The Department of Justice (“DOJ”) announced yesterday that it recovered over $4.7 billion in fiscal year 2016 in civil cases involving claims of fraud against the government under the False Claims Act (“FCA”).  This is the third largest annual recovery in FCA history and one of the largest in recent years, easily surpassing last year’s recovery of $3.6 billion.  This number does not include state shares related to their Medicaid programs, which added hundreds of millions of dollars more to the government’s FCA haul.  Indeed, the top three health care settlements in 2016 resulted in $500 million in state recoveries alone.

Health care settlements dominate 2016

Over half of the $4.7 billion recovered in FY 2016 involved health care programs, including settlements with pharma and medical device companies, hospitals, nursing homes, laboratories, and physicians.  The largest health care payout in 2016 was $785 million related to allegations of Medicaid overcharges for a drug approved to treat heartburn.  $413.2 million of that amount was paid to the federal government, while $371.4 million went to states based on claimed losses to Medicaid programs.

Other large health care settlements included $390 million for alleged kickbacks to specialty pharmacies for recommending drugs, $260 million for excessive and unnecessary testing.

The DOJ’s press release characterized the agency’s success as “a direct result of the high priority the Obama Administration has placed on fighting health care fraud,” noting that since 2009, the government has recovered $19.3 billion in health care fraud actions, which constitutes 57% of the health care fraud dollars recovered in the 30 years since the 1986 amendments to the False Claims Act.

Notable recoveries outside of the health care industry

This year’s recoveries were also boosted by recoveries from fraud actions in the housing and mortgage industry. The DOJ recouped $1.6 billion, including one notable settlement for $1.2 billion based on allegations that the bank provided residential mortgages that did not meet necessary federal requirements, and for failing to report such deficiencies to authorities as required.

Also notable was an $82.6 million settlement arising out of the April 2010 Deepwater Horizon/Macondo Well explosion in the Gulf of Mexico.

For-profit schools also constituted a significant chunk of 2016’s recoveries, including a $95.5 million settlement with federal and state authorities based on allegations of illicit student recruiting and false certification with Title IV of the Higher Education Act and corollary state laws. The government contracting industry was responsible for a surprisingly small portion of recoveries at only $25.6 million for selling defective holographic weapon sites to DOD, DHS, and the FBI.

Individual accountability and the Yates Memo

As has been covered previously on this blog (here, here, and here), the DOJ issued a memorandum in September 2015, highlighting what was characterized as an increased commitment to holding individuals accountable for fraud (the “Yates Memo”).  2016 saw several key examples of the Yates Memo in practice.

Dr. Asad Qamar—the highest paid cardiologist in the United States in 2012 and 2013—and his practice settled allegations that they billed Medicare, Medicaid, and TRICARE for medically unnecessary procedures, paid kickbacks to patients by waiving copayments without individual financial hardship analyses, and allegedly induced patients to undergo expensive and unnecessarily invasive procedures. The DOJ’s press release specifically called out another 10 individuals who were held personally liable for alleged false claims in 2016.

Increase in whistleblower lawsuits and recoveries

Out of the total $4.7 billion in announced recoveries, DOJ reported that $2.9 billion were related to qui tam lawsuits brought by private litigants under the FCA.  Indeed, of the 845 FCA suits filed in 2016, 702 were brought by qui tam relators.  DOJ acknowledged that the growth in the number of qui tam suits was one factor that led to the increased recoveries reported.  The Affordable Care Act of 2010 added new incentives and protections for whistleblowers, which also may explain the increase in these suits.  DOJ reported that in 2016, $519 million was paid to individual qui tam relators as an incentive for exposing fraud.

This announcement closes out what has been an unprecedented use of the FCA by the Obama Administration, ultimately amounting in a total of $31 billion in recoveries during the life of the Administration. It is unclear whether the incoming Trump Administration will take a similar approach, particularly given the potential repeal of the ACA (in whole or in part).