AHLA's Speaking of Health Law
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AHLA's Speaking of Health Law
Behind the Seal: Why DOJ Investigations Drag On—and When They Shouldn’t
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Jackie Papish, Partner, Barnes & Thornburg LLP, speaks with Brandon Helms, Shareholder, Hall Render Killian Heath & Lyman PC, about issues that arise during delays in Department of Justice (DOJ) investigations under the False Claims Act (FCA). They discuss potential reasons for these delays and what they mean for providers in terms of time and cost; how a 2023 case from the Fifth Circuit, United States ex rel. Aldridge v. Corporate Management, Inc., illustrated excessive DOJ delays; whether Congress intended for these kinds of delays when it passed the modern FCA; and possible ways to improve the system. Brandon recently co-authored an article in Health Law Connections magazine about this topic. From AHLA’s Hospitals and Health Systems and Fraud and Abuse Practice Groups.
Watch this conversation: https://www.youtube.com/watch?v=IuEj2w0wlTs
Read the Health Law Connections article: https://www.americanhealthlaw.org/content-library/connections-magazine/article/e157919b-1308-48af-b1a0-d41f1dba2f66/Behind-the-Seal-Why-DOJ-Investigations-Drag-On-and
Learn more about AHLA’s Hospitals and Health Systems Practice Group: https://www.americanhealthlaw.org/practice-groups/practice-groups/hospitals-and-health-systems
Learn more about AHLA’s Fraud and Abuse Practice Group: https://www.americanhealthlaw.org/practice-groups/practice-groups/fraud-and-abuse
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SPEAKER_02Welcome to AHLA's Speaking of Health Law podcast. My name is Jackie Papuch. I'm a partner of Francis Dornberg in Washington, DC, an incoming chair of the hospitals and health systems practice group. I'll be your host for today's podcast. Today we have a very special guest joining us to talk about a topic that keeps healthcare executives and lawyers like Jackie and my special guest at night. And that is Department of Justice investigations under the False Claims Act, and more specifically, why they sometimes seem to drag on forever. Joining me today is Brandon Helms. He's a shareholder at Hall Render and co-author of the recent AHLA connections article Behind the Seal, Why DOJ Investigations Drag On and When They Shouldn't. Brandon, can you please introduce yourself?
SPEAKER_00Yes, thanks, Jackie. Hi, my name is Brandon Helms. I'm a partner at Hall Render in the Detroit office. I focus on compliance investigations and defending government False Claims Act investigations as well as litigation. And I'm also a vice chair on AHLA's fraud and abuse practice group.
SPEAKER_02Thanks, Brandon. So let's start with some of the basics. How about? I'd like to lay a framework for some of our listeners, maybe who aren't as familiar with the False Claims Act. Can you just give a little bit of a basic understanding of how the False Claims Act works?
SPEAKER_00Sure. So the False Claims Act prohibits people from submitting false claims to the government or from causing others to submit false claims to the government. And there's some other claims in there as well, but that's it in general. And there's four elements to an FCA violation. One is a false claim, uh, and then two, knowingly submitted. That's two different elements. So knowingly is you have actual knowledge of the falsity or reckless disregard for the truth or deliberate ignorance, and then submitted to the government. So it has to be a claim submitted to the government as opposed to like a third-party payer. Um, and then fourth, that the the falsity is material to the government's decision to pay. Under the False Claims Act, the government can seek up to treble damages as well as per claim penalties. So in the healthcare space, those numbers can be catastrophic because there are so many claims submitted to the government. Most false claims act cases start as whistleblower lawsuits, uh, which are filed filed under seal. These are known as uh key TAM actions, and the plaintiffs are called relators. And then under the under the False Claims Act statute, initially the government gets about 60 days to investigate. Well, not about, it gets 60 days to investigate, and that's why the case stays under seal. However, the government can get extensions of that seal period, and it's often common for them to get uh a number of seal extensions in three or six month increments.
