BY Rossanna Madrigal, Esq. and Michael R. Alexander, Esq., Brown & Fortunato, P.C.
On August 1, 2024, the Criminal Division of the Department of Justice (“DOJ”) rolled out a new Corporate Whistleblower Awards Pilot Program (the “Pilot Program”). According to the DOJ, under the Pilot Program, individuals that provide truthful and complete information that leads to a successful forfeiture exceeding $1,000,000 in net proceeds may be eligible for an award from the proceeds. An eligible individual may receive up to 30% of the first $100 million in net proceeds forfeited and up to 5% of any net proceeds forfeited between $100 and $500 million.
The Pilot Program is a three-year initiative by the DOJ, and it aims to fill gaps in existing whistleblower programs, including the False Claims Act qui tam program. Since this is an initiative of the DOJ, the scope of the Pilot Program is much broader than just healthcare arrangements. Specifically, the Pilot Program applies to four designated program areas: domestic financial institution violations; foreign corruption and bribery; violations related to bribes and kickbacks paid to domestic public officials; and federal healthcare offenses involving private health care benefit programs.
With respect to healthcare, the Pilot Program applies to arrangements involving private and other non-public health care benefit programs (i.e., private health insurance programs). This means that the Pilot Program goes beyond the scope of the False Claims Act qui tam program, which is specific to fraud schemes related to the Medicare and Medicaid programs. The DOJ published some specific guidance addressing qualifications for an award under the Pilot Program as well as the process for making reports to the DOJ. For example, the information provided must be truthful, complete, and voluntarily reported. Also, the reporting individual must have attempted to report the alleged violations through the company’s internal compliance processes before submitting or concurrently with their report to the DOJ. And, during the investigation process, the individual is expected to cooperate with the government.
The DOJ also published exclusionary criteria. For example, if an individual would be eligible for an award under another whistleblower program had they reported the same information to that program, the individual is not eligible for payment under the Pilot Program. Also, if the individual meaningfully participated in the alleged misconduct, they are not eligible for an award under the Pilot Program. The DOJ was also careful to note in its guidance that individuals that make reports and cooperate with investigations may be eligible for an award and such award, and the amount of the award is under the full discretion of the DOJ. Awards are only considered if the information leads to a successful forfeiture exceeding $1,000,000 in net proceeds. The calculation for net proceeds takes into account amounts that are due to creditors as well as victims of the fraud scheme, who will be paid before a whistleblower’s award is considered.
How could the Pilot Program affect providers? Arrangements between providers, health care entities, and health insurance companies could come under scrutiny. The Pilot Program could encourage individuals to report any program or arrangement that has the effect of compensating providers for business, for example. Pervasive billing issues, such as miscoding or upcoding claims, could also be subject to review under the Pilot Program, if there is evidence that such errors were made intentionally or negligently.
The actual impact of the Pilot Program is still unknown as the Pilot Program is only a few months old. However, some are already speculating that the Pilot Program could have broad sweeping effects on commercial insurance plans that have largely felt insulated from qui tam investigations. The Pilot Program could also lead to an increase in the number of whistleblowers and corresponding investigations could lead to the discovery of violations of other laws and regulations. Since the first investigations are likely still underway and settlements have not been published, it remains to be seen how the DOJ will be reviewing these arrangements and under what laws the DOJ will use for their settlements. But it is likely that the same types of arrangements that are normally scrutinized under the federal fraud and abuse laws will be reviewed under the pilot program insofar as they involve commercial insurance programs (e.g., fraud against patients, investors, and non-governmental entities in the health care industry).
The DOJ plans to examine the Pilot Program throughout its three-year term, and at the end of the term will decide whether to extend or revise the Pilot Program. It is possible that the Pilot Program will become a permanent whistleblower program in the future, which could affect how providers and insurance companies interact, engage, and contract with each other for years to come.