Section 1128 (b)(15) of the Social Security Act might not sound too familiar to many healthcare executives, but they're probably keenly aware of the obscure rule's practical implications.
Feds seeking to get around plausible deniability
This is the section of the law that allows federal prosecutors to effectively end the healthcare careers of presidents, CEOs, general counsels and other high-ranking executives when crimes are committed by their organizations—even in cases where the officials didn't know the crimes were taking place.
More specifically, the law says the government doesn't have to prove that the executives were aware of illegal conduct in order to exclude them from participating in Medicare—a punishment considered "the death penalty" for a healthcare executive's career.
The rule was designed in part to foil the plausible-deniability defenses executives use to insulate themselves from fraud, according to Greg Demske, assistant inspector general for legal affairs in HHS' inspector general's office, in his remarks Tuesday during the American Health Lawyers Association's annual meeting in Boston. Demske said one recent investigation into alleged crimes at a healthcare company turned up notes from an executive meeting in which the phrase "plausible deniability" appeared as a discussion item.
"Well, guess what?" Demske said. "None of the people there can remember what that was about."
Plus, the inspector general's office doesn't have the legal authority to see grand jury testimony, so it can't rely on those proceedings to prove an executive knew of illegal conduct, Demske said.
In the same AHLA session Tuesday, Morgan, Lewis & Bockius partner Kathleen McDermott said the federal government's recent focus on using this "permissive exclusion" authority is very significant. Demske noted that prosecutors are likely to insist on exclusion as part of a settlement in a case in which actual harm was caused.
McDermott said that if prosecutors won't grant executives a "release of administrative remedies" for permissive exclusion, there is a real chance that federal lawyers will seek the punishment later on—possibly after all other criminal or civil settlements from the company are signed and approved.
"I think this is a real game-changer," McDermott said.
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