SPEAKER_02And Brandon, can we just break that down a little bit more? So the um the key temper leader goes to the to goes to the government, um, goes to the um goes to the court, files the complaint under seal. What does that mean for the folks who are named in that complaint, the defendants, the hot potentially the hospitals and the health systems? Do they find out about it and when do they find out about it?
SPEAKER_00Yeah, so in the beginning, they have no idea. Uh whoever might be named as a defendant, it's kept sealed from them and the public at large. A copy is sent to a local U.S. attorney's office as well as to Maine Justice in DC. And then they decide who is going to be investigating it, both from you know from an attorney's standpoint, from an office standpoint, and then what agents they're going to be working with. Um, and we'll we'll get into the nuances here, but those investigations can last for a long time. And the generally the the defendants in an SEA lawsuit don't find out that they're defendants until either the government's uh close to wanting to negotiate with them, or they send a civil investigative demand to the target telling them they're being investigated. Or neither of those things might happen and the the government might decline intervention and then the suit is unsealed, and then at that point the whistleblower, the relator, wants to litigate against the target.
SPEAKER_02So do the defendants have any ability to say, hey court, that you know, this seal shouldn't drag on forever? Like at what point can they get involved and say, guys, come on, this has to come to an end?
SPEAKER_00Yeah, unfortunately, no. Uh, while the case is under seal, the defendant doesn't have much control over how fast the investigation moves or how fast the case goes. They're they're really at the mercy of the government to decide when the next step is taken.
SPEAKER_02And Brandon, you have some experience with working on the government side, right?
SPEAKER_00I I do, yes.
SPEAKER_02Okay. So can you maybe for our listeners here, help them, you know, give them a little inside baseball to the extent that you can in terms of maybe why these investigations take as long as they do. Obviously, the statute, the false claims that provides for this 60-day period. Um, I don't know in really any instance that I've ever experienced that's happened. Um, you know, that that 60-day sale period has been um adhered to. Oftentimes there are you know these these extensions, but um, you know, they could be what six months, a year, two years. We often explain to our clients that these really are um like they can be a marathon in in some instances, just having to figure out you know how to how to um you know tag along uh for the ride uh sometimes. So from your experience, um, you know, do you have any uh insight for our listeners?
SPEAKER_00Yeah, so I spent eight years as an AUSA in Detroit, and I spent half of that time doing civil false claims act investigations. Uh there's a lot of legitimate reasons why they take a long time. Uh one, these are fraud actions, so they're they're complex from the start. You have to prove what the defendant uh was thinking and like and how you know that that's what they were thinking. And you don't you usually don't have like a recorded statement or an email saying like, let's commit fraud. So it takes a lot to piece that together to build your case. Um on top of that, a lot of the whistleblower lawsuits are related to the healthcare industry, which as we know is a pretty complex, heavily regulated industry. So it can be even more complicated to figure out is there a you know, is there a violation here and is it one that should be investigated? Um as the Supreme Court noted in Escobar, uh the FCA is not intended to punish garden variety breaches of contracts or regulations. So DOJ has to pay special attention as to whether or not this is something that's worth pursuing. Um and then on top of that, unless there's a criminal, a parallel criminal investigation, DOJ doesn't have a ton of tools to work with. Uh no grand jury subpoenas, fewer agents, no undercover cameras, you know, none of the cool stuff you see in like CSI and stuff like that. You're you're really limited to like what you can do and maybe one agent can do. Um so it takes time. Um so those are m some of the legitimate reasons. Um and I would say, like, I have a lot of respect for DOJ and for my for my fellow prosecutors when I was doing it. But there are times where I've seen investigations take longer than they should. Um, you know, I I I've seen both on the defense side now and when I was in AUSA some instances where not much happened during the six-month sphere period, and then the government just kind of submits a boulder plate motion saying we need another six months to keep investigating, and and those motions are granted. And that's the type of situation where I'm hoping that there can be some change in the way that the the way DOJ investigates these cases to try and move them forward faster.
