DOJ's limits on use of guidance documents in federal action could hinder fraud prosecution

justice scales and gavel
A new policy at DOJ could significantly impact how its pursues healthcare fraud cases. (Image: Getty/BrianAJackson)

The Justice Department has established new limits on how federal prosecutors use guidance documents in civil cases against companies, a change that could have a significant impact on how the feds handle healthcare fraud cases. 

Federal agencies issue guidance documents to provide more details on how companies should comply with federal law. They're extremely prevalent in healthcare; both the Food and Drug Administration and the Centers for Medicare & Medicaid Services, for example, issue them often to clarify regulatory compliance. 

The change, as outlined by a memo (PDF) from the No. 3 official at the Department of Justice, Rachel L. Brand, would prevent DOJ attorneys from using "noncompliance with guidance documents as a basis for proving violations of applicable law." 

"That a party fails to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying legal requirements," according to the memo. "Agency guidance documents cannot create any additional legal obligations." 

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In healthcare, this change could especially impact how federal prosecutors pursue fraud cases, according to an article from The New York Times. The Department of Health and Human Services Office of Inspector General has issued guidance documents for providers, drug companies, insurers and medical device manufacturers that are often used in fraud cases. 

Lindsey E. Gabrielsen, a lawyer at the Boston-based Foley & Lardner law firm, told the newspaper that the DOJ "will face serious hurdles" in cases that are based on violations of HHS guidance documents. 

Fraud recoveries decreased in 2017 even as OIG and other agencies put more of a focus on enforcement using data analytics and other new technologies. 

The new policy applies to any forthcoming cases as well as cases pending as of its Jan. 28 release, when possible, according to the memo. The feds recovered $4.13 billion in fraudulent charges last year, a dip from an unprecedented $5.6 billion in 2016.  

The number of civil cases increased last year from 708 in 2016 to 826 last year, but civil penalties also dropped from $38.4 million to $22.8 million in 2017. 

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Corporate attorneys and groups including the U.S. Chamber of Commerce applauded the move, according to NYT, as it offers relief for companies in heavily-regulated industries and offers them more room to combat allegations of noncompliance. The memo is also in line with a key goal of the Trump administration—to ease regulatory burdens on companies. 

However, consumer advocates warn that it could substantially hinder federal agencies' abilities to enforce key protections.