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Posts Tagged ‘rcod’

RCOD Responsible Corporate Officer Doctrine Individual Liability and Exclusion

Thursday, July 12th, 2012

Prosecution and Exclusion Under the Responsible Corporate Officers Doctrine

Over recent years, we have seen healthcare regulatory agencies more actively use an approach that pursues individuals for the misdeeds that occur within the healthcare organization. Individuals are being pursued for both criminal responsibility and for exclusion under the Medicare and or Medicaid programs.

The ability to pursue individuals for corporate responsibility goes back as far as 1943 involving a case of adulterated drugs. The Supreme Court decided that an individual officer of the applicable company who had no knowledge of the unlawful conduct could have guilt imputed to him “solely on the basis of his authority and responsibility as president and general manager of the corporation.”  The doctrine lay dormant for over 30 years until it was again addressed by the Supreme Court in the landmark case of United States v. Park. In the Park case, the United States Supreme Court reaffirmed the principle that responsible corporate officers can be held criminally liable without the required a showing of “awareness of some wrongdoing doing” or “conscious fraud.”

Over the last two or three years, both the FDA and the OIG have used the responsible corporate officer doctrine to pursue individual corporate officers for criminal prosecution and program exclusion. These prosecutions have been based solely on the position of the officer rather than any specific knowledge of illegal activity.

The FDA sent a letter to Sen. Charles Grassley in March 2010 which acknowledged that it will begin to increase its use of the responsible corporate officer doctrine.  Since that time, the FDA has invoked the doctrine on several occasions, primarily in connection with pharmaceutical company misbranding and off-label promotion cases. For example, in August 2011 the OIG notified former CEO of InterMune, who was awaiting sentencing on misbranding charges that occurred between 1998 in 2003, that he was being excluded from participation in the Medicare and Medicaid programs.

The FDA has even pursued potential criminal charges and program exclusion against attorneys for pharmaceutical related companies. For example, in 2010, the FDA brought charges against the General Counsel for GlaxoSmithKline alleging obstruction and improper influence of a federal investigation and making false statements to the FDA. the GSK General Counsel was required to sit through the trial on this alleged offense which resulted in the judge ruling for acquittal based on the fact that no reasonable jury could have convicted her on the basis of the evidence presented.  However, this one unsuccessful case will not likely serve as a deterrent to the FDA’s use of the responsible corporate officer doctrine against attorneys and other corporate officers in the future.

The Office of Inspector General has also released recent information regarding its intent to use the responsible corporate officer doctrine to pursue individuals on a more frequent basis.  In 2010, the OIG issued guidance regarding the appropriate use of the responsible corporate officer doctrine in making determinations as to whether to exclude individuals from the Medicare and Medicaid programs.  Under the OIG Guidance, if there is evidence that an office or managing employee “knew or should have known” about the conduct at issue, the OIG will presume that the individual should be excluded from the program.  Absent a showing of “significant factors” that weigh against exclusion, managers who knew or should have known with the exercise of reasonable care will be excluded.  The OIG Guidance also addressed cases where it cannot be demonstrated that the officer or manager “knew or should have known” about the wrongdoing.  In such cases, the OIG states that it will weigh a number of factors to determine whether an individual should still be excluded.  Some of these factors include the role of the individual in the organization, the circumstances surrounding the alleged misconduct, the seriousness of the offense, whether preventing the misconduct would have been impossible, and any actions that the individual took up learning of the alleged wrongdoing.

The current standards set by the OIG seem to limit the use of the responsible corporate officer doctrine to cases where the manager or owner has some control over the processes and is in a position to have known of the offense if  reasonable care was used.  Legislation has been proposed that would expand the application of the doctrine to include all individuals and entities currently or formerly affiliated with a sanctioned entity.  This proposal would expand the application of the responsible corporate officer doctrine to officers of affiliated entities who knew or should have known of the misconduct.

