How Conduct Abroad Impacts Health Care Business In US

This article by counsel Alison Fethke and associates Devin Cohen, Haley Bavasi and Charles O'Toole was published by Law360 on October 12, 2017.

Given the uptick in global awareness and enforcement of anti-bribery and corruption laws, most U.S.-based health care companies are attuned to the risks associated with legal infractions caused by their operations and conduct abroad. However, such ex-U.S. activities may also impact health care companies' ability to conduct business within the U.S. For example, overseas conduct could trigger exclusion, debarment or suspension from federal procurement of health care programs, such as Medicare and Medicaid, even if the alleged wrongdoing (e.g., conduct relating to bribery or corruption) occurs entirely outside of the U.S. and has no tie to any federal program. Further, quasi-government entities, such as the World Bank, also have debarment policies which can impact U.S. health care companies.

This article first explores the interaction between the Office of Inspector General exclusion statute and the Foreign Corrupt Practices Act. Second, it discusses how debarment of federal contractors participating in development programs run by quasi-governmental organizations (such as the World Bank) could lead to unexpected scrutiny by U.S. federal agencies.

The FCPA and Mandatory Exclusion

A felony FCPA plea or conviction triggers fines and penalties under U.S. securities laws, and could also impact a company's ability to participate in U.S. federal health care programs. The Office of Inspector General of the U.S. Department of Health and Human Services has the authority to exclude individuals and entities from all federally funded health care programs as required by statute (mandatory exclusion),1 or based on OIG's discretion (permissive exclusion").2 A company charged with a violation of the FCPA books and records and internal controls provisions,3 a felony under federal law,4 could be excluded based on: (1) a guilty plea or conviction in a court with competent jurisdiction; and (2) OIG's determination that the underlying conduct meets the language of the mandatory exclusion statute. Mandatory exclusion compels OIG to exclude individuals and entities convicted of certain offenses, including felony convictions relating to health care fraud, from participation in all federal health care programs for a minimum of five years.5

The consequences of exclusion, either mandatory or permissive, are severe: exclusion prevents items or equipment sold by an excluded manufacturer that are used in the care or treatment of federal healthcare program beneficiaries from being reimbursed, directly or indirectly, by any federal health care program. Although OIG has not yet excluded a company for an FCPA violation, the self-executing nature of the statute and OIG's lack of discretion leave open the real possibility that such an exclusion could happen in the future,6 a fact which the U.S. Department of Justice has acknowledged.7 This threat of exclusion has doubtless impacted numerous companies facing prosecution in their decisions to cooperate and enter into a deferred prosecution agreement, despite the high associated costs of compliance.

To determine whether a violation triggers mandatory exclusion, OIG evaluates the conduct underlying the guilty plea or conviction. For an FCPA books and records and internal controls violation, OIG would consider whether the misconduct was undertaken: (1) "in connection with the delivery of a health care item or service"; and (2) "relating to...