The U.S. Department of Justice (“DOJ”) announced its False Claims Act (“FCA”) enforcement statistics for FY 2023 and identified key priorities for FCA enforcement in 2024 and beyond. The DOJ continues to pursue FCA enforcement aggressively, highlighting the need for government contractors and others receiving federal funds to have robust, comprehensive and up-to-date compliance programs in place to minimize their potential exposure to FCA liability.

The FCA permits private citizens to bring lawsuits as whistleblowers (known as qui tam relators) alleging violations of the FCA against defendants and to share a percentage of any recovery by the government, thereby creating substantial incentives for whistleblowers to assert claims of fraud against the government. In FY 2023, the DOJ paid whistleblower plaintiffs nearly $350 million in connection with the resolution of FCA claims. The FCA also imposes treble damages and penalties on those who knowingly present false or fraudulent claims for payment to the United States, posing potentially enormous risk to government contractors and health care providers that routinely submit large numbers of claims for reimbursement to the federal government.

Significant Increase in DOJ-Initiated FCA Cases in FY 2023

The DOJ announced that it recovered nearly $2.7 billion under the FCA and opened 500 new FCA cases in FY 2023 alone. According to the DOJ, this represented the highest number of non-whistleblower-initiated cases ever brought in a single year, and it is a dramatic increase of 64% over the number of government-initiated FCA cases reportedly brought in FY 2022. This suggests the DOJ may have an increasing ability to use new technology to identify and bring FCA cases on its own. The DOJ announced that the federal government and private whistleblowers also entered into 543 settlements and judgments in FY 2023. Roughly half of these settlements related to claims of fraud in government loan programs such as the Paycheck Protection Program (“PPP”), created to provide assistance during the COVID-19 pandemic. According to the DOJ, the total recovery in those cases was less than $50 million, demonstrating that the DOJ will pursue FCA claims even for relatively small recoveries as a deterrent to others.

Private whistleblowers filed 712 new FCA suits in FY 2023. The DOJ also announced it recovered more than $2.3 billion in FY 2023 in FCA cases initiated by whistleblowers, representing more than 85% of the nearly $2.7 billion the DOJ recovered, demonstrating the DOJ’s continued significant reliance on private whistleblower actions as an important part of the DOJ’s FCA enforcement efforts.

Continued Substantial FCA Recoveries for Health Care Fraud

Based on the FY 2023 results provided by the DOJ, health care fraud continues to be a significant focus of the DOJ’s enforcement efforts. The DOJ announced it recovered more than $1.8 billion in cases involving alleged health care fraud under the FCA in FY 2023, representing more than two-thirds of the total FCA funds recovered last year. Those FCA settlements related to matters involving a wide range of entities and individuals in the health care industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities and individual physicians, as well as pharmaceutical companies and medical device manufacturers. A review of FCA settlements in FY 2023 reveals that the DOJ and FCA whistleblowers targeted the following types of fraud, among others:

  • Medicare, Medicaid and TRICARE fraud
  • Inaccurate diagnosis code reporting under Medicare Advantage (Medicare Part C)
  • Knowing submission of inaccurate information or knowing failure to correct inaccurate information
  • Unnecessary services and tests
  • Kickbacks
  • Substandard care
  • Billing improprieties
  • Claims relating to the opioid epidemic

The DOJ’s Use of Civil Investigative Demands in FCA Investigations

The DOJ also announced that it issued more than 1,500 Civil Investigative Demands in FY 2023, seeking documents, interrogatory responses and oral testimony. According to the DOJ, this was the most ever in a single year.

In short, the DOJ’s FY 2023 statistics demonstrate that the DOJ and private whistleblowers are continuing to aggressively pursue claims under the FCA and that many new FCA cases are already underway, with more undoubtedly still in the pipeline.

