By TAYLOR CHENERY
Two Department of Justice (DOJ) memoranda issued in recent months may signal a shift in the government’s approach to analyzing and proving allegations of healthcare fraud in civil enforcement actions. Both memos relate to the government’s use of guidance documents — as opposed to codified statutes or regulations — to educate regulated parties and to enforce existing statutory or regulatory requirements. By limiting the use of such guidance documents in enforcement actions, the memos may afford healthcare providers an additional tool for fending off fraud allegations in some cases.
On Nov. 16, 2017, Attorney General Jeff Sessions issued a memorandum to all components of the DOJ prohibiting the Department from publishing guidance documents that effectively bind the public, including healthcare providers, without undergoing the notice-and-comment rulemaking process (the “Sessions Memo”).[i] The Sessions Memo defines “guidance documents” as “any Department statements of general applicability and future effect, whether styled as ‘guidance’ or otherwise, that are designed to advise parties outside the federal Executive Branch about legal rights and obligations falling within the Department’s regulatory or enforcement authority.”
Such documents are particularly prevalent in the healthcare context. In addition to documents issued by the DOJ, such as guidance letters and question and answer documents, “guidance documents” also could include resources from other agencies such as Medicare Benefit Policy Manuals issued by CMS and educational documents and advisory opinions issued by OIG. The Sessions Memo also provides specific principles for the DOJ to follow when issuing future guidance documents — such as disclaiming the effect of law and avoiding mandatory language such as “shall,” “must,” or “required” — and directs the Associate Attorney General to work with components of DOJ to identify existing guidance documents that should be repealed, replaced, or modified in light of those principles.
On Jan. 25, 2018, then-Associate Attorney General Rachel Brand issued a memorandum providing additional instruction to DOJ litigators about limiting the use of agency guidance documents in affirmative civil enforcement (“ACE”) cases (the “Brand Memo”).[ii] The Brand Memo confirms that the principles outlined in the Sessions Memo are relevant to more than just the DOJ’s own publication of guidance documents and should guide DOJ litigators “in determining the legal relevance of other agencies’ guidance documents” in ACE cases, thus implicating an enormous and far broader swath of sub-regulatory guidance documents beyond those issued directly from DOJ.
The Brand Memo provides specific limitations about the use of guidance documents in ACE cases. It instructs that the DOJ cannot use its enforcement authority to effectively convert guidance documents into binding rules or create binding requirements that do not already exist by statute or regulation. Similarly, the Brand Memo prohibits DOJ litigators from using noncompliance with guidance documents as a basis for proving violations of applicable law in ACE cases, specifically including cases brought under the False Claims Act (FCA). It also instructs that a party’s noncompliance with an agency guidance document should not be treated as conclusively or even presumptively establishing a violation of the applicable statute or regulation.
Although it is difficult to predict what practical, long-term effect the Sessions and Brand memos may have on the government’s enforcement efforts, the potential impact is significant. The DOJ seemed to recognize as much when it issued press releases immediately following issuance of the memos entitled “Attorney General Jeff Sessions Ends the Department’s Practice of Regulation by Guidance” and “Associate Attorney General Brand Announces End to Use of Civil Enforcement Authority to Enforce Agency Guidance Documents.”[iii]
At the very least, the memos afford healthcare providers additional defense arguments when faced with allegations of regulatory or statutory violations. For example, a provider facing a government FCA investigation may now be able to argue more persuasively that the government should decline to intervene in the case if the alleged violation is not clear based solely on the language of the underlying statute or regulation and without consulting relevant guidance documents. In the past, DOJ attorneys commonly have referenced and relied on guidance issued by government agencies and government contractors when investigating, analyzing, and prosecuting allegations of healthcare fraud.
Similarly, a healthcare provider engaged in active FCA litigation may be able to limit what evidence can be offered to establish the alleged violation by arguing that reliance on guidance documents beyond the statutory or regulatory language is improper. And to that end, the memos may have a particularly significant impact in enforcement actions involving allegations related to medical necessity because substantive definitions or explanations of what constitutes “reasonable and necessary” services typically are found only in sub-regulatory guidance.
The Sessions and Brand memos, however, do not completely nullify the use of guidance documents in enforcement actions. The Brand Memo specifically states that DOJ attorneys may continue to use guidance documents “for proper purposes,” such as using evidence that a party read a guidance document to prove that the party had knowledge of the statutory or regulatory requirement described in the document. Of course, in some instances DOJ attorneys and other parties may disagree as to what constitutes using a guidance document for a “proper purpose” vs. as a basis for proving a violation of the statutory or regulatory requirement at issue.
The Sessions and Brand memos may indicate that moving forward statues and regulations will be enforced in more strict accordance with the statutory or regulatory language and without consulting or relying on guidance documents to establish violations. If a violation cannot be established based on clear statutory or regulatory language, that strongly suggests that the type of allegation at issue may not be the proper subject of an FCA civil enforcement action, which can carry extremely severe penalties and damages. In light of these DOJ memos, providers facing either current or future enforcement actions should carefully consider the extent to which the government or a qui tam relator is attempting to or may be forced to rely on guidance documents to establish the alleged violation at issue.
[i] Memorandum for All Components, available at https://www.justice.gov/opa/press-release/file/1012271/download.
[ii] Memorandum for Heads of Civil Litigating Components United States Attorneys, available at https://www.justice.gov/file/1028756/download.
[iii] See https://www.justice.gov/opa/pr/attorney-general-jeff-sessions-ends-department-s-practice-regulation-guidance; https://www.justice.gov/opa/pr/associate-attorney-general-brand-announces-end-use-civil-enforcement-authority-enforce-agency.
Taylor Chenery is a member at Bass, Berry & Sims and concentrates his practice on government compliance and investigations and related litigation, focusing on issues of healthcare fraud and abuse. He has significant experience representing a wide variety of healthcare clients in responding to governmental investigations and defending False Claims Act lawsuits.