Cybersecurity
Last year was also the most active enforcement year to date under the Civil Cyber-Fraud Initiative, with the DOJ announcing several multimillion-dollar settlements across various industries. These cases involved allegations that defendants failed to protect health information gathered through government-funded COVID-19 contact tracing programs and financial information obtained under the COVID-19 Emergency Rental Assistance Program. (Other cases involved universities, including a settlement with Pennsylvania State University resolving allegations that it failed to comply with cybersecurity requirements in contracts with the U.S. Department of Defense (DoD) and National Aeronautics and Space Administration (NASA), and the government’s first intervened lawsuit against the Georgia Institute of Technology, where the DOJ has alleged that the university and certain of its labs induced the DoD to enter into and retain contracts under the false pretense that they would comply with applicable cybersecurity regulations and provide accurate security assessment scores.)
Healthcare
While the government’s enforcement efforts may be expanding to other industries, the healthcare sector continued as the dominant target for enforcement in terms of the number of cases and total recoveries. In 2024, the DOJ recovered more than $1.67 billion from healthcare-related judgments or settlements with entities across the industry, including hospitals and health systems, long-term care providers, pharmacies, pharmaceutical manufacturers, and laboratories.
Hospitals and health systems
Whistleblower-initiated qui tam lawsuits continued to be the primary driver of enforcement and recovery, and allegations of Stark Law and Anti-Kickback Statute violations continued to drive those cases. This is perhaps not surprising, given that an alleged unlawful arrangement may “taint” a large number of claims and, in turn, result in a significant recovery. While there was no single blockbuster settlement in 2024, there were a handful of significant cases resolving allegations that hospitals and health systems entered unlawful physician payment arrangements, including a $42.5 million settlement resolving allegations that an operator of three hospitals unlawfully provided free services from ancillary providers (nurse practitioners, physicians assistants, and hospitalists) to non-employed surgeons to induce referrals from those surgeons in violation of the Anti-Kickback Statute and Stark Law. Hospitals and health systems also continued to be named in cases relating to allegations of medical necessity, upcoding, noncovered services, and inadequate oversight of personnel.
Long-term care providers
Last year saw a rise in cases alleging that long-term care providers billed for services that were not rendered as billed or were not rendered at all. For example, some cases alleged that home health providers billed for nursing or personal care services by employees who were not present at the recorded time of service or billed for services that were simply not provided at all. There was also an uptick in cases involving allegations of services being provided to ineligible patients. And, as is typical, allegations of unlawful kickback payments to medical directors for patient referrals remained a constant theme for long-term care providers.
Pharmacies
Headlined by a $410 million settlement with Rite Aid in July, last year saw a dramatic increase in False Claims Act cases alleging that pharmacists violated their duty of corresponding responsibility under the federal Controlled Substances Act (CSA). The implementing regulations impose a “responsibility for the proper prescribing and dispensing of controlled substances” on “the prescribing practitioner.” But they also impose “a corresponding responsibility” on “the pharmacist who fills the prescription.” According to the DOJ, the government considers pharmacists to be the “last line of defense” against the improper dispensing of controlled substances, and, in practice, exercising corresponding responsibility means pharmacists must investigate and resolve all “red flags” before dispensing prescriptions for controlled substances. While the Drug Enforcement Administration (DEA) has not published a definitive list of red flags, it insists that red flags are circumstance-dependent, which has led some pharmacies to feel open to allegations of wrongdoing based on 20/20 hindsight.
The DOJ announced a similar $8 million settlement with Food City in December, resolving allegations that it dispensed opioids in violation of the CSA. In the same month, it intervened in a case against CVS alleging pharmacies sought federal reimbursement for opioid prescriptions filled in violation of the CSA.