With the current focus on health care fraud, we can plan to see attempts by regulators and legislators to expand the scope of the doctrine.  At least part of the reason for this trend is the theory that individual liability will be a more effective tool to prevent misconduct.  The use of the Park Doctrine is yet another method that regulators are using to push providers toward the development to police themselves for fraud, abuse and systematic errors.  This forces providers to put more effort into their compliance and audit systems and to be certain that they are proactively maintained.  A proactively operated compliance program will maximize the possibility that fraud or abuse will be detected before it becomes unmanageable.  Such a program will also create a line of defense for the organization and individual officers who can demonstrate that systems were in place and operating effectively; even if the specific area of wrongdoing is not detected.

Ruder Ware provides a broad range of services to health care providers of all types and sizes.  We routinely assist providers in the creation and operation of appropriately scaled compliance programs.  We also perform “effectiveness reviews” of existing programs.

RCOD Responsible Corporate Officer Doctrine Use Increasing

Monday, July 9th, 2012

Prosecution and Exclusion Under the Responsible Corporate Officers Doctrine

Individual Liability Force Toward Effective Compliance Programs

Over recent years, we have seen healthcare regulatory agencies more actively use an approach that pursues individuals for the misdeeds that occur within the healthcare organization. Individuals are being pursued for both criminal responsibility and for exclusion under the Medicare and or Medicaid programs.

The ability to pursue individuals for corporate responsibility goes back as far as 1943 involving a case of adulterated drugs. The Supreme Court decided that an individual officer of the applicable company who had no knowledge of the unlawful conduct could have guilt imputed to him “solely on the basis of his authority and responsibility as president and general manager of the corporation.”  The doctrine lay dormant for over 30 years until it was again addressed by the Supreme Court in the landmark case of United States v. Park. In the Park case, the United States Supreme Court reaffirmed the principle that responsible corporate officers can be held criminally liable without the required a showing of “awareness of some wrongdoing doing” or “conscious fraud.”

Over the last two or three years, both the FDA and the OIG have used the responsible corporate officer doctrine to pursue individual corporate officers for criminal prosecution and program exclusion. These prosecutions have been based solely on the position of the officer rather than any specific knowledge of illegal activity.

The FDA sent a letter to Sen. Charles Grassley in March 2010 which acknowledged that it will begin to increase its use of the responsible corporate officer doctrine.  Since that time, the FDA has invoked the doctrine on several occasions, primarily in connection with pharmaceutical company misbranding and off-label promotion cases. For example, in August 2011 the OIG notified former CEO of InterMune, who was awaiting sentencing on misbranding charges that occurred between 1998 in 2003, that he was being excluded from participation in the Medicare and Medicaid programs.

The FDA has even pursued potential criminal charges and program exclusion against attorneys for pharmaceutical related companies. For example, in 2010, the FDA brought charges against the General Counsel for GlaxoSmithKline alleging obstruction and improper influence of a federal investigation and making false statements to the FDA. the GSK General Counsel was required to sit through the trial on this alleged offense which resulted in the judge ruling for acquittal based on the fact that no reasonable jury could have convicted her on the basis of the evidence presented.  However, this one unsuccessful case will not likely serve as a deterrent to the FDA’s use of the responsible corporate officer doctrine against attorneys and other corporate officers in the future.

The Office of Inspector General has also released recent information regarding its intent to use the responsible corporate officer doctrine to pursue individuals on a more frequent basis.  In 2010, the OIG issued guidance regarding the appropriate use of the responsible corporate officer doctrine in making determinations as to whether to exclude individuals from the Medicare and Medicaid programs.  Under the OIG Guidance, if there is evidence that an office or managing employee “knew or should have known” about the conduct at issue, the OIG will presume that the individual should be excluded from the program.  Absent a showing of “significant factors” that weigh against exclusion, managers who knew or should have known with the exercise of reasonable care will be excluded.  The OIG Guidance also addressed cases where it cannot be demonstrated that the officer or manager “knew or should have known” about the wrongdoing.  In such cases, the OIG states that it will weigh a number of factors to determine whether an individual should still be excluded.  Some of these factors include the role of the individual in the organization, the circumstances surrounding the alleged misconduct, the seriousness of the offense, whether preventing the misconduct would have been impossible, and any actions that the individual took up learning of the alleged wrongdoing.

