Getting personal

Federal regulators, concerned that blockbuster penalties levied against entire companies are not stemming the tide of reimbursement fraud, are moving to hold corporate executives themselves more accountable for illegal conduct.

HHS’ inspector general’s office announced last week at the Pharmaceutical Regulatory and Compliance Congress in Washington that the agency is expanding the enforcement of a little-used provision in existing federal law that allows the government to exclude executives from Medicare and other federal health programs.

Although the Social Security Act has long given the inspector general’s office the discretion to exclude executives and whole companies, the penalty rarely has been enforced against individuals—until now, said Mary Riordan, senior counsel for the inspector general’s office.

“What we are hoping to do is change corporate behavior by holding individuals accountable,” Riordan said in an interview. “We keep seeing the same bad conduct, sometimes by the same companies, over and over, and the money and the big dollar fines aren’t making the difference.”

Jones Day healthcare compliance lawyer Frank Sheeder III said executives would be loath to receive a declaration of exclusion from Medicare.

“If a person becomes excluded, then it’s no longer viable for them to have a career in healthcare, in most cases,” Sheeder said. “There are prohibitions against employing excluded parties if you are a part of federal healthcare programs.”

The exclusion follows the individual regardless of whether he or she changes jobs.

The law gives wide latitude in deciding whether to exclude an individual executive. In deciding whether to apply the discretionary punishment, the government will consider whether the executive knew or should have known about the activity, whether he or she participated in it and the level of financial damages that resulted.

The inspector general’s office also will look at whether executives reported the fraud to authorities and whether such a report was made before or after the executive had reason to know an investigation had already begun.

In looking at the circumstances, investigators are free to consider the facts that led to a finding of guilt as well as allegations in civil lawsuits, such as False Claims Act filings.

However, a civil lawsuit or a civil settlement is not enough to apply an exclusion. Riordan said the fraudulent company has to have pleaded guilty or been found guilty of criminal conduct to trigger a review that would allow consideration of allegations in civil filings.