DOJ has again signaled it remains focused on investigating health care fraud and false claims throughout the country. The latest major, coordinated enforcement action underscores that federal grantees must not only be vigilant in training and monitoring their workforces to mitigate fraud risk, but should also be versed in mandatory disclosure obligations—and voluntary disclosure protocols—when employees go rogue.

Applicants, grantees, and subrecipients of a federal award have a mandatory obligation to disclose violations of federal criminal law—including fraud, conflicts of interest, and bribery offenses—as well as violations of the civil False Claims Act.

DOJ’s latest coordinated enforcement effort underscores the point.

Health Care Fraud: 193 Defendants Criminally Charged with over $1.5 billion in Actual Losses

On June 27, 2024, DOJ announced the 2024 National Health Care Fraud Enforcement Action. The coordinated action resulted in criminal charges against 193 defendants, including 76 doctors, nurse practitioners, and other licensed medical professionals in 32 federal districts across the United States.

The charges include:

• Kickbacks for Wound Grafts: Four individuals, including two wound care company owners, allegedly overbilled Medicare and received kickbacks related to medically unnecessary grafts used on Medicare beneficiaries, resulting in $900 million in purported false and fraudulent claims.
• Online Distribution of Adderall and Other Stimulants Without Adequate Patient Care: Several individuals—including a CEO, clinical president, and nurse practitioner—working with a digital technology company allegedly over-prescribed Adderall and other stimulants without adequate patient interaction, pursuant to an “auto-fill” policy.
• Diverted, adulterated, and misbranded HIV Medication: Three owners and executives of a wholesale pharmaceutical drug distributor allegedly re-sold drugs to pharmacies with falsified documentation that concealed the drugs were obtained through patient “buybacks” and from the black market.
• False and Fraudulent Claims for Addiction Treatment: Various defendants in multiple cases allegedly submitted false and fraudulent claims for drug and alcohol addiction treatment services where care was inadequate or never provided.
• Telemedicine and Laboratory Fraud: Thirty-six defendants allegedly engaged in fraudulent schemes involving telemedicine and laboratory claims, including kickbacks and bribes related to unnecessary genetic testing and telemedicine claims submitted based on patient interactions lasting only 10 to 30 seconds.

These false and fraudulent claims to Medicare, Medicaid, and private insurance companies allegedly caused approximately $1.6 billion in paid claims and kickbacks out of the estimated $2.75 billion in losses these schemes were intended to collect.

Federal Grantee Obligations and Best Practices: Mandatory and Voluntary Disclosures

DOJ’s barrage of criminal charges in the healthcare arena reminds recipients of healthcare-related federal funding—including federally qualified health centers (“FQHCs”), Ryan White clinics, 340B program participants, Medicare and Medicaid participants, and others—they must establish an effective compliance program that identifies potential fraud and false claims, investigates tips and allegations, mitigates potential harm, and ensures adherence to laws, regulations, and contractual obligations.

Crucially, federal grantees must have structures in place to ensure compliance with federal mandatory disclosure obligations.

Mandatory Disclosure Requirements

Under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, aka the “Uniform Guidance” at 2 C.F.R. Part 200, recipients of federal grant funding must report “all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award.”

Notably, effective October 1, 2024, in the new version of the Uniform Guidance, this requirement has been expanded so applicants, recipients, and subrecipients of a federal award must “promptly” disclose whenever, in connection with a federal award, it has credible evidence of the commission of a violation of criminal law involving conflict of interest or a violation of the civil False Claims Act.

For HHS grantees, like FQHCs, the Uniform Guidance requirements are codified at 45 C.F.R. Part 75.

Failing to meet disclosure obligations can result in corrective action, including:

• Suspension or termination of the entire Federal award;
• Suspension or termination of a portion of the federal award; or
• Suspension and debarment from future federal awards.

How to Report Violations of Federal Criminal Laws and/or the False Claims Act

Awarding agency disclosure protocols differ. Where HHS funding is concerned, HHS-OIG prefers a specific grant self-disclosure process involving the submission of a particular Grant Self-Disclosure Submission Form.

Grantees may also choose to voluntarily disclose misconduct that falls short of mandatory disclosure obligations. Self-disclosure, whether mandatory or voluntary, is generally a mitigating factor in any resulting enforcement or corrective action.

For more information regarding corporate compliance and risk management activities, please contact Rosie Dawn Griffin or Brittney Rudolph or attend one of Feldesman’s various trainings.

If you have any questions regarding False Claims Act investigations or litigation, please contact Feldesman partner and Enforcement Insider Editor Mindy B. Pava (mpava@feldesman.com) or call 202.466.8960. Be sure to also check out our Enforcement Insider blog to stay up to date on the latest enforcement actions and court decisions of interest to federal grantees and other recipients of federal funding.