February 1, 2000

Practical Compliance Program Advice from Asst. U.S. Attorney Jim Sheehan

Holland & Knight Newsletter
Christopher A. Myers

Assistant United States Attorney, James Sheehan, of the Eastern District of Pennsylvania is one of the best known and most aggressive health care fraud enforcement prosecutors in the country. Sheehan and his assistants consistently have been on the cutting edge in developing new theories of false claims liability with which to attack health care providers. Therefore, when Sheehan speaks on compliance and fraud enforcement matters, it makes sense for health care providers to pay attention.

At a recent health care fraud conference Sheehan predicted a "flood" of whistleblower suits against health care companies. This is not necessarily unexpected, as health care providers have seen whistleblower suits under the False Claims Act increase exponentially over the past few years. Multimillion dollar payoffs for whistleblowers have received tremendous publicity, and plaintiffs' lawyers have been beating the bushes for new cases. Sources within the Department of Justice estimate that there may be as many as 4,000 whistleblower suits against health care entities currently in the pipeline.

In addition to the dire predictions about potential liability, however, Sheehan also offered some practical advice for health care providers to help avoid whistleblower suits in the first place. It is now a given that any health care company, particularly those that participate in the Medicare or Medicaid programs, should have a corporate compliance or integrity program. The following are some practical steps, recommended by Sheehan and others, with which we concur, that organizations can take within the context of their compliance programs to help reduce the likelihood of a whistleblower suit.

First, health care companies should have a compliance hotline or other "outside-the-system channel" that allows employees to report concerns without fear of retaliation. Employees are sometimes intimidated if they think they are required to report potential wrongdoing through the normal chain of command, particularly if they think their supervisors might be involved in, or approve of the improper conduct. If the compliance reporting system is not viewed as confidential, concerned employees are much more likely to take their concerns to the government or to a lawyer. If they understand that they can report problems confidentially, and that there will be an honest follow up on their report, they are much more likely to keep problems inside the company. Sheehan recommended that any hotline system extend to cover not just employees, but also outside contractors and agents of the company.

Second, when employees are leaving a health care organization, the organization should conduct an exit interview. "When people leave the organization, ask them if there's anything about this organization that they have specific concerns about," said Sheehan. Asking such questions of every departing employee will give the company an opportunity to identify problems early and to deal with them appropriately outside the context of a false claims investigation. Just asking about concerns is not enough, however. If the reporting attorney reports problems, the company must follow up promptly and take corrective action where necessary. Sheehan stated, "the first questions that we ask in the U.S. Attorney's Office when a whistleblower comes in are: Did you tell anybody? Did you complain about this?" If they raised the issue and were told to "shut up and sit down," that would provide evidence of an intent to defraud, Sheehan said. On the other hand, if the reported problem were investigated and appropriate follow up was carried out, that might provide strong evidence of a lack of criminal intent.

In evaluating the operations of a compliance program in the context of deciding whether the company intended to defraud the government, Sheehan recognized that the job of a compliance officer is a "difficult" one. He said, "The last thing we want to do is ruin the career and life of the person who is making the effort to do the right thing." Nevertheless, Sheehan and other government prosecutors take a close look at compliance program operations and do not give companies the benefit of the doubt if the compliance program, in their view, is not operating effectively.

In addition to the two recommendations from Sheehan endorsed above, some in the industry are beginning to take the concept of exit interviews one step further. While exit interviews are recognized as an important tool in the compliance effort, some employees who are leaving the company are unwilling to discuss openly potential illegality or other compliance problems. They may be concerned about references or other possibly negative communications with their new or prospective employers. To avoid this problem, some experts are recommending post-employment contacts with recently departed employees. Thus, in addition to the exit interview questions about compliance-related issues, some companies are sending letters to departed employees two to three months after they leave the company. These letters ask the former employees if they witnessed or were aware of any illegal activity or compliance program violations when they were employed at the company.

The vast majority of former employees will not respond to the letter. However, failure to respond to requests for compliance information can cast the former employee in a bad light if they later file a whistleblower suit. This inability to take the high ground of the righteous can sometimes deter a former employee from filing suit in the first place. It can also provide ammunition for the company in its efforts to convince the government not to intervene if a whistleblower suit is filed. Post-employment letters, if honestly addressed, can constitute important evidence that the company is truly trying to do the right thing and that it has no intent to defraud the government. They also help send the message to current employees that the company is committed to ethical behavior. Studies have shown that seemingly little things like this make employees feel good about the company generally and less likely to believe that it would engage in unlawful behavior. Such attitudes, in turn, encourage employees to deal with compliance issues internally and provide a strong deterrent to whistleblower suits.

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