The Justice Department’s Corporate Enforcement Policies and Program applies to prosecutions outside of the FCPA context.  The impact of DOJ’s new approach, encouraging voluntary disclosures, applies to other federal criminal cases, such as healthcare fraud. 

In a recent action, DOJ declined to prosecute HealthSun Health Plans (“HealthSun”) for violations of wire fraud and healthcare fraud. From 2015 until 2020, HealthSun’s former Director of Medicare Risk Adjustment Analytics orchestrated a scheme to submit false and fraudulent information to the U.S. Department of Health and Human Services’ Centers for Medicare & Medicaid Services (“CMS”) to increase reimbursement payments for Medicare Advantage enrollees.

Medicare payments for Medicare Advantage plans is based, in part on the health condition of the patients. HealthSun submitted false and fraudulent information about diagnoses for chronic ailments (referred to as “risk-adjusting conditions or diagnoses) (1) that enrollees did not have and/or (2) that were entered into patient health records by non-health care providers. SunHealth received $53 million in overpayments.

Applying DOJ’s Corporate Enforcement Policy, DOJ cited the following factors to SunHealth’s case: (1) the timely and voluntary self-disclosure of the misconduct; (2) HealthSun’s full and proactive cooperation, including the provision of all known facts about the misconduct, including information about all individuals involved in the scheme obtained from imaging of their business and personal cell phones; (3) the nature and seriousness of the offense; (4) HealthSun’s timely and appropriate remediation, including terminating employees who were involved in the misconduct, reporting and correcting the false information submitted to CMS, and substantial improvements to its compliance program and internal controls through investments in the design, implementation and testing a risk-based sustainable Medicare Advantage compliance program; and (5) HealthSun’s agreement to immediately remit $53 million in overpayments earned as a result of its illegal scheme.

As part of its remediation, HealthSun separately submitted data corrections to CMS, and HealthSun’s payment of $53 million will be credited against corrected overpayments for payment years 2016 to 2021.  Based on the recalculations, HealthSun may be required to submit additional payments to cover overpayment differences.  

By voluntarily disclosing and cooperating with DOJ for this matter, HealthSun avoided several significant consequences. 

First, and most importantly, HealthSun avoided disqualification for participation in federal health care programs, meaning all Medicare and Medicaid programs.  The potential consequences from exclusion from such programs could have had a devastating impact on HealthSun’s viability.  Healthcare, pharma and medical device companies face serious consequences for engaging in healthcare fraud, and the voluntary disclosure and cooperation route is an important avenue to avoid exclusion consequences.

Second, HealthSun earned a significant reduction in the potential penalty for engaging in healthcare fraud.  If HealthSun had not voluntarily disclosed the matter and cooperated, HealthSun would have paid a penalty in the multi-hundreds of millions dollars.  HealthSun earned a lower penalty equal to the amount of the total ill-gotten gains earned from the illegal scheme.

As more companies fall under the criminal prosecution eye, especially those about to be prosecuted for export controls and sanctions violations, the benefits of voluntary disclosure and cooperation have to be weighed.  The National Security Division at DOJ, the component responsible for the criminal prosecution of sanctions and export controls violations, has adopted its own corporate enforcement program encouraging voluntary disclosure and cooperation of potential offenders.