Eliminating fraud from the federal healthcare programs continues to rank at the top of the federal government's law enforcement agenda. Though the feds have taken steps to encourage self-disclosure of various infractions by healthcare providers, the process chosen may prove to be self-defeating.
In October 1998, HHS' inspector general's office issued the Provider Self-Disclosure Protocol, which encourages providers to disclose conduct that violates criminal, civil or administrative law but promises weak protections in return. Although more than 50 providers are participating in the program, fewer than 10 settlements have been reached to date. Nonetheless, HHS Inspector General June Gibbs Brown recently proclaimed the program a success and predicted more providers will participate.
That assessment seems overly optimistic. Although one or two providers appear to have obtained better settlement results than may have occurred without self-disclosure, the program has two significant flaws: It defines cooperation with the inspector general to include a waiver of attorney-client privilege; and it fails to protect self-disclosing providers from whistleblower lawsuits.
To make a disclosure, a provider submits written reports summarizing its internal investigation and quantifying the financial harm to federal healthcare programs. Thereafter, the inspector general verifies the disclosure by reviewing documents and interviewing employees. The protocol explains that good-faith cooperation after the voluntary disclosure will benefit the provider and that failure to cooperate will be deemed an "aggravating" factor for sentencing purposes.
If cooperation merely required providing access to employees and nonprivileged documents, providers might find cooperation burdensome but worthwhile. Unfortunately, the inspector general has defined cooperation to require providers to produce documents safeguarded by the attorney-client privilege and work-product protections if the "OIG believes (such documents) are critical to resolving the disclosure." The inspector general suggests, somewhat cryptically, that it is "prepared to discuss with provider's counsel ways to gain access to the underlying information without the need to waive the protections provided by an appropriately asserted claim of privilege."
The problem with this approach is that any provider that produces privileged materials to the inspector general assumes a significant risk that the documents may be obtained in other litigation by third parties. For example, shareholders, insurers, competitors or former employees may request in civil proceedings the documents that have been provided to the government. If these parties are able to persuade a court that the self-disclosure documents relate in some fashion to their claims, many jurisdictions would require their release, reasoning that the provider waived the privilege by voluntarily handing over documents to the government.
Although the inspector general professes a willingness to work with providers to prevent waiver, there is little protection in such efforts. The better course would be for the inspector general to stop requiring providers to turn over privileged materials. Otherwise, a provider confronts a Hobson's choice: produce the documents and waive the privilege regarding third parties, or refuse to produce the documents and lose the benefits associated with cooperating with the government.
Waiver of privilege isn't the only pitfall for providers that make voluntary disclosures. Providers also increase their risk of being the target of a whistleblower lawsuit. Because the inspector general cannot speak for the U.S. Justice Department, it cannot assure a provider considering disclosure that there isn't a whistleblower suit already filed under seal. And the inspector general cannot promise that the Justice Department won't intervene in any future whistleblower suits, even those brought by employees or former employees involved in the self-disclosure process.
Although it's too early to determine whether disclosures made under the inspector general's protocol will result in such litigation, the Defense Department's experience with self-disclosure is instructive. In that industry, contractors initially flocked to the self-disclosure program, which began in the mid-1980s when the industry was under intense scrutiny by the government. However, many contractors stopped using the program when they realized that employees had strong financial incentives to file whistleblower lawsuits based on internal investigations conducted to permit self-disclosure. In one case, a corporate vice president at one defense company participated in an internal investigation of a subsidiary's billings that led the company to self-disclose and refund $75 million to the government. The company executive considered the company's self-disclosure insufficient and filed a whistleblower suit. He ultimately received $22.5 million when the company settled the suit.
If the government is truly interested in having more providers voluntary disclose misconduct, the Justice Department should join the inspector general in offering the voluntary disclosure program and adopt a policy that it will not intervene in whistleblower suits related to the conduct that has been self-disclosed.
While the inspector general has reasons to declare the self-disclosure program a success, it might be premature to predict any significant expansion in participation. The program continues to contain significant disincentives for providers wanting to self-disclose misconduct. Some of those disincentives are inherent in voluntary disclosure, such as the risk that disclosure precipitates a criminal investigation that otherwise might not have occurred. Other disincentives, such as the need to waive attorney-client privilege, could be easily corrected by the inspector general. Yet other disincentives, such as the vulnerability to whistleblower suits, also could be eliminated if government agencies spoke with one voice.