Not Following Government Guidance May Be Used Against You in False Claims Prosecutions

Unlike the regulations they purport to clarify, guidance materials issued by federal agencies don’t carry the weight of law. Accordingly, the longstanding efforts of the U.S. Department of Justice (DOJ) to prosecute labs and other providers for failing to adhere to guidance has been highly controversial. Now, after a bit of a relapse, the DOJ strategy of infusing guidance with quasi-legal authority seems to be back in play.

The Controversy Over Treating Guidance Like Law   

If regulations were simpler, there’d be no need for government agencies to issue guidance explaining what they mean. But in the real world where regulations are far from clear and easy to understand, guidance provides crucial clarification. This is especially true in the health care realm.

While helping regulated entities, prosecutors, judges and other stakeholders interpret the law, guidance materials don’t carry the weight of law. However, the DOJ has prosecuted regulatory entities for not complying with guidance materials. In the health care context, that typically involves using guidance as evidence of guilt for False Claims Act (FCA) violations. The argument: A lab or other provider that submitted a false claim did so “knowingly” to the extent it failed to follow the recommendations set out in guidance pertaining to the issue.

There’s a constitutional problem with this practice, namely, the principal that agencies may regulate only within the authority that Congress delegates to them. The instrument of Congressional delegation, the Administrative Procedure Act, requires federal agencies to go through the notice-and-comment rulemaking process to promulgate new regulations. The guidance that agencies issues doesn’t require notice-and-comment rulemaking. So, treating it like a law would circumvent the constitutional process.

The Trump Administration: The Sessions & Brand Memoranda

The above reasoning was the basis of a November 2017 memorandum written by then U.S. Attorney General Jeffrey Sessions memorandum banning publication of guidance documents “that purport to create rights or obligations binding on persons or entities outside the Executive Branch (including state, local and tribal governments).” The Sessions Memorandum directed the DOJ to adhere to certain principles in constructing and publishing guidance documents, including refraining from the use of mandatory language and including specific language in the guidance to point out that the guidance represents a voluntary standard, non-compliance with which would not result in enforcement action. Sessions also called for including unambiguous statements that published guidance documents are not legally binding final agency actions.

In January 2018, the DOJ issued another memorandum to limit the use of agency guidance documents in litigation. What came to be known as the “Brand Memo” (named for then-Associate Attorney General Rachel Brand) stated that “effective immediately for [affirmative civil enforcement] cases, the Department may not use its enforcement authority to effectively convert agency guidance documents into binding rules.” Specifically, “this memorandum applies when the Department is enforcing the [FCA], alleging that a party knowingly submitted a false claim for payment by falsely certifying compliance with material statutory or regulatory requirements.”

The DOJ codified the policy statements from the Brand Memorandum into the Justice Manual at Section 1-20.000, which states that “criminal and civil enforcement actions brought by the Department must be based on violations of applicable legal requirements, not mere noncompliance with guidance documents issued by federal agencies, because guidance documents cannot by themselves create binding requirements that do not already exist by statute or regulation.” Therefore, the “Department may not bring actions based solely on allegations of noncompliance with guidance documents.”

The Biden Administration: The Garland Memo

Perhaps not surprisingly, when the administration changed, so did the DOJ policy. On July 1, 2021, Attorney General Merrick Garland issued a memorandum “clarif[ying] the principles that should govern the issuance and use of guidance documents by the Department of Justice” and rescinding the Sessions and Brand memoranda. The Garland Memo contends that the previous administration’s directives against using guidance materials as evidence of proving “knowingly” in FCA cases are “overly restrictive” and might discourage agencies from developing guidance in the first place.

Just over two weeks later, the DOJ issued an interim final rule to implement the Garland Memo directive to “revoke the amendments to its regulations,” characterizing them as “unnecessary and unduly burdensome, lack[ing in] flexibility and nuance and limit[ing] the ability of the Department to do its work effectively.” The interim rule also states that the Justice Manual sections regarding agency guidance revised by the Trump administration “will be revised as appropriate at a later date.”

Impact on Labs

The Garland Memo and new interim rule reaffirm the DOJ’s position that guidance documents don’t equate to regulations. But actions speak louder than words. The recent DOJ actions mean that US attorneys can once more cite failure to follow guidance as evidence that a lab “knowingly” submitted a false claim in violation of the FCA. Essentially, we are right back to where we were in 2017.

Going forward, expect DOJ attorneys to continue and perhaps even step up their reliance on the Medicare Manuals, agency memoranda, advisory opinions, and other guidance documents to go after labs that don’t follow guidance advice. Also likely to benefit from the new/old DOJ policy are whistleblowers to the extent it opens the door to using guidance violations as evidence in qui tam lawsuits against labs and other providers.

Bottom Line: While being aware of and seeking to follow HHS, OIG, CMS and other guidance is always sound advice, it’s especially important now that the DOJ can use guidance to establish your guilt for an FCA violation.