and other data analytics tools.
00;12;09;24 - 00;12;50;23
Jody Rudman
I think a really significant take away from that is that outliers and billing patterns are going to be detected and sniffed out, and stopped before these claims are paid, and then chase down the line. And what that means for those who are in the provider landscape is that if questions are being asked early, if you are put on some kind of payment review or payment suspension or payment audit early, I would immediately double down on efforts internally to figure out something is driving this.
00;12;50;27 - 00;13;20;07
Jody Rudman
What is it? Where is it? How do we explain it? There may be in-house counsel get them involved. There may be outside counsel, get them involved. I do not believe that audits and suspensions and so on should. I'm sure nobody failed to take them seriously before. But I do think now, because the Department of Justice is utilizing these tools very aggressively now, it is high time to take those very seriously.
00;13;20;10 - 00;13;22;26
Jody Rudman
The minute questions are being asked.
00;13;22;29 - 00;13;46;16
Jonathan Porter
Yeah, absolutely, Jody. And that's something where I'm proud of our practice group that you lead, because we jumped on this maybe a year ago when CMS first started making statements about how they were going to take seriously their payment suspension abilities. Jody, you might remember we did an episode with Bryan Nowicki a year or so back where he told our listeners about payment suspensions, how to fight them, the catastrophic impact they have.
00;13;46;18 - 00;14;01;26
Jonathan Porter
It's a bit like doing a boxing match with both hands tied behind your back, because if you're in healthcare and let's say you're a nonprofit, what are you going to do if they turn off the spigot of money, all of a sudden you've lost your ability to care for patients, to pay your lawyers to fight the payments, especially to try to clear your name.
00;14;01;29 - 00;14;20;19
Jonathan Porter
That's a really, really big deal. And I think you're right. That's been utilized way more than ever before. And it makes sense for the super egregious knowing fraudsters out there that are opening up these shops and then moving all the money offshore as largely not who we represent, though, Jody, we're representing legitimate providers who are just trying to do the right thing.
00;14;20;19 - 00;14;46;04
Jonathan Porter
And so that could have a catastrophic impact if you're, say, a nonprofit health system trying to care for vulnerable patients, that's really hard. The other thing I noticed, Jody, in this takedown, there's still a lot of efforts to market or broker patient data. That seems to be something that is not going away, where you get these call centers and they're they're getting the identities of of elderly patients, and then they're selling it back and forth.
00;14;46;07 - 00;15;08;09
Jonathan Porter
Boy, that's something where I really wish people would realize, if you're in a situation where you're buying and selling patient data, you just got to be really careful and make sure that you're doing all of the things correctly, because that's going to draw a lot of scrutiny. There are correct ways to do it. I, I was watching the ballgame over the last weekend, and there was an ad that came on that was targeting Medicare patients, trying to get them to sign up for part C plans.
00;15;08;14 - 00;15;31;14
Jonathan Porter
There's correct ways to do this. You just got to make sure that you know that you're doing it the correct way, because you're drawing a lot of scrutiny if you're not. So, Jody, let's talk one last thing before we close. DOJ announces these takedowns every year and DOJ publishes False Claims Act statistics every year. Jody close us out by predicting where you see healthcare fraud enforcement going in future years.
00;15;31;18 - 00;15;41;21
Jonathan Porter
The numbers in the False Claims Act space are going up. And as you just told us, the numbers in these criminal takedowns are going up. Should the healthcare industry just expect these numbers to go up and up and up?
00;15;41;21 - 00;16;14;16
Jody Rudman
I think that the civil False Claims Act will continue to be on the rise. It is a significant and very important enforcement tool and responsible for the recovery of more money for and on behalf of the government than I think, any other tool at the government's disposal. So I anticipate the civil False Claims Act will continue, Jonathan, statistically, to be utilized more and to be a more significant recovery tool year over year.
00;16;14;21 - 00;16;37;04
Jody Rudman
Having said that, of course, there are some interesting cases in litigation right now that involve the scope and parameters and even constitutionality of certain aspects of the civil False Claims Act. And so it's one to watch the relator quit tam device you and I have talked about before, and I think there will be litigation continuing on that aspect of the civil False Claims Act.
00;16;37;04 - 00;17;08;28
Jody Rudman
So that may impact a little bit of these prognostications. The criminal laws. Yes. I do think, Jonathan, we are going to continue to see big takedown announcements, you know, year over year. One would hope that we'll see less and less healthcare fraud in need of prosecuting criminally. And as you pointed out, and you're so right, there are far more responsible, wonderful, great actors out there than there are fraudsters.
00;17;08;28 - 00;17;39;04
Jody Rudman
But the issue is that the money on the fraud side of the world can be very significant. And for those who are maybe have aims that are not ideal or legal, I don't think this will put a stop to truly illegal activity. So for those who are doing all the right things and seeking counsel and reading these announcements and taking away from it, okay, wait, what do I need to pay attention to and how do I need to document things?
00;17;39;04 - 00;18;01;15
Jody Rudman
And so on. My hope is that we will not see such folks swept into the ambit of larger organizations and larger takedowns and things. However, the number of criminal defendants may go down, the number of people charged may go down, but I don't think the aggressiveness of enforcement or the dollars at issue will go down for the reasons I said.
00;18;01;16 - 00;18;02;13
Jody Rudman
What do you think?