SPEAKER_02Well, let's talk about some of the practical implications, right? So both of us now are in you know uh defense side mode, right? And I think you know, both of us um represent uh providers who can be subject to these types of actions. What does it mean, Brandon, for our clients? And specifically, maybe we're we're talking about healthcare providers here on the ground who are dealing with this. And one of the key assumptions here is that there is, you know, this is an ongoing, they're being subject to an ongoing investigation, I think, right? Because you know, oftentimes, you know, a client gets a CID and there's you know, generally an assumption, depending on certain, you know, um key factors, that there's a pending um key TAM complaint that's under seal. Um, and you might deal with that investigation for years before the government would potentially uh confirm that there is, in fact, a key TAM complaint and and seek even a partial unsealing of it to confirm that.
SPEAKER_00Yeah, it's it's scary and and for a good reason. Um, I mean, the as I mentioned, the damages can be pretty catastrophic and they don't, like you said, they don't move fast. So if a target gets wind that they're the target of an FCA investigation, whether it be because they are served with a civil investigative demand, or maybe they hear about some of their employees being interviewed, uh it it should trigger a couple responses. Um, aside from being scared and freaking out, that target should immediately engage counsel to try and get a handle on what's going on. Um, you know, try to think about potential documents, try to start crafting a counter-narrative to whatever the government might be investigating, and then also just set expectations. You know, be prepared for a lengthy investigation process, be prepared for the fact that you're likely going to be spending a decent amount on legal fees. Um, and also know that if you if you're at this point in an investigation, the government has at least some reason to believe that fraud has been committed. And so at this point, it's going to be hard to convince those DNA DOJ investigators that they're wrong or that there's nothing there. So it's not it's not just going to be a matter of saying, well, we did everything right, you should just go away. You're gonna need to provide documents and probably witnesses to corroborate that before you can start suggesting to DOJ that they should end their investigation.
SPEAKER_02Do you think that, and and having the experience that you do, do you think that the government fully appreciates or takes into account the uh the cost that these types of investigations have, these these types of you know pending complaints over years and years may have on those who are subject to those investigations?
SPEAKER_00In general, I would say no, unfortunately. Uh for longtime prosecutors who have been doing FCA cases, or perhaps for some uh DOJ attorneys who spent time in private practice beforehand, they might have a sense of of the cost. Um, you know, in a litigation, one of the most timely and time-consuming and costly parts of the litigation is collecting and producing documents. And that's the same for responding to a CID. Um, so I you know, if if you haven't had experience doing that or experience dealing with a you know a defendant who says, hey, I just can't afford to keep doing this, if you haven't done that, then you you don't really have a sense of how expensive it is on the other side.
SPEAKER_02What are we talking about, Brandon? I know we don't have to talk about like specific numbers, but I'm sort of curious. Um, you know, what what is maybe the range at which these types of investigations and and defending these types of complaints can can get to?
SPEAKER_00It it's kind of sticker shock. Uh there is no real cheap investigation. So I would I would say on the low end, if you have an investigation that only lasts maybe a year or less and doesn't require a ton of documents, on the very, very cheap side, that's probably not gonna happen very often. You're looking at like$50,000 to$100,000 in legal fees. I think if you have an investigation that's going to last for a couple years and you're gonna have to be trying, if you're gonna try to prove to the government that you're you don't have a violation or the violation is much smaller than what the government's thinking, you're probably looking at closer to like$500,000. And if you're really looking at an investigation that is leading toward the government intervening and litigating if you don't settle, uh at the very least, you're looking at like a million dollars. And if you're using a huge law firm, you're you're going to exceed that million dollars. So um it's it's pricey. You don't want to find yourself in this situation.
