The Chicago U.S. Attorney's Office is creating a new unit to prosecute healthcare fraud, a move that tantalizes the city's white-collar defense lawyers with the promise of more work.
Assistant U.S. Attorney Heather McShain will lead the team of five prosecutors, and Assistant U.S. Attorney Stephen Chahn Lee will serve as the unit's Senior Counsel.
"What the (U.S. Attorney's Office) is doing is putting folks on notice that it's a big deal," said Deborah Gersh, co-chair of the healthcare practice at Ropes & Gray. "I do think there's going to be greater emphasis on firms building out their healthcare and government enforcement combined practice. We've been doing that for years … in other cities and would expect to see that here as well."
The team brings local focus to what has been a national priority for the U.S. Department of Justice for a decade, to combat fraud in Medicare. The national focus seems likely to continue under President Donald Trump's administration. Last week the DOJ announced the strike force's largest-ever enforcement action: It charged 412 people, including 115 medical professionals, with submitting $1.3 billion in fraudulent healthcare billings. Fifteen were from the Northern District of Illinois. In a statement, U.S. Attorney General Jeff Sessions said the doctors, nurses and pharmacists had "chosen to violate their oaths and put greed ahead of their patients."
In Chicago, federal prosecutors earned 10 criminal convictions against executives at Sacred Heart Hospital for taking bribes and kickbacks. They also have prosecuted professionals in the home healthcare and hospice industries.
The focus of white-collar defense at private law firms shifts depending on the enforcement priorities of federal prosecutors. Without prosecutors to bring cases, there's no need to hire lawyers to defend against them. At the American Health Lawyers Association, membership in the fraud and abuse practice group has grown 8 percent over the last five years, to 2,341 attorneys.
The new unit "sends a message," that healthcare fraud remains a priority for the office, said Nancy DePodesta, a partner at Arnstein & Lehr and former assistant U.S. attorney. Since 2015, the Chicago firm has brought on four attorneys, including her, who have experience either with False Claims Act cases or with representing doctors before the Illinois Department of Financial & Professional Regulation.
Lisa Noller, chair of the white-collar defense practice at Foley & Lardner, said responding to government enforcement in healthcare fraud cases is a "booming business" for her. It's the result of better coordination between three government agencies—the DOJ, Centers for Medicare & Medicaid Services, and U.S. Department of Health & Human Services—combined with prosecutors who've devoted their careers to this area of law.
Whether the new unit will translate into new work for white-collar lawyers fluent in healthcare will depend on the resources it receives, said Noller, who was an assistant U.S. attorney before joining Foley seven years ago. It will also depend on the complexity of the cases prosecutors pursue, and the size and finances of the defendants they charge.
"I'm very optimistic about the formation of this unit," she said. "It is something that I have been in favor of for a number of years. But time will tell whether it results in additional prosecution."
One possible target could be the Chicago area's pharmaceutical companies, said Ryan Hedges, a partner at Vedder Price who co-led the prosecution of Sacred Heart. Hedges joined the firm in 2015 because "Vedder, like many firms, felt like they had an untapped market," with these cases. "We're trying to grow it."
"Healthcare fraud: The hot new legal practice?" originally appeared in Crain's Chicago Business.