DOJ, State AGs Innovate to Fight Covid-19 Fraud

The start of 2022 reveals that the government is moving beyond prosecuting “common” or blatant Covid-19 theories of fraud such as improperly taking Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL) funds that were meant to help businesses cover payroll and specific expenses during the public health emergency. Now, the Department of Justice is bringing actions that are not under the usual federal fraud and abuse laws such as the False Claims Act and Anti-Kickback Statute.

As we begin the third year of Covid-19, state governments have similarly had a chance to mobilize and take enforcement action using state consumer protection laws.

For example, late last year, the holidays brought a surge of demand for Covid-19 testing as individuals planned travel and family gatherings. Many Covid-19 testing sites became inundated with patients, often leading to long waits and slow results because of test processing delays. Many patients who did not receive their test results in a timely manner filed complaints, typically using the Covid-19 fraud hotlines established by the Department of Justice, the Department of Health and Human Services Office of Inspector General, or various state enforcement agencies.

The result: Within a matter of days, state governments took action. The Washington State Attorney General’s Office and the Minnesota Attorney General’s Office filed separate consumer protection lawsuits against a company that managed a chain of Covid-19 testing sites in several states, for alleged deceptive and fraudulent practices.

The allegations included claims that the company and its lab delivered false or inaccurate test results. Additionally, the states alleged the company’s system did not allow for sufficient private insurer options, which resulted in employees selecting “uninsured” almost automatically. The company then improperly submitted claims for reimbursementto the federal government, instead of private insurers, according to the complaints.

The complaint filed by the Minnesota Attorney General’s Office was brought under the state Consumer Fraud Act, Uniform Deceptive Trade Practice Act, False Advertising, Foreign Corporations Act. The complaint filed by the Washington State Attorney General’s Office was brought under its state Consumer Protection Act. The cases demonstrated a shift of enforcement to the states, using state laws that had not been used before for Covid-19 enforcement actions. Both cases are currently pending.

Justice Department Uses ADA, Sherman Act

Meanwhile, the Department of Justice has either filed or resolved more than 70 matters relating to Covid-19 fraud so far this year, mostly relating to schemes arising from PPP or EILD. However, it too is broadening the scope of its enforcement.

For example, in January, DOJ’s Antitrust Division indicted four managers of Medicare-certified home health agencies who allegedly conspired to eliminate competition by agreeing to fix the rates paid to home health aides and to not hire each other’s workers during the Covid-19 pandemic.

While the home health industry has historically been the subject of some government scrutiny by the HHS OIG and DOJ, this recent indictment is based on an alleged conspiracy to restrict trade under the Sherman Antitrust Act rather than the common fraud and abuse laws.

Also in January, the DOJ used the Americans with Disabilities Act to enforce actions relating to online access to Covid-19 vaccines. DOJ brought suit against two supermarket chains whose online Covid-19 vaccine portals were allegedly not accessible to individuals with certain disabilities.

One chain’s website was alleged inaccessible—including the inability to select available appointment times—to people who use screen-reader software. Similarly, the DOJ alleged the other chain’s website did not allow people to use the “tab” key instead of a mouse to navigate the website and proceed past the first step of the vaccine registration process. This prevented some individuals from selecting the button or box to schedule an appointment. In both matters, the DOJ secured settlements.

The use of consumer protection, antitrust, and disability laws does not mean there will not be more Covid-19 related enforcement actions under the False Claims Act or Anti-Kickback Statute. Undoubtedly, through the use of whistleblowers, the False Claims Act is the government’s most effective tool in combating fraud against the government. However, if a whistleblower has filed a qui tam complaint alleging Covid-19 related fraud, the complaint is filed “under seal” and outside of the public’s view while the government investigates, and it typically takes more than one year before the DOJ decides whether to intervene and prosecute the matter.

While the federal government continues to investigate matters to uncover more complex fact patterns and develop novel legal theories—which may take time—state governments are moving quickly to fill in the gaps.

Thus far in the pandemic, the federal government has spent $4.1 trillion on health care due to Covid-19. As a result, we should expect the unexpected from the government as it continues to bring actions against alleged wrongdoers.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Kirti Vaidya Reddy is a partner at Quarles & Brady LLP with extensive experience in government investigations and federal civil litigation. She advises on fraud and abuse matters and conducts internal investigations and risk assessments. She previously served as an assistant U.S. attorney for the Southern District of New York, Civil Division.

Jaya F. White is the chair of Quarles & Brady’s Chicago office’s Health Law Practice Group and co-chair of the Long-Term Care team. She advises health-care clients on fraud and abuse, and privacy issues, among other regulatory, compliance, and transactional matters.

Mark W. Bina is co-chair of Quarles & Brady’s Health Care Litigation team. He represents clients in dispute resolution, health regulatory, licensing, and compliance matters.