Pharmaceutical manufacturers
Pharmaceutical manufacturers continued to face allegations of kickbacks, including paying excessive consulting fees, overpaying for intellectual property acquisitions or licensing fees, offering company performance shares, and providing other extravagant benefits to prescribing doctors, such as luxury travel and entertainment. The largest settlement in this space, however, resolved allegations that a drug manufacturer directed its charitable donations through third-party foundations to patients to cover co-pays of its drugs. This topic is sure to remain top of mind in 2025, with the U.S. Court of Appeals for the First Circuit issuing its long-anticipated decision in United States v. Regeneron Pharmaceuticals, where it held that for claims to have “resulted from” a violation of the Anti-Kickback Statute, the alleged kickback must have been the “but-for” cause of the referral.
Laboratories
Allegations of kickbacks continued to drive enforcement against laboratories and diagnostic providers in 2024, with several laboratories entering seven- or eight-figure settlements resolving allegations of commission payments for referral volumes or other unlawful incentives to sales representatives. Other labs settled cases involving allegations that they paid referring providers kickbacks in various forms, including a $28 million settlement resolving allegations that a lab billed for genomic cancer tests that were medically unnecessary and procured through illegal kickbacks. Medical necessity of testing also continued as a steady theme for enforcement in this space, with several labs reaching settlements resolving allegations of medically unnecessary urine drug screens.
Signals from the Administration for 2025 and Forward
While the new administration has publicly emphasized the need for government efficiency, including significant cuts to departments across the federal government, the consistent messaging from political appointees and relevant DOJ officials points to a heavy focus on fraud, waste, and abuse through increased enforcement under the False Claim Act in healthcare and beyond.
Appointees Focus on Fraud, Waste, and Abuse
During Attorney General Pamela Bondi’s confirmation hearing in January, she committed to ensuring sufficient “staff and funding levels to properly support and prosecute false claim cases,” noting that the “False Claims Act is so important and especially… with whistleblowers as well, and the protection, and the money it brings back to our country.” Likewise, Dr. Mehmet Oz testified during his hearing in March: “Let’s be aggressive in modernizing our tools to reduce fraud, waste, and abuse. This will stop unscrupulous people from stealing from vulnerable Americans and extend the life of the Medicare trust fund” And, in introducing Dr. Oz as administrator for the Centers for Medicare & Medicaid Services, Department of Health and Human Services Secretary Robert F. Kennedy, Jr. stated that “[t]ogether, we are committed to Make America Healthy Again by combating fraud and abuse in Medicare and Medicaid, and ensuring that these programs truly serve the American people.” These statements, of course, should be considered in light of the significant legal staff cuts at HHS and the federal government’s hiring freezes, which may significantly impact the staffing and resources of the DOJ.
DOJ Officials Commit to Aggressive False Claims Act Enforcement
In remarks delivered in February, Deputy Assistant Attorney General Michael Granston emphasized the DOJ’s commitment to enforcement under the False Claims Act, saying that DOJ “plans to continue to aggressively enforce the False Claims Act” and noting that the “return on investment” makes investment in the DOJ’s enforcement efforts a worthwhile use of government resources. Granston and other DOJ officials identified certain strategic enforcement areas that the DOJ is likely to emphasize during this administration, including customs and tariffs, cybersecurity, pandemic relief, Medicare Advantage, and antidiscrimination.
Customs and tariffs
During his remarks, Granston stated that the DOJ plans to use the False Claims Act to protect against illegal foreign trade practices and attempts to avoid the payment of import duties and tariffs. Likewise, the director of the Fraud Section of the Civil Division, Jamie Ann Yavelberg, identified tariff evasion as a “key area” for enforcement. While this may be a new area of emphasis given the Trump Administration’s focus on tariffs, it would not be the first time the DOJ has utilized the False Claims Act to enforce customs duties. In recent years, the DOJ has reached several eight-figure settlements with companies accused of misclassifying products to avoid paying customs duties, mischaracterizing the nature or value of imported goods, or misrepresenting the country of origin to avoid paying duties. Given the administration’s focus on trade issues, “reverse false claims” actions challenging goods classifications under the Harmonized Tariff Schedule, country of origin, or product value are likely to increase significantly.
