Due Diligence for Compensation Compliance: Mitigating Risk in Financial Relationships and Healthcare Transactions

Description

Financial relationships between and among healthcare providers--specifically, methods and amounts of compensation--continue to be an area of significant scrutiny and government enforcement activity, with government prosecutors having both civil and criminal enforcement tools in their current toolbox. The stakes can be high. Civil penalties and settlement amounts for actions brought under healthcare fraud and abuse laws have reached tens and even hundreds of millions of dollars, while the government's alternative and complementary use of its criminal enforcement tools (carrying the risk of jail time) has increased. The increasing stakes in many ways reflect the increasing complexity of relationships in healthcare, coupled with increasing sophistication of the claims being brought by whistleblowers and prosecutors.

In a 2020 update to its memo regarding "Evaluation of Corporate Compliance Programs," the U.S. Department of Justice stated that a well designed compliance program should include comprehensive due diligence of any transaction targets, and "f]lawed or incomplete pre- or post-[transaction] due diligence… can allow misconduct to continue… causing resulting harm to a business's profitability and reputation and risking civil and criminal liability." Of note, state and federal healthcare fraud and abuse laws may define "financial relationships" very broadly. Therefore, it may often be the case that parties should review all compensation arrangements involving those who can make or influence referrals, including professional service agreements, management agreements, and employment agreements.

Depending on the nature of risks identified during the diligence process, the parties can address and mitigate potential liability or compliance problems.

Listen as our authoritative panel of healthcare attorneys examines the issues in healthcare compensation compliance and the historical and emerging risk areas and related focus areas for due diligence review.