C-Suite Accountability: The DOJ’s New Focus on Healthcare Executives

“The Justice Department will continue to pursue individuals — including C-suite executives — who commit health care fraud.” This statement comes from the Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. 

The C-suite is often under scrutiny in healthcare cases. This is especially true when evidence shows they were involved in the decision-making process that led to illegal or non-compliant activity, or they were complicit in the activity. 

Traditionally, organizations have been left holding the bag and being responsible for paying settlement dollars all on their own. But more and more settlements these days include settlement payments from individuals like Chief Executive Officers (CEOs), Chief Financial Officers (CFOs), or Chief Operating Officers (COOs), for example.  

A Texas hospital CEO agreed to pay over $5.3M to settle kickback allegations involving laboratory testing.1 The CEO allegedly agreed to a kickback scheme in which the hospital paid commissions to recruiters who used purported management service organizations (MSOs) to pay kickbacks to doctors to induce their laboratory testing referrals to the hospital. Specifically, it was alleged the CEO knowingly signed and caused others to sign false certifications in Medicare cost reports regarding the hospital’s compliance with the Anti-Kickback Statute, and thereby caused the submission of false claims to federal health care programs. Regarding this case, the U.S. Attorney for the Eastern District of Texas emphasized the importance of “seeing past a corporate entity and holding individuals responsible for making the decisions to engage marketers to pay providers for their laboratory referrals is what justice requires.”  

In another case, a CEO agreed to pay, along with the companies he led, $4.6 million to settle allegations of improper billing of telehealth services for nursing home residents.2 In this case, the government claimed the CEO and companies submitted claims with the HCPCS code Q3014 for services that did not meet the requirements of this code. Billing rules associated with this code allow for a “telehealth originating site facility fee” in addition to the professional fee for the underlying psychological service being provided. HCPCS code Q3014 should only be billed by the originating site (in this case, the nursing homes) when the facility provides administrative and clinical support for a patient receiving services via telehealth. The government alleged the CEO and companies submitted or caused to be submitted improper and false claims for “telehealth originating site facility fees,” billed pursuant to HCPCS code Q3014, which should only have been billed by the nursing homes. 

CEOs are not the only executives under scrutiny. In a settlement involving a medical device manufacturer, two executives agreed to pay, along with the company, $12 million to resolve allegations of making improper payments to physicians.3 The two executives were the CFO and the President and Chairman of the Board. The government alleged the device manufacturer provided improper remuneration to seventeen orthopedic surgeons and neurosurgeons to induce them to use the manufacturer’s spinal implants, devices and other equipment in medical procedures the physicians performed on Medicare beneficiaries, in violation of the Anti-Kickback Statute. The improper remuneration was allegedly provided in the form of consulting fees, intellectual property acquisition and licensing fees, registry payments and performance shares, as well as travel to a luxury ski resort, lavish dinners and holiday parties for surgeons, their office staff and family members. The government claimed the two executives controlled or otherwise directed the company’s operations, strategic decisions, and the agreements with surgeons.  

Continuing with other C-suite executives who have been included in enforcement investigations, a COO agreed to personally pay a portion of a $32.5 million settlement between the government and a Medicare Advantage Organization (MAO)4. This COO agreed to pay $750,000 to resolve his alleged role in the activity. The government alleged that the MAO submitted unsupported diagnosis codes to CMS, which resulted in inflated reimbursements. It also alleged the MAO made material misrepresentations to CMS regarding the scope and content of its network of providers (physicians, specialists and hospitals) in its application to CMS. The government’s settlement with the COO resolved his alleged role in this latter scheme. 

All of these examples are consistent with the intent of the U.S. Department of Justice (DOJ). The DOJ often refers to this as ‘individual accountability.’ Various DOJ memoranda and comments made by DOJ leadership have emphasized the importance of evaluating individual accountability in their corporate wrongdoing investigations.  

For example, they have stated the Department's first priority in corporate criminal matters is to hold accountable the individuals who commit and profit from corporate crime. Such accountability deters future illegal activity, incentivizes changes in individual and corporate behavior, ensures that the proper parties are held responsible for their actions, and promotes the public's confidence in our justice system. 

In addition to the DOJ’s emphasis on individual accountability during investigations, the DOJ also looks for an organization’s compliance programs to hold executives accountable internally when appropriate. When assessing a compliance program, the DOJ offers the following questions to determine its effectiveness: 

  • How does the company incentivize compliance and ethical behavior?  
  • What percentage of executive compensation is structured to encourage enduring ethical business objectives?  
  • Are the terms of bonus and deferred compensation subject to cancellation or recoupment, to the extent available under applicable law, in the event that non-compliant or unethical behavior is exposed before or after the award was issued? 
  • Does the company have policies or procedures in place to recoup compensation that would not have been achieved but for misconduct attributable directly or indirectly to the executive or employee?  
  • What policies and practices does the company have in place to put employees on notice that they will not benefit from any potential fruits of misconduct? 

In conclusion, executives in the C-suite should be aware that the decisions they make can have compliance implications. If executives’ strategies, decisions, or actions contribute to non-compliance, enforcement agencies may want to pursue executives for their individual accountability. 

The enforcement cases shared demonstrate the DOJ will hold Chief Executive Officers, Chief Financial Officers, Chief Operating Officers, company Presidents and Board members responsible for non-compliance. 

 

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References:

[1] https://quickreadbuzz.com/2024/05/29/healthcare-zigrang-bailey-wheaton-doj-announces-record-breaking-fraud-and-abuse-settlement/#_ftn33 

[2] https://www.fiercehealthcare.com/regulatory/community-health-network-pays-345m-settle-illegal-referral-scheme-allegations 

[3] https://www.justice.gov/usao-cdca/pr/prime-healthcare-services-and-its-ceo-agree-pay-65-million-settle-medicare-overbilling  

[4] https://www.healthlawdiagnosis.com/2023/12/doj-settlement-targets-owner-and-management-company-in-addition-to-post-acute-care-facilities/

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