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Preparing for an Internal Investigation in the Healthcare Industry: What Do Medical Practice and Corporate Leaders Need to Know?

Although internal investigations are usually triggered by unfavorable events or allegations of misconduct, when handled appropriately, they can produce beneficial results that help insulate the business from liability while also protecting individual leaders from the risk of civil or criminal prosecution at the federal level. While the most highly-publicized internal investigations in recent years have come out of the banking and finance industry, the civil and criminal risks of non-compliance in the health care industry make conducting adequate and strategic internal investigations of critical importance for providers, suppliers, and other health care entities as well. 

Health Care Internal Investigations: Understanding the Steps, Benefits and Risks Involved

From Medicare and Medicaid billing to marketing and employment, virtually all aspects of practicing medicine or operating a business in the health care industry have compliance implications. Not only can non-compliance lead to lawsuits from employees and patients, but it can also trigger scrutiny from federal authorities such as the U.S. Department of Justice (DOJ), the U.S. Department of Health and Human Services’ Office of Inspector General (OIG), the Drug Enforcement Administration (DEA), the Federal Bureau of Investigation (FBI), and the Internal Revenue Service (IRS). Within the health care industry, task forces such as the Medicare Fraud Strike Force and the Opioid Fraud and Abuse Detection Unit aggressively target providers and other businesses for compliance deficiencies as well. 

So, as the leader of a medical practice or pharmacy, an executive at a durable medical equipment (DME) company or toxicology laboratory, or a member of the board of a hospice or addiction clinic, what do you need to know about internal compliance investigations? In this article, we will discuss seven reasons why an internal investigation may be necessary or beneficial, and then we will provide an overview of seven key aspects of internal investigations for corporate entities and other businesses in the health care sector:

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Dr. Nick Oberheiden
Dr. Nick Oberheiden

Attorney-at-Law & Founder

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel (Beaverton, OR)

Lynette S. Byrd
Lynette S. Byrd

Former Federal Prosecutor

Partner

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel (Dallas, TX)

Subodh Chandra
Subodh Chandra

Former Federal Prosecutor

Local Counsel (Cleveland, OH)

R. Brandon Johnson
R. Brandon Johnson

Former Federal Prosecutor

Local Counsel (Charleston, WV)

Roger Bach
Roger Bach
(Non-Lawyer)

Former Special Agent, OIG

Dennis A. Wichern
Dennis A. Wichern
(Non-Lawyer)

Former Special Agent-in-Charge

Chris Anderson
Chris Anderson
(Non-Lawyer)

Compliance Consultant

Beverly Gibson
Beverly Gibson
(Non-Lawyer)

Compliance Auditor

Joe Lewis
Joe Lewis
(Non-Lawyer)

Pharmacy Compliance

Valerie Rivera
Valerie Rivera
(Non-Lawyer)

Private Investigator

  • Witness Interviews
  • Expert Input
  • Self-Disclosure
  • Conflicts of Interest
  • Attorney-Client Privilege
  • Joint-Defense Privilege
  • Cross-Border Considerations

Why Conduct an Internal Investigation?

There are many reasons why it may be necessary or beneficial to conduct an internal compliance investigation. While certain entities are required by law to conduct investigations upon being made aware of potential compliance issues, even in the absence of a legal mandate, an internal investigation can be an effective means to:

  • Stop Ongoing Violations (or Prevent Future Violations) – If it is possible that your business or practice has been exposed to legal liability or federal prosecution due to a compliance violation, conducting an internal investigation will allow you to pinpoint the issue, determine what remedial action is necessary, and ensure that the violation is not continuing or at risk for recurrence.
  • Create Documentation of the Company’s GoodFaith Response – As with internal compliance programs, thorough documentation is key when responding to compliance violations. By conducting – and thoroughly documenting – an adequate investigation, you can show federal authorities that you responded promptly and in good faith. 
  • Protect Executives and Board Members Against Allegations of Complicity – In the same vein, conducting an internal investigation can help insulate your practice’s or business’s leadership from individual exposure. In many cases, failure to launch an internal investigation will be viewed as evidence of complicity among those who have the authority to dictate the business’s response. 
  • Uncover the Facts to Avoid Assumptions and Miscalculations – When faced with a compliance issue, acting on incomplete information will prove fruitless, and in many scenarios it can actually do more harm than good. Conducting an internal investigation will ensure that you have all of the facts so that you can avoid costly assumptions and a miscalculated response. 
  • Determine Whether Compliance Program Updates are Necessary – Was the violation a result of an employee mistake, or is a deficiency with your practice’s or business’s compliance program to blame? Conducting an internal investigation will also allow you to determine whether updates to your compliance program are necessary. 
  • Promote Internal Compliance and Transparency – Conducting an internal investigation will let your personnel know that you are serious about compliance, and it can also be an opportunity to promote internal transparency. However, an unmeasured response can backfire, cultivating fear and concerns of retribution. 
  • Get Ahead of Federal Investigators and Law Enforcement – If the compliance violation is significant enough to raise concerns about a federal investigation, then conducting an internal investigation will allow you to get ahead of federal authorities. By gaining a comprehensive picture of any issues that federal agents may uncover, you can prepare to develop and execute a strategy for avoiding civil or criminal prosecution. 