SPEAKER_02Yeah, yeah. Well, let's talk, uh, take a couple of minutes to talk about judicial oversight of the seal period specifically, right? Because that's um kind of the the meat of the article for for um the connections article that was uh uh published and which is the subject of this podcast. So um let's talk a little bit about the case that you reference in your article. It's called Aldridge, um, which seems to illustrate how some of these delays can extend uh for, I think you know, the Aldridge case was was many, many years, right? Uh so can you just give us a little bit of a background of that and walk us through what happened there?
SPEAKER_00Sure. So the Aldridge case is uh from the Fifth Circuit in 2023. Um it started in May 2007 as a sealed key TAM. The conduct, the alleged fraud conduct spanned from 2002 to 2013, so a really long time period. Um over eight years, DOJ obtained 18 extensions of the seal period. The defendants first learned about the investigation in March 2010, so about seven years after the investigation started. But even then, the government did not intervene in the case until September of 2015, so another five years had passed. Um at that point, the defendants moved to dismiss, arguing that the government's eight-year delay uh prejudiced them. The district court denied that motion. It went to trial finally in January of 2020, so 10 years after the defendants learned about the case. Uh, the jury found them liable for about 10 million, which the district court then trebled to 32 million. So the defendants appealed. On appeal, the Fifth Circuit upheld the jury's verdict, but they held that the government's allegations did not relate back to the relators' initial complaint. And then they also refused to apply the FCA's tolling provision because they found that the government had not acted with due diligence. And as part of that opinion, the Fifth Circuit chided the district court for enabling the gainsmanship of the government by just kind of rubber stamping all of their ex seal extension requests. Um so as a result of that decision, the fifth the Fifth Circuit reduced the damages by about half. So down to about 16 million, which is a positive for the defendants, but still, you know, after 13 years of defending themselves in an investigation and then a litigation, those defendants still had to pay$16 million uh in FCA damages plus whatever they paid in legal fees to the relator.
SPEAKER_02Um and what were some of the factors, I guess, in Aldridge um when the court made the decision? I mean, did they look at things like, well, you know, after waiting for so long, the defendant wasn't able to actually um uh uh really defend itself because it had been, you know, so many years and things weren't preserved and witnesses weren't around. Like, does that impact did that impact that decision? And would you think that be a factor um that courts will think about moving forward?
SPEAKER_00That that definitely played a role in it, the fact that the defendant, you know, the real risk of losing documents and losing witnesses and not being able to defend yourself. One of the other key things that the district court found was that in one of the government's motions to extend the seal period, they had noted that their expert had um had suggested that they intervene in the case, but still several years passed between when that expert said the case was ready to be litigated and when the government actually litigated. And so that was another example of how the government was not moving with adequate diligence.
SPEAKER_02And do you find that that's the Aldridge case case is really, you know, just an outlier? Um, that it's kind of an exception, or has this become the norm that folks like us have to deal with now on a more regular basis?
SPEAKER_00I'd like to say both. Um I think it's an exception in the fact that it it was a really long time period. I mean, 13 years from uh from filing until a um a trial is is pretty long. But it's not uncommon for these investigations to go on for several years before the government makes an intervention decision. Uh, you know, it and if the it if there's not a resolution pre-litigation, you know, having a five-year investigation period is is pretty common. And then once you're litigating, you're looking at least two to three years, and that's on the short end before you reach a resolution. So uh unfortunately, no, these cases last a long time.
SPEAKER_02Looking to just the statute itself and um, you know, what Congress intended when that was enacted and this 60-day steal period, it just seems so far off from what is happening in reality in terms of you know these extensions constantly happening. Um, you know, do you feel like this is really what Congress intended when it when it passed um this this statute uh is and and I'll stop there. I have lots of follow-up questions, but yeah.