Cybersecurity
DOJ representatives also signaled that cybersecurity will remain a fixture of the DOJ’s enforcement efforts, highlighting recent settlements in the space and discussing the final Cybersecurity Maturity Model Certification (CMMC) rule issued by DoD in October 2024, which is expected to become a DoD contract requirement in mid-2025. The officials noted that because CMMC requires defense contractors to perform cybersecurity security assessments and certify the results of those assessments to the DoD, it is a potential source of liability under the False Claims Act. The DOJ’s emphasis on cybersecurity enforcement, coupled with ever-changing rules and regulations, is likely to spur increased scrutiny and development in this space in the months and years to come.
Pandemic relief
As discussed above, the DOJ has dramatically increased its enforcement related to pandemic relief in recent years. According to Granston and other DOJ officials, this is likely to continue for the foreseeable future, as one official noted that the DOJ has more than 700 active cases involving fraud on pandemic-relief programs. While the DOJ initially prioritized claims of straightforward fraud schemes involving the Paycheck Protection Program, many of those cases have now been resolved. Going forward, the remaining cases in this space are likely to be “high-dollar” and more complex. DOJ officials also focused on the large increase in “data mining” and qui tam complaints in this space, emphasizing the value of insider information offered by whistleblowers when initiating new enforcement actions.
Medicare Advantage
Medicare Advantage, or Medicare Part C, comprises nearly half of all Medicare expenditures and covers millions of beneficiaries. In their remarks, Granston and other DOJ officials indicated that the DOJ intends to increase its enforcement of fraud under Part C relating to the provision of substandard or unnecessary care, upcoding or adding diagnosis codes in the risk adjustment process, kickbacks for steering beneficiaries to managed care plans, and the use of artificial intelligence.
Diversity, equity, and inclusion
The Trump Administration’s focus on diversity, equity, and inclusion (DEI) programs was highlighted early this year by President Trump’s January Executive Order 14173, which seeks to end “illegal DEI” programs by linking compliance with federal antidiscrimination laws to the False Claims Act through the inclusion of antidiscrimination requirements in every federal government contract or grant award, specifically stating that these terms will be “material” to payment. The DOJ also recently announced a new Civil Rights Fraud Initiative that will target entities that “knowingly violate[] federal civil rights laws” while certifying compliance as a condition of receiving federal funds. The memorandum announcing the initiative specifically lists universities as potential targets—citing violations such as encouraging antisemitism, refusing to protect Jewish students, allowing men to intrude into women’s bathrooms, or requiring women to compete against men in athletic competition. The memo, however, makes clear that the initiative will reach beyond universities to any “federal contract or recipient of federal funds” who maintains a DEI program that “assign[s] benefits or burdens on race, ethnicity, national origin.” According to the memo, the initiative will be co-led by the Civil Fraud Division (which enforces the False Claims Act) and the Civil Rights Division (which enforces civil rights laws) and each of the 93 U.S. Attorney’s Offices will identify an Assistant United States Attorney to advance the initiative’s efforts. The DOJ will also coordinate with other federal agencies, including the Department of Health and Human Services and state attorneys general on enforcement.
Takeaways
In public statements, press releases, and congressional testimony, the Trump Administration and the DOJ are signaling increased enforcement in healthcare and beyond. While these statements should be balanced against the significant legal staff cuts and the federal government’s hiring freezes, early signs indicate the DOJ is moving forward with its stated priorities. So far this year, the DOJ has already announced an $8 million settlement with a flooring importer over alleged customs violations and a significant $62 million settlement with a medical group for allegedly submitting false diagnosis codes to increase reimbursement under Medicare Advantage. Evidenced by Executive Orders and a new Civil Rights Fraud Initiative, it appears the Trump Administration is willing and eager to use the FCA as an enforcement tool in new and unique ways, but it’s also likely a safe bet that the mainstays of civil fraud enforcement are not going away. The healthcare sector should anticipate continued enforcement involving alleged kickbacks, upcoding, and provision of unnecessary services.
