Enforcement Trends: New DOJ Policy Targeting Whistleblowers with Weak Cases May Make Life Easier for Labs

It’s not just new laws, regulations or even court cases. Trends in health care fraud enforcement are sometimes driven by changes in prosecution policies, including those that aren’t made public. Such a potential game-changer came out of the Justice Department about a year ago in the form of an internal memo instructing prosecutors to not only decline to participate in but also actively seek dismissal of qui tam whistleblower lawsuits that lack merit. A year later, it appears that the new tough-love whistleblowers policy, aka the Granston Memo (after Michael Granston, the DOJ official who authored it) is having a real impact on federal health care enforcement activity.

The Granston Memo
Here’s a quick recap of the Granston Memo. (If you want all the gory details, see Lab Compliance Insider (LCA), March 20, 2018.) Whistleblower Law, 101. When and if the DOJ decides to take over a whistleblower’s claim, the defendant’s risks go way up as does the pressure to settle. If, on the other hand, the DOJ declines to intervene, the risk and pressure to settle shifts to the whistleblower. But there’s also a rarely used part of the False Claims Act, (Section 3170(c)(2)(A)) that lets the government actually seek dismissal of the case if it thinks the suit doesn’t serve the government’s interests.

The Granston Memo, which we only know about because somebody leaked it to the press in January 2018, calls on federal prosecutors to use Sec. 3710(c)(2)(A) power aggressively and lists the kinds of cases that prosecutors should try to get dismissed.

The 7 Cases the Granston Memo Targets for Dismissal

1. Meritless claims asserting an “inherently defective” legal theory or “frivolous factual allegations;”
2. Parasitic or opportunistic claims that duplicate pre-existing government investigations and add no useful information to the investigation;
3. Cases that pose threats to government policies or programs;
4. Actions interfering with other FCA cases;
5. Cases threatening harm to national security, e.g., actions that may compromise classified information or involve intelligence agency operations;
6. Cases where costs will exceed gain, including “opportunity costs” of not utilizing resources for higher priority cases with a better chance of recovery; and
7. Claims that may frustrate an investigation.

The Granston Memo also instructs prosecutors to notify whistleblowers when they’re thinking about pursuing a Sec. 3710(c)(2)(A) dismissal. Reasoning: Whistleblowers will be more likely to drop the case once they realize that the DOJ not only isn’t going to intervene on their behalf but may actually try to get the case thrown out of court.

Impact of the Granston Memo
While the DOJ generates more than its fair share of internal memos, the early returns suggest that the Granston Memo is actually shaping policy. We do know that FCA whistleblower recoveries in the health care segment declined in 2018, from $2.151 billion to $1.945 billion. But year-to-year recoveries were also down from 2016-17, a year before the Granston Memo came into existence.

A much more reliable indicator of the Memo’s influence is that prosecutors are now actually bringing Sec. 3710(c)(2)(A) dismissal claims against whistleblowers, most notably on Dec. 17, 2018, when the DOJ moved to dismiss 11 qui tam actions in seven judicial districts. The cases were brought by the National Healthcare Analysis Group (NHCA), a company that specializes in generating FCA cases, and essentially asserted the same complaints with different defendants, at least in the DOJ’s opinion. In its dismissal claims, the DOJ accuses the NHCA of dishonesty contending that transcripts from the “witness interviews reveals the false pretenses NHCA uses to obtain information.”

Takeaway
Regardless of the ultimate outcome, the DOJ’s move to get the NHCA cases tossed out of court is 100% consistent with the principles outlined in the Granston Memo.  It remains to be seen whether the DOJ will pursue these actions more frequently. But if it does, health care will reap the greatest benefit considering that such a disproportionate number of whistleblower FCA claims target the industry.

A DOJ operating on Granston Memo principles would also strengthen the hand of attorneys defending your lab in a qui tam suit by offering a new strategic option: Making the case to the prosecutor that the case should be dismissed under one or more of the seven Granston Memo factors.