New provisions of the Justice Manual that were circulated by the Deputy Attorney General recently provide new insight on how the Department of Justice will implement the Brand Memo in False Claims Act cases. The Brand Memo was issued on January 25, 2018 and quickly spread through the whistleblower legal community as it seemed to limit the use of agency guidance documents in affirmative civil enforcement cases. Since its release, the memo has been repeatedly cited by defendants who claimed that violations of subregulatory guidance should not be considered in False Claims Act cases.
Essentially the memo’s policy prohibits agencies from making
an end run around notice and comment rulemaking by simply issuing guidance
memoranda to create de facto regulations.
Now we’re seeing how the memo is being applied and the
consequences seem less dramatic than originally feared. The new Justice Manual provisions carve out
significant exceptions and permit many uses of guidance documents in
enforcement actions, particularly in the healthcare context.
First, DOJ
may use a guidance document as probative evidence that a party has satisfied, or failed to satisfy, professional or industry standards or practices relating to applicable statutory or regulatory requirements.
§ 1-20.202
The provision explains that the use applies “broadly in the healthcare arena, where guidance documents, like other statements of professional standards such as CMS’s Medicare Benefit Policy Manual or Local Coverage Determinations, are relevant evidence of violations of the principal requirement that procedures billed to Medicare or Medicaid be medically “reasonable and necessary.” Id.
The provision tracks the government’s position in United States ex rel Polukoff v. St. Mark’s Hospital, No. 17-4014, at 14-15 (10th Cir. July 7, 2017), and explains that the
use does not give these documents the force of law, but rather aids in demonstrating that the standards in the relevant statutory and regulatory requirements have been or have not been satisfied.
Id.
Second, DOJ
may cite a guidance document where a party’s compliance, or failure to comply, with the agency guidance is itself relevant to the claims at issue.
§ 1-20.204
This is relevant to healthcare fraud as providers must certify in claim forms and enrollment agreements that they are in compliance with program rules. The Justice Manual’s examples addresses both the claim forms and provider agreements stating as to claim forms that:
when a provider falsely certifies compliance with a guidance document, and the certification is material to an agency’s payment decision, the false certification to obtain a payment may be offered to establish the elements of falsity, materiality, and scienter.
Id.
And as to provider agreements:
when a government contract or provider agreement requires compliance with some agency guidance document, it is the contract-not the agency guidance itself-that makes the agency guidance pertinent and, in these cases, violations of that guidance undertaken with the requisite mental state may expose individuals to liability.
Id.
We think these provisions, among others, are helpful to whistleblowers as they fight back against the argument made by many defendants that violations of subregulatory guidance should not be considered at all by the courts after the Brand Memo.