SPEAKER_00I I think in part, so it when Congress passed the modern FCA in 1986, the main point was to help spur DOJ to do more fraud investigations. And that has certainly happened. I mean, last year there were 1700 new FCA investigations, 1300 of those were key actions, uh, there were 6.8 billion in recoveries last year. So, in one sense, yes, like the FCA is doing what Congress wanted it to do. On the other hand, I don't think Congress wanted these investigations to go on forever. Yeah, you know, 60 days is not a lot of time, and back then there weren't there wasn't ESI, so it makes sense that they take somewhat longer now. But the I don't think Congress intended for the FCA to uh potentially bankrupt companies to defend them or incentivize them to settle because it's cheaper to settle than it is to defend the investigation. And those things do happen. So it you know it can be incredibly unfair for an FCA def uh defendant to to be asked five years after the fact, hey, you know, get us documents and find us witnesses that can uh respond to this and and then also defend yourself when you have no idea that it's coming.
SPEAKER_02Yeah, yeah. Well, we've talked a lot about sort of the the practicalities around the seal and maybe some of the downsides of it. And um, you know, I I think for our listeners it could be really helpful to just spend a few more minutes uh and and chat through some of the practical um solutions and and what is the path forward uh based on you know what we know today and the case law as it is developing and the way the courts are treating these types of issues, um, you know, would in terms of any kind of changes that you see moving forward, what what would be some more realistic changes that could improve the system?
SPEAKER_00I I think one thing that could improve it would be DOJ, both main justice and then local U.S. attorneys' offices, to, if they don't have rules or guidance on this, to implement guidance on supervising the the progress of a FCA investigation. I think it varies from office to office a lot. Um and so if as long as as long as supervisors are making sure that their line A USAs or their DOJ trial attorneys are showing progress on like a you know a three or six month basis in their investigations, I think that would go a long way to holding them accountable. I think something else that uh the courts could do is when they're considering a motion to extend the seal, not just accepting boilerplate recitations of we've been investigating, we need more time to investigate, please grant our extension. Because there are a lot of courts that do that. I don't think that investigators should have to spell out everything they did in the last seal period and then explain everything they intend to do in the next SEAL period. But requiring some detail and some explanation, I think would help hold AUSAs accountable to making sure that, you know, hey, if I know I'm gonna have to report this in the next six months, I better have something to show for it.
SPEAKER_02Yeah, and it seems to be fairly ad hoc. I mean, in in my experience, even that um some it's it sounds like some judges are a little bit more sticklers than others, and and some US attorneys' offices have different policies in comparison to others just based on geographic region. Um so it sounds like we need some uniformity, perhaps, um in the way in which these types of issues are approached or some sort of uniform policy could be could be helpful. What about um, you know, is there any role for defense counsel here? I mean, is there anything that defense counsel can do to help usher these along or um you know assist uh assist the government in figuring out uh you know which direction they need to go?
SPEAKER_00Yeah, I mean, for reasons we discussed earlier, it can be hard. Um, companies have document retention policies and they have them for a reason. So you know, if you have like a three year document retention policy and you don't learn about an investigation until five years later, there's a good chance you've lost. Some key documents. Um, I think some things that companies can have in place. One would have already having a robust compliance program and making sure that when tips come in that they treat them seriously and and follow through on investigating them, that will help that will at least help um prevent uh whistleblower lawsuits from being filed, or if they are filed, at least the the company has a little bit of a heads up as to what's going what's coming down their way. Um and then when a company has some kind of awareness of an investigation, whether it's from a CID or you know, they learn that a former employee is being investigated, they should move as fast as possible to try and learn the facts and start preparing a defense. And that will likely involve engaging outside counsel. Um but doing all of those things, there's there's no foolproof way to avoid an FCA investigation. So it's just a matter of having policies in place to make sure that if when one when one happens, you're best positioned to deal with it.
