DOJ Announces $4.7 Billion in False Claims Act Recoveries: But What Does That Really Mean?

December 30th, 2016 - Paul Weidenfeld
Categories:   Compliance   Practice Management  

The Department of Justice (DOJ) recently announced that it had recovered $4.7 billion in False Claims settlements and judgments making it the "third best year" in "False Claims Act History." Trumpeted by many as a return to DOJ's record setting years, an examination of the numbers over time reveals that healthcare recoveries have actually been remarkably consistent over the past seven years, and that then they say more about the emphasis DOJ places on resolving "big" cases than they do about overall fraud enforcement.

A Dependence on Large Cases

Big settlements make for impressive press releases and are good for overall numbers, and FY 2016 was no exception. The "Top 5" settlements in 2016 accounted for $2.5 billion, an amount that accounted for over 52% of all federal recoveries for the year; and the total announced recoveries for these five cases was $3.55 billion! Following the playbook, the "Top 5" healthcare settlements accounted for a whopping 60% of all federal healthcare recoveries in 2016 at just a tick over $1.5 billion. This dependency on large settlements is not new. Indeed, according to research that we have conducted, the five largest settlements have consistently accounted for over 50% of recoveries in virtually every calendar year since 2012 - if not longer.

Healthcare Recoveries Have Been Remarkably Stable

Despite dependence on obtaining a few large settlements each year, DOJ's $2.6 billion in healthcare recoveries for FY 2016 continued a trend of surprising stability in recoveries attributable to healthcare. Beginning in FY 2010 with the recovery of $2.5 billion, over the next seven years (including 2016), healthcare recoveries have averaged $2.5 with a consistency that belies the suggestion that enforcement has been "up and down" or inconsistent. The recoveries over that period of time are as follows: FY 2010: $2.5B, FY 2011: $2.4B, FY 2012: $3.1B, FY 2013: $2.7B, FY 2014: $2.4B, FY2015: $2.1B, and FY 2016: $2.6B!

Recent Fluctuations in Recoveries Are Linked to Major Housing and Financial Fraud Settlements - They Do Not Appear to Be Related to Overall Enforcement

Although the fluctuations in recovery totals from year to year are often attributed to overall enforcement efforts, healthcare recoveries have been consistent over the last seven years and the differences in overall recoveries have directly tied to the ability of the DOJ to finalize major Housing and Financial Fraud Settlements. In 2012, the "record recoveries" reported by DOJ year were largely due to the $1.7 billion it received as part of the landmark housing settlement; and the next (and current) record of $6 billion recovered in 2014 was fueled by the $3.3 billion that came from banking and housing settlements. In 2016, the "third best year", was much the same with $2 billion in housing and banking settlements.

Recovery Totals Do Not Necessarily Equate to Enforcement Success or Efficiency

Enforcement is typically defined as the process of ensuring compliance with the applicable laws and regulations. There is a tendency to equate to larger recoveries with greater or more effective enforcement, but is that really the case? Isn't it fair to ask whether the $9 billion that DOJ recovered between 2012 and 2016 in Housing and Financial Fraud settlement cases is a measure of "less" enforcement of the industry rather than more? Should we expect better enforcement to result in less fraud and lower recoveries in the long run?

Prevention is the most cost effective form of enforcement, but large fines and mandatory Corporate Integrity Agreements (CIAs) are also said to be important components of enforcement for their deterrent effect on future misconduct. 2016, however, does not provide much evidence of the impact of deterrence. This was the second time Pfizer entered into large settlements for Wyeth since it acquired the company ($784.6 million in 2016 and $413.2 in 2013); Novartis' settlement was its second since 2010 ($410 million and $495 million); Tenet's settlement of $513 million was preceded by its $900 million blockbuster in 2006 (a "record settlement" at the time); and Wells Fargo was part of the landmark $25 billion dollar in 2012 before entering into the $1.2 billion this year!

Regardless, Providers Should Take Notice!

We may wonder about the "meaning" of the recovery of $4.76 billion in FY 2016, but it would be a mistake to question its significance. It takes a tremendous amount of work and effort to obtain settlements of this magnitude year after year, but DOJ well knows that the accomplishments of this year will soon be forgotten if they are not repeated or advanced. DOJ can and must continue to push, and the message to providers is clear: Take Notice, Pay Attention to Compliance and Stay Out of Harm's Way!

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