Waller Lansden Looks at Effective Corporate Compliance & Conflict
Waller Lansden Looks at Effective Corporate Compliance & Conflict | Corporate Compliance, Government Audits, Whistleblower, Sarbanes-Oxley, False Claim Act, Dodd-Frank Act, Federal Healthcare Program

(L-R) Jennifer Weaver and colleagues William Athanas and John Park answer questions from an audience of healthcare executives regarding compliance issues and ways to effectively enforce corporate programs without turning violators into whistleblo
Keeping Violators from Turning into Whistleblowers

In any interaction with the government, communication is essential and keeping meticulous records is the key to assure a fair outcome.

Many attorneys familiar with the healthcare world as it is today believe it is not a question of if, but when, their client company will face a government inquiry on their business practices.

Complex regulations, the rising costs of healthcare programs that are part of the federal budget, and ever-increasing enforcement resources have combined to multiply the number of healthcare investigations and enforcement actions.

There are, however, ways for healthcare providers to prepare for and possibly reduce the risks they face.

Waller Lansden attorneys John Park, Jennifer Weaver and William Athanas recently addressed the topic, “Compliance and Conflict: Effectively Enforcing Corporate Programs without Turning Violators into Whistleblowers,” speaking to representatives of local healthcare companies.

Weaver proposed a list of the “top ten” strategies that could help healthcare providers avoid violations of federal legislation and effectively respond to inquiries and investigations as they arise, as well as strategies for resolving resulting conflicts.



Ten essential strategies for a prudent healthcare company to undertake on an ongoing basis:

  1.  Assess the risks actually faced by the organization.
  2.  Heed compliance program guidance published by the government.
  3.  Be proactive in investigating and resolving potential compliance violations.
  4. Identify and capture evidence of systemic success.
  5. Recognize that compliance strategies cannot remain static.
  6. Understand that a government inquiry can take different forms.
  7. Educate employees about how to respond to government contact.
  8. Develop a protocol for responding to document production requests.
  9. Have a strategy in place to respond to search warrants.
  10. Prepare for an extended battle while remaining cognizant of strategies to narrow the inquiry and shorten the process. 


She said that a best practice scenario would be to implement a ongoing compliance program aimed at educating employees about relevant legal guidelines and applicable organizational policies while encouraging and providing guidance in reporting compliance concerns.

The particulars of a compliance program will vary depending on the size of the organization, the breadth of its operations, and the healthcare section in which it operates.

However, every program should start with a thorough and candid evaluation of risk, identifying the who, what, where, when, and how that are at the intersection of the provider’s activities and the applicable guidelines.

In the current legal environment, there are more whistleblowers than ever before, due to the expansion of federal whistleblowers provisions, and the expansion of case law protected activity making retaliations claims more difficult to defend.

Weaver added that the government is using whistleblowers as a compliance tool, especially since the False Claims Act and the Dodd-Frank Act create a “bounty” for employees to recover a percentage, up to 30 percent, of the recovery awards, based on the value of information the employee provides to government investigators.

The whistleblower allegations occur most commonly in five arenas: healthcare, technology, communications, engineering and construction. The majority of the allegations stem from internal complaints, although third-party proceedings are increasing.

A whistleblower can be anyone who, from a subjective and objective standpoint, believes that a wrongdoing has occurred. The belief does not have to be correct, as long as it is defined as “reasonable,” nor does it have to be formally made — it can be verbal and does not have to be a “complaint” at all to trigger an investigation.

Weaver suggested that “the mother of all whistleblower statutes is the False Claims Act,” which imposes civil liability for submitting false claims for payment to the United States. False claims can be direct, or “reverse” stemming from making false statements to avoid paying money owed to the government.

The False Claims Act cases may be filed by a private citizen whistleblower, referred to as a “relator,” on behalf of the government. The relator may be a disgruntled employee who has inside information, and a claim can be filed as long as the relator had good faith or an objectively reasonable basis for believing he or she was pursing a valid FCA claim.

The government has at least 60 days from the time of filing to investigate the relator’s allegations to decide whether to intervene. During this time, the defendant may have no knowledge of pending lawsuit.

Although damages belong to the government, the relator is entitled to a portion (10–30 percent) of any recovery — for example, the share of $51.5 million that the Columbia/HCA relator received, and the relator share of $67.2 million in the Dey Laboratories case. Even if part of the wrongdoing, the relator’s award is automatic.

The alarming risk of whistleblower action for a company in the healthcare sector is that the company could be excluded from federal healthcare programs, essentially “the death penalty for any healthcare company,” Weaver said, warning, “It could happen to any company. The government enjoys the ability to look at things in hindsight.”

She added, “It is important for a company to keep track of all the things it has done right.” The government can ask, “What did you do to prevent this after the first time?”

Companies would be well served, she noted, to catalog disciplinary measurers imposed and the circumstances that prompted them, in order to demonstrate commitment to consistency when defending government inquiries or whistleblower allegations.

In this context, a company should employ progressive discipline. Weaver pointed out that … although it might be tempting to leap at the first opportunity to get rid of a troublesome complainer … whenever possible, remedial measures should be considered for first time violations. If possible, the company should adopt an approach that appropriately punishes the employee for the misconduct, while simultaneously validating the compliance program.

As an alternative to termination of the employee, the company might adopt incremental measures including probationary periods, increased reporting obligations, increased supervision of the employee’s activities, or a suspension for a certain term.

Companies in highly-regulated industries like healthcare and financial services often face a struggle as they seek to enforce disciplinary measures without triggering a rash of lawsuits.

The Department of Health and Human Services, Office of Inspector General, has published compliance program guidance for various types of healthcare providers including hospitals, nursing facilities, home health agencies, ambulance providers and hospices, requiring they demonstrate a commitment to compliance with the law.

At the same time, the federal government has made it easier to file whistleblower lawsuits.

Under the Sarbanes-Oxley Act of 2002, publicly traded companies are required to track complaints regarding suspected violations of accounting and auditing practices and to allow employees to make confidential, anonymous reports on potential violations. In addition, the Dodd-Frank Act dramatically expands the types of claims for which employees may obtain a bounty for whistleblowing. Under this act, whistleblowing employees can bring suit on behalf of the government, potentially collecting up to 30 percent of any sanction in excess of $1 million that the government recovers.

These new legal protections increase the likelihood that employees who have been disciplined or terminated will attempt to take advantage of whistleblower protections. The courts have also expanded whistleblower protections. The Supreme Court recently ruled that companies can be held liable for retaliating against an employee for the whistle blowing activity of third parties such as family members and close associates.


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