Emphasis on Individual Responsibility Likely to Continue Even After Yates Departure

Pursuing False Claims Act (FCA) and Anti-Kickback (AKS) prosecutions against labs is just one of the things the U.S. Department of Justice does to crack down on corporate wrongdoing. On Sept. 9, 2015, the DOJ increased the pressure when then-Deputy Attorney General Sally Quillian Yates issued a memo (commonly known as the Yates Memo) calling on prosecutors to focus not just on the corporation but the individuals responsible for its transgressions. Now that a new administration has begun and Yates has been replaced

Labs no longer qualify for leniency based on cooperating with law enforcement unless they furnish "all relevant facts relating to the individuals responsible for the misconduct."

by newly-confirmed Attorney General Jeff Sessions, some in health care may be wondering if the policy in the Yates memo will be pursued as vigorously.

While nobody can be sure what's going to happen, here are a few things we do know about the Yates Memo and some predictions for what its future may hold.

The 3 Key Changes in Prosecution Policy
While the Yates memo is best known for its emphasis on holding individuals accountable for corporate wrongdoing, it's worth a reminder that it has several practical implications beyond simply that policy on individual accountability. Here are three important ways the memo impacted DOJ enforcement policy:

1. Labs no longer qualify for leniency based on cooperating with law enforcement unless they furnish "all relevant facts relating to the individuals responsible for the misconduct."

2. Absent "extraordinary circumstances," DOJ settlements with corporations would no longer release the individuals responsible for the transgression from liability.

3. The DOJ will sue individuals for money damages regardless of their ability to pay.

(For more about these changes and their practical implications for labs being investigated, see Compliance Perspectives for an in-depth article about the Yates memo in the December 2015 issue of GCA.)

Health Care Prosecutions in the Aftermath of the Yates Memo
Roughly 17 months after the memo was issued, it is clear that the DOJ has embraced the policy as evidenced by a discernible pattern of bringing fraud cases against not just health care organizations but their individual execs/ directors/managers. Three recent examples:

Tenet: In October 2016, Tenet Healthcare Corporation and two of its hospitals agreed to pay $513 million to settle claims of paying bribes and kickbacks in exchange for patient referrals. Under previous policy, the settlement would have likely released not just Tenet but the individuals involved. But the DOJ stayed true to the Yates Memo and on Jan. 24 indicted Tenet's former senior vice president of operations for his alleged role in the $400 million scheme, claiming that he caused the bribes and kickbacks to be paid and actively concealed the scheme by falsifying financial records and circumventing internal accounting controls.

NAHC: In September 2016, the board chairman and a senior vice president of North American Health Care (NAHC) paid $1 million and $500,000, respectively, to settle claims they had a role in the skilled nursing company's alleged billing of medically unnecessary rehabilitation services provided to

The DOJ has also been faithful to the Yates Memo mandate of pressuring health care organizations into playing ball with the government by turning on their execs/ directors/managers in exchange for leniency.

residents. A week later, NAHC concluded its own separate $30 million settlement with the DOJ. Consistent with Yates Memo principles, the settlements covered only the parties involved and expressly excluded any other individuals from the release of liability, thus leaving the door open for further prosecutions.

Tuomey: In October 2015, Tuomey Healthcare System agreed to shell out $72.4 million to settle claims of paying part-time specialists for referrals of hospital patients and falsely billing Medicare $39 million. But in accordance with Yates Memo policy, the settlement did not release the South Carolina system's individual executives. One of those executives was former CEO Ralph "Jay" Cox III, whom the DOJ claimed was the driving force behind the "sweetheart deals," undertaken despite attorneys' warnings, designed to keep physicians from referring outpatients to a new freestanding surgery center. In September 2016, Cox agreed to pay $1 million and accept a four-year ban to settle charges stemming from his personal involvement in the scheme.

The DOJ has also been faithful to the Yates Memo mandate of pressuring health care organizations into playing ball with the government by turning on their execs/directors/managers in exchange for leniency. The clearest evidence for this is the growing prevalence of inserting into settlement agreements a "cooperation clause" requiring the settling health care organization to:

• Fully cooperate with investigations into the allegations covered in the settlement, including into "individuals and entities" that the settlement does not release from liability;

• Make "former directors, officers and employees available for interviews and testimony"; and

• Furnish non-privileged documents to the government concerning the conduct covered in the settlement.

According to Bloomberg BNA, in 2016, 46% of FCA settlements included a cooperation clause; by comparison, cooperation clauses appeared in only 17% to 32% of FCA settlements made between 2008 and 2015.

What Happens Next?

"[S]ometimes, it seems to me that the corporate officers who caused the problem should be subjected to more severe punishment than the stockholders of the company who didn't know anything about it."

—Jeff Sessions,
Attorney General

Internal federal government policies are always subject to change, especially when a new President takes office. Many may be wondering if this enforcement policy emphasizing individual accountability will continue under a new administration and new Attorney General. While no one can predict the future, based on what we know so far, it looks like the Yates Memo is going to be around for at least a little while longer.

In fact, the early indications are that the DOJ will continue to follow Yates Memo policy, at least for the time being. Here are a few reasons labs and their executives can expect to see continued emphasis on holding accountable not only labs but also the individuals running them:

• New Attorney General Jeff Sessions is a former prosecutor with a track record of aggressively pursuing corporations and white collar crime. As Washington D.C. attorney John F. Wood predicts in a November 30, 2016 article for Inside Counsel "[C]orporate America should not expect a weakening of corporate criminal prosecutions."

• During his confirmation hearings, Sessions said he intended to increase FCA enforcement and continue the current emphasis on charging individuals tied to corporate wrongdoing. "[S]ometimes, it seems to me," Sessions testified, "that the corporate officers who caused the problem should be subjected to more severe punishment than the stockholders of the company who didn't know anything about it."

• Last but not least, as Ms. Yates noted in one of her last speeches, holding individuals accountable for corporate wrongdoing is not based on political party or ideology. It is a core principle of criminal justice that continues regardless of which party is in power. Moreover, in its short existence, the policy has proven both potent and effective in bringing corporate wrongdoers to justice.

Takeaway: The Yates Memo has made a discernible difference in federal fraud enforcement and signs indicate that the DOJ is likely to continue following the Yates Memo policies under the new administration.