7 Key Aspects of Corporate Internal Investigations

In order to serve these purposes, an internal investigation must be conducted appropriately. This requires a thorough understanding of the legal and practical issues involved, and it requires active efforts to ensure an appropriate level of transparency without subjecting the business (or its executives or directors) to legal risk. As a result, internal investigations should be conducted under the supervision of outside legal counsel, and the attorneys handling the investigation should have the experience required to quickly provide strategic advice while avoiding conflicts of interest and preserving the attorney-client privilege. 

1. Witness Interviews: What are They? Why are They Important? How are They Conducted?

While much of the information to be obtained during an internal investigation will come from your practice’s or business’s electronic records, witness interviews are a fundamental component of the investigative process as well. Identifying witnesses will often be an ongoing process, with the information from one interview often leading to the identification of other employees who need to be questioned. 

The selection of individuals to interview is itself a strategic process. For example, it may be beneficial to initially interview employees who are not suspected to be at fault in the compliance violation and potential “suspects” for later interviews once more information has been gathered (and the investigation is no longer covert). This way, the questions asked of these “suspects” can be more targeted, and this can reduce the likelihood that the interviewee will attempt to obscure facts or mislead the investigation. On the other hand, if immediate remedial action is required, it may be necessary to begin the investigation overtly and promptly speak with the individuals involved in order to uncover the cause, scope, and nature of the violations at issue. 

With these considerations in mind, witness interviews should serve three contemporaneous goals:

  • Uncover as many relevant facts as possible;
  • Determine what facts certain employees may be trying to hide; and,
  • Assess each witness’s credibility so that their statements can be evaluated and weighted appropriately.

Witness interviews should be carefully structured, and preparations should be tailored to each individual witness’s background and suspected role (if any) in the violation. The witness’s potential concerns and questions should be anticipated as well so that the interviewer is not caught off guard and can proficiently articulate all relevant information. 

2. Expert Input: When is an Expert Needed? Who is Qualified? What if Your Internal Expert is Conflicted?

Oftentimes, the complexity of the issues involved in an internal compliance investigation will require the involvement of experts who can render professional opinions on matters that are beyond the knowledge of the practice’s or business’s leaders and outside counsel. For example, an expert may be needed to determine if there are flaws in a medical practice’s billing software, or if a particular medical service or prescription meets the applicable standard for medical necessity. 

When choosing an expert for an internal investigation, there are several factors to consider. The first is proficiency: You may be making decisions based upon the expert’s recommendations, so you need to feel confident that his or her advice is reliable. The second is impartiality: While it may save costs to utilize an internal expert, if your internal expert is conflicted or otherwise has a vested interest in the outcome of the investigation, then an outside expert should be used. Finally, will the expert be able to represent himself or herself effectively if called upon to testify? While some professionals are very good at what they do, they are not well-suited to face questions from federal agents or in front of a federal judge.

During an internal investigation, an expert can serve as either: (i) a consulting expert, (ii) a testifying expert, or (iii) both. A consulting expert is one whose involvement is kept confidential and whose professional opinions are used to help guide the investigation. A testifying expert is one who will help explain why legal liability should be limited (or avoided) based upon the facts and circumstances at hand. In some cases, it will make sense for a consulting witness to transition into a testifying witness; however, when taking this approach, it is critical to ensure that the expert does not become privy to information that you do not want exposed. 

3. Self-Disclosure: When is it Necessary? When is it Inadvisable? What are the Benefits and Risks?

Once you have gathered all of the relevant facts and obtained input from appropriate experts, then you can address the crucial issue of self-disclosure. Under varying circumstances, Medicare and Medicaid-participating medical practices and corporate entities that discover billing violations are required to self-disclose those violations to the federal government. However, before rushing to self-disclose after an internal investigation in hopes of avoiding federal prosecution, there are numerous issues that must be carefully addressed. These include (but are not limited to):

  • Timing – When is it time to self-disclose? At what stage during or after the internal investigation should you make contact with federal authorities?
  • Scope – What information do you need to self-disclose? How can you avoid falling short of your self-disclosure obligations without unnecessarily sharing information that might trigger a federal investigation?
  • Compliance – When you self-disclose, will you be able to demonstrate that you conducted an adequate internal investigation? Have you prepared sufficient documentation to convince the authorities that you have meet your investigative and self-disclosure obligations? 
  • Agency – To which agency should you self-disclose? What are the risks involved, and how can you tailor your self-disclosure so as to reduce the likelihood of a follow-on federal investigation?