DOJ’s False Claims Act Priorities in 2024 and Beyond

In addition to the DOJ’s announcement, at the Federal Bar Association’s Qui Tam Conference, DOJ Principal Deputy Assistant Attorney General Brian Boynton identified some of the DOJ’s top FCA enforcement priorities for FY 2024 and beyond:

Cybersecurity Fraud

The FCA will be the DOJ’s primary mechanism to ensure that government contractors and grant recipients follow federal cybersecurity requirements, consistent with the Civil Cyber-Fraud Initiative, started in 2021. In his remarks, Mr. Boynton stated that the DOJ “will continue to dedicate resources to investigating companies that fail to comply with their cybersecurity obligations” and that those cases will “be a significant area of enforcement in the coming years.”

COVID-19 Pandemic Relief Fraud

The DOJ announced it will also continue to use the FCA to pursue alleged fraud in connection with PPP loans and other federal assistance provided in the aftermath of the COVID-19 pandemic, even though Mr. Boynton acknowledged that many recoveries in those cases are “fairly small.” Among the DOJ-initiated claims in this area was a claim against a loan processor for failing to implement appropriate fraud controls to comply with Bank Secrecy Act and Anti-Money Laundering requirements.

Health Care Fraud

To no one’s surprise, the DOJ advised it will continue to pursue allegations of health care fraud as a top FCA priority. In his remarks, Mr. Boynton emphasized that one area of focus is on kickbacks providing financial inducements to generate health care referrals, including alleged violations of the Anti-Kickback Statute and the Stark Law.

Nursing Home Fraud

The DOJ identified various types of alleged fraud schemes involving nursing homes, including medically unnecessary rehabilitation therapy, the misuse of antipsychotic medications, medically unnecessary lab tests and grossly substandard care.

Claims Against Private Equity Firms and Other Third Parties That Cause the Submission of False Claims

Mr. Boynton also emphasized that the DOJ will seek to hold third parties accountable under the FCA “if their conduct played a significant and foreseeable role in” the submission of false claims. As an example, coding consultants and billing specialists may find themselves in the DOJ’s crosshairs if they cause providers to improperly inflate payments by upcoding or otherwise submitting unsupported claims.

Mr. Boynton specifically singled out private equity and venture capital firms that cause the submission of false claims either by directly attempting to influence health care provider treatment decisions or, more indirectly, by setting revenue targets and benchmarks that influence patient care decisions so as to maximize reimbursement. Investors should beware.

What You Need to Know

The DOJ has made abundantly clear that it will continue to use the FCA to aggressively pursue fraud claims, particularly in the areas of cybersecurity compliance, PPP loans, health care and nursing home fraud and third-party conduct allegedly resulting in the submission of false claims. In today’s environment, government contractors and others receiving federal funds would be well-advised to review the DOJ’s aggressive FCA enforcement activity and make sure their compliance programs are current and functioning properly to minimize the risk of potential FCA liability.

It is also worth mentioning again the United States Supreme Court’s decision in June 2023 in the consolidated cases of United States ex rel. Schutte v. SuperValu, Inc. and United States ex rel. Proctor v. Safeway, Inc. (the subject of a prior alert), in which the Court held that a FCA defendant’s subjective intent is critical in determining whether a defendant violated the FCA. In light of the Court’s ruling and the DOJ’s continued aggressive FCA enforcement, government contractors and others submitting claims for federal funds should consider contemporaneously documenting their interpretations of complex, ambiguous regulations relating to reimbursement, since a reasonable, good-faith interpretation of an ambiguous regulation may help in defending against potential FCA liability.

Harris Beach’s Government and Compliance attorneys are closely watching these and related issues. If you have questions or want more information about steps to take to minimize the risk of FCA liability, please reach out to attorney Terrance P. Flynn at (716) 200-5120 and; attorney Peter M. Hoffman at (516) 880-8112 and; attorney Christopher C. Palermo at (914) 298-3032 and; or the Harris Beach attorney with whom you most frequently work.

This alert is not a substitute for advice of counsel on specific legal issues.

Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as Washington D.C., New Haven, Connecticut and Newark, New Jersey.