SPEAKER_02What about, and and just to make sure this is very clear for our listeners, for those who aren't as familiar with this process, so the key TAM complaint gets filed, right? And then there's this seal period in which the DOJ is going to be investigating the allegations contained in that complaint. And then it determines whether it's going to decline to intervene or whether it's going to intervene and take over the case and move forward. Um, and you know, that time period, uh that seal period obviously varies quite a bit and can extend. Is one solution potentially uh that you know we've got this 60-day statutory seal period? Um is is it is one solution that maybe DOJ implement or somehow um judges uniformly start implementing? I mean, who knows uh what that would look like? Um, but but that there be a required early declination and that the government just say, you know what, 60 days have passed, haven't had the time to figure out what we're gonna do exactly, but for now we're gonna decline because we don't know affirmatively that we want to move forward, but we'll reserve our right to intervene at a later date. I mean, what does that look like as a potential solution? Is that practical? Um, what are some of the downsides or upsides, for example, of that solution?
SPEAKER_00Yeah, but I mean, the one downside is I mean, the government and and courts too, they don't want to prematurely kill an investigation that might turn out to have merit just because in the beginning it's not moving fast enough. And I understand that. But it it would be helpful that if as soon as DOJ starts to starts to think like, you know, we're we're probably going to decline this case to try and do whatever it needs to do quickly to confirm that. Because the sooner the case is declined, uh it's a breath of fresh air for the defendant, and then they can also change their practice accordingly. Because what DOJ might not know is while DOJ is investigating, the defendant's investigating too. They're spending time, you know, spending time and resources, interviewing their employees, looking through documents. They're likely paying legal fees to have their outside counsel do that on the back end as well. And so if if they learn that the government's going to decline, they can ramp down those those efforts to try and save some costs. Uh and then on top of that, one one positive thing I've seen from this current administration is its increased willingness to to move to dismiss meritless key actions as opposed to just declining them. Because on the latter case, when when they just decline and then the relator has a choice, a lot of the times lately the relator is choosing to litigate. And then even if the claim is frivolous, the defendant still has to spend time moving to dismiss, and if they don't succeed on that, then they have to engage in discovery with the relator. So if if the if DOJ is willing to move to dismiss the case, which I think they did maybe 20 sometimes last year, um that means the case is just gone, and then the the defendant doesn't have to worry about it anymore.
SPEAKER_02Yeah, I mean, we've certainly seen um you know during this administration a willingness to engage in those types of um, you know, dismissals, which I think maybe were not as not as common previously, but there seems to be some appetite and avenue for those, which is also encouraging sitting on the defense side, of course, in in representing our clients. But um, you know, I think this is all uh, you know, it's it's very interesting. It's it's a wonder um, you know, what this will look like uh in the coming years, if there will be any efforts um to maybe you know create some uniformity around the approach here. Um so you know, we shall see, right? Um let's take a couple minutes and just I I want to ask you sort of just an overarching question, Brandon, in terms of, you know, what is um, you know, perhaps one thing that you could change with respect to um false claims act investigations um and and the way in which that they are handled today.
SPEAKER_00Yeah, and I again I want to preface this by saying I really do um have the utmost respect for my fellow, or I'm not one anymore, but for for DOJ prosecutors, they have hard jobs and they go about it very well and generally with the most utmost integrity. But I if I could change one thing, it would it would be kind of things we've been talking about, which it would be a more formal guidance or policy for holding the government accountable for the SCA investigations. Um you know, some of them just drag on for far too long with with no real justification for doing that. So if there was more official policies to hold uh SCA investigations to a certain pace or to a certain progress on a per seal basis, that would be one thing to change. And then also just having more judges have the mindset of the the Fifth Circuit panel in the Aldridge case, where it's it's not gonna be okay to take 18 extensions of the seal period. You're gonna need to show on a concrete basis what's happening, or else the case is going to be unsealed and you're gonna be forced to make a decision.
SPEAKER_02Well, I appreciate it, Brandon. Thanks all, and that's uh that's all that we have for today for the Speaking of Health Law podcast. Um we appreciate you listening, and uh we will see you next time.
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