In addition to developing a pre-self-disclosure strategy, it is necessary to develop a post-self-disclosure strategy as well. If the federal government decides to conduct an investigation, you will need to be prepared to respond appropriately. This includes having substantiating documentation available, determining which of your personnel should speak with federal agents, and developing a chain-of-command policy so that all information and requests get funneled through outside counsel.  

4. Conflicts of Interest: What is in Your Practice’s or Business’s Best Interests During an Internal Investigation? What if this Differs from the Best Interests of Individual Leaders, Practitioners, or the Board? 

Compliance issues can often raise complicated questions with regard to conflicts of interests. When conducting an internal investigation, the focus needs to be on protecting the company’s best interests—not the interests of any one individual. However, it will not always be clear when and how these interests may diverge. 

In some cases, conflicts will be obvious. For example, if the investigation focuses on kickbacks paid to a particular physician or board member, then the company’s interest in protecting itself could easily be in direct conflict with the interests of the individual whose misconduct is in question. On the other hand, if the issue appears to be systemic or it is not clear where the issue originates, then particular care must be taken to ensure that the investigation remains focused uncovering the information needed to make sound decisions at the corporate level. 

5. Attorney-Client Privilege: Does it Apply to Internal Investigations? Who is Privileged? When Can the Privilege Be Deemed “Waived”?

Since the purpose of an internal investigation is to uncover evidence of compliance violations – including evidence that could potentially be incriminating under federal law – extreme caution must be exercised in order to ensure that all communications and documents generated during the investigation are protected by the attorney-client privilege. While the decision may eventually be made to waive the privilege when dealing with federal authorities, the option to protect information that is entitled to the privilege should not be foreclosed. Furthermore, as the DOJ and other agencies have differing policies on the benefits offered to corporate entities and professional practices that waive the attorney-client privilege during their investigations, it may not be feasible to make a determination regarding what information you will allow to be disclosed until events unfold subsequent to the internal investigation.

Unintentional waiver of the attorney-client privilege is a key concern during internal compliance investigations as well. The risk of the inadvertent disclosure of privileged information is yet another reason why roles must be clearly defined during an investigation and why personnel involved in the investigation must be clearly advised of the risks involved. It is also a key consideration in deciding who should be privy to sensitive information, and why information uncovered during an internal investigation should generally be made available only on a need-to-know basis. 

6. Joint-Defense Privilege: What is It? Why Use It? What are the Risks and Implications?

In cases involving certain types of compliance violations, it may make sense for health care practices and businesses to establish what is known as the “joint-defense privilege.” This is a privilege that allows co-defendants in a federal criminal case to share information and jointly strategize without risking waiver of the standard attorney-client privilege. It is created through the execution of a Joint Defense Agreement, and is most often used with internal personnel and unrelated third parties that are at risk for being targeted jointly for individual offenses. 

Examples of scenarios in which establishing the joint-defense privilege during or as a result of a health care internal investigation include:

  • Billing managers or other individual employees are at risk for prosecution for Medicare or Medicaid billing violations that also create civil or criminal exposure at the corporate level.
  • Physicians, pharmacists, executives, or board members are at risk for Anti-Kickback Statute liability due to accepting or making illegal payments on behalf of the business or practice.
  • The business or practice is at risk for being prosecuted as part of an alleged health care fraud conspiracy involving one or more unrelated entities. 

7. Cross-Border Considerations: What is Unique? What Additional Considerations are Involved? What Additional Steps are Required?

In today’s world, businesses and law enforcement efforts can span the globe. As a result, while health care fraud investigations are often confined to the federal level (although federal authorities will work with state and local law enforcement in many cases), investigations targeting DME companies, pharmaceutical companies, medical technology companies, and other entities with operations or personnel in multiple countries can involve multiple international law enforcement agencies. 

An overseas investigation could follow a physician or pharmacist to the United States; or, the DOJ, DEA, or FBI could coordinate with foreign agencies to investigate and prosecute a multi-national company in multiple jurisdictions. Whatever the case may be, if an internal investigation suggests the potential for cross-border liability, the response to the investigation must be both expanded and tailored accordingly.

Speak with a Federal Health Care Fraud Defense Lawyer in Confidence

The federal lawyers at Oberheiden, P.C. provide comprehensive compliance and defense representation for health care practices and businesses across the United States. If you believe that you may need to conduct an internal investigation, we encourage you to contact us immediately. Our attorneys can help you make strategic decisions; and, if an investigation is warranted, we can oversee the investigation while taking all of the steps necessary to protect you and your business in the event that federal agents come knocking.

To get started with a free and confidential consultation, call 888-519-4897 or contact us online now. 

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