The current standards set by the OIG seem to limit the use of the responsible corporate officer doctrine to cases where the manager or owner has some control over the processes and is in a position to have known of the offense if  reasonable care was used.  Legislation has been proposed that would expand the application of the doctrine to include all individuals and entities currently or formerly affiliated with a sanctioned entity.  This proposal would expand the application of the responsible corporate officer doctrine to officers of affiliated entities who knew or should have known of the misconduct.

With the current focus on health care fraud, we can plan to see attempts by regulators and legislators to expand the scope of the doctrine.  At least part of the reason for this trend is the theory that individual liability will be a more effective tool to prevent misconduct.  The use of the Park Doctrine is yet another method that regulators are using to push providers toward the development to police themselves for fraud, abuse and systematic errors.  This forces providers to put more effort into their compliance and audit systems and to be certain that they are proactively maintained.  A proactively operated compliance program will maximize the possibility that fraud or abuse will be detected before it becomes unmanageable.  Such a program will also create a line of defense for the organization and individual officers who can demonstrate that systems were in place and operating effectively; even if the specific area of wrongdoing is not detected.

 Ruder Ware provides a broad range of services to health care providers of all types and sizes.  We routinely assist providers in the creation and operation of appropriately scaled compliance programs.  We also perform “effectiveness reviews” of existing programs. 

 Health care attorney John H. Fisher is Certified in Health Care Compliance

Responsible Corporate Officers Doctrine – New Focus On Health Care

Tuesday, February 14th, 2012

Responsible Corporate Officer Doctrine – New Focus On Application To Health Care

Recent enforcement actions and public comments by enforcement officials make it clear that parties who are responsible for health care fraud enforcement plan, to focus more on the Responsible Corporate Officer Doctrines (“RCO Doctrine”) as a tool to fight health care fraud.  Comments by Wisconsin Bar Health Law Seminar are just one example of the new focus on the RCO Doctrine.

            The RCO Doctrine was derived from the United States Supreme Court’s decision of U.S. v. Park.  The RCO Doctrine permits corporate officers to be held personally responsible for the criminal acts committed at the corporate level.  The RCO Doctrine is a draconian measure that can hold corporate officers liable as long as they were in a position to prevent a legal violation.  Park permits application of the doctrine even in cases where the corporate officer does not have actual knowledge of, or has not actually participated in, the alleged violation.

            Health care is one area where the RCO Doctrine is being increasingly used as an enforcement tool.  The doctrine is being actively used to pursue corporate officers who are in a position of authority regarding the alleged violation.  Some cases have even upheld the application of the RCO Doctrine against a corporate officer even when the corporation itself is acquitted of the charges.

            The RCO Doctrine can be used against virtually any corporate officer, including the CEO, president, vice president, secretary, treasurer, general counsel or virtually any other management-level functionary.  Health care is particularly susceptible to the use of the RCO Doctrine.  In many cases, enforcement officials do not want to take action that could adversely affect availability of health care services to the community.  This causes officials to focus on individuals in management.  In fact, some officials take the position that where health care fraud occurs, someone must be criminally charged.  This is a growing enforcement trend that makes health care management particularly vulnerable.  In fact, some recent cases have gone so far as to charge legal counsel with criminal violations, raising issues regarding the role of in-house legal counsel in compliance roles.

            The emergence of the RCO Doctrine places a spotlight on the duty of corporate officers to be certain that systems are in place to ensure that legal violations do not occur.  Systems should also focus on promptly remedying compliance concerns before they spin out of control.

            Health care organizations are actively using compliance programs to minimize compliance risk.  These programs should be a continued focus of health care organizations as a method to reduce legal risk.  The programs should be flexible to address areas of risk that apply to the specific organization.  Policy changes, training and actions should be taken where areas of risk are identified.

            The Affordable Care Act creates mandatory compliance program obligations on most health care organizations.  Organizations that receive $5 million or more of Medicaid revenues must adopt most elements of a compliance program.  Nursing homes will need to certify that they have compliance programs in place by 2013, with other provider types following thereafter.  Many institutions have already implemented compliance policies, but should take the opportunity to audit their programs for effectiveness.  Smaller providers such as physician practices will need to adopt compliance programs for the first time in response to the Affordable Care Act.

            A well-designed, effective compliance program may