00;18;02;13 - 00;18;24;02
Jonathan Porter
Yeah, Jody, you know, you keep seeing these takedowns and you say, well, surely people will get smart and understand they can't get away with the super egregious fraud stuff. Every single year we have these takedowns and still there's going to be another one after that. I don't think people are wising up. If anything, I think they're getting more emboldened and committing more of the super egregious fraud stuff.
00;18;24;02 - 00;18;41;19
Jonathan Porter
Like on the last episode that we did, talking about hospices that are popping up and then just taking a bunch of money and shipping it off shores, that seems to happen more and more. And so with all of these takedowns, it doesn't seem like anything's slowing down, which is really alarming. As a taxpayer, I really don't like that.
00;18;41;22 - 00;19;03;11
Jonathan Porter
So hopefully at some point the criminal controls in the healthcare world are going to get better. My concern, Jody, is that the legitimate people are getting swept up in this, and the temptation is to just all right, well, let's just really enforce all healthcare. And that's where I think we run into a problem, because there's a lot of really well-intentioned, thoughtful people in healthcare that are not trying to commit fraud.
00;19;03;14 - 00;19;24;11
Jonathan Porter
And that's where I think a lot of False Claims Act enforcement has gotten into is all of a sudden you're not just looking at the super egregious knowing fraudsters, you're looking at the hospitals that there's some question about it, you know, whether you're billing the right code or we're doing incident two the right way. There's all these like, little things, and we're going to now fight over who knew what.
00;19;24;11 - 00;19;41;25
Jonathan Porter
And should you have known something different and you're doing it under a lower burden of proof, I think that's really hard. And so I agree with you, Jody. There's to be more and more enforcement. And I think a lot of it's going to be on the FCA side, even if Zafirov comes down, if that eventually gets decided by the Supreme Court.
00;19;41;27 - 00;20;07;04
Jonathan Porter
And they say that qui tams are unconstitutional, I think DOJ will find it or Congress will find a different way of working with whistleblowers. And so I don't think this is going to slow down. And so, Jody, maybe the correct way of looking at this is if you're in healthcare, just continue to try to do the right things and document all the things that you're doing and why you're doing it, in hopes that at some point, if there is enforcement, you've got a a paper record of why you're doing what you're doing.
00;20;07;04 - 00;20;07;26
Jonathan Porter
What do you think about that?
00;20;07;29 - 00;20;41;15
Jody Rudman
I absolutely agree with that. Absolutely. And although all litigation is expensive and stressful and frustrating, it can be wise and a good idea and helpful to litigate your way through some of this when there are valid, strong, quality defenses to show that, hey, look, we did not do anything wrong. And here's the proof of it. I do agree, however, Jonathan, that I don't think accusations will necessarily go away.
00;20;41;17 - 00;20;48;02
Jody Rudman
And that's really the unfortunate part for those getting sort of swept up in the dragnet, who maybe not be.
00;20;48;06 - 00;21;08;27
Jonathan Porter
Yeah, I think that's right, Jody. And that's why I think it's great that we've got this team that you're running that has legit trial experience. And so when you get the opposite side of the SuperValu story that people might remember from the Supreme Court, SuperValu went to trial and the defense won. And so it's important that that we are standing here supporting the legitimate people in health care who are trying to do things the right way.
00;21;08;27 - 00;21;13;19
Jonathan Porter
And so, Jody, thanks for your leadership and thanks for joining us on the podcast. I appreciate it.
00;21;13;19 - 00;21;18;08
Jody Rudman
It was wonderful to be here and thank you so much for inviting me.
00;21;18;10 - 00;21;46;02
Jonathan Porter
To close these differences that we're talking about on this podcast between the False Claims Act and criminal laws, these are actually really hard for a lot of people to grasp. Even a lot of really good lawyers who do this don't fully grasp why there's a difference. The route and what DOJ is looking for on each side. That's why I'm so happy to practice with Jody and the rest of our team here at Husch Blackwell, because we got a lot of people who are experienced and understand the difference between criminal laws and the civil False Claims Act.
00;21;46;02 - 00;22;07;21
Jonathan Porter
I'll give a quick story. When I was at DOJ, one of the FBI agents I worked a bunch of cases with, he went undercover once and went into this room of healthcare marketers they're talking about, hey, we're getting paid by hours. This is all fine. And then they stopped the thing, and they came over to my undercover FBI agent and said, hey, by the way, everything I just said is totally wrong.
00;22;07;22 - 00;22;27;26
Jonathan Porter
We're going to do things totally illegal. We're going to pay people by the amount of orders that they're generating. But that's very illegal. So we had to say the other thing over there. That's how you can show that someone is very aware that what they're doing is against the law. What I think a lot of people don't understand is that, to me, is the gold standard of showing criminal knowledge.
00;22;27;28 - 00;22;56;24
Jonathan Porter
And it's important to show that when you don't have that frequently, you don't have that on the civil side and false claims side. You got to have a lawyer is going to say, this is not normal. This is not what normal fraud looks like. Let me tell you stories of actual knowing criminal fraud. And so I'm just so grateful to the practice here at Husch Blackwell with all of these teams who know how to defend clients when they're up against False Claims Act investigations for things that really don't fall short of that knowing fraud standard.
00;22;56;24 - 00;23;14;02
Jonathan Porter
And that's really what we've got to hold the government whistleblowers to that knowing fraud standard. So we're going to continue to talk about those things on the podcast. I hope you continue to listen. So to our listeners, we appreciate you. And we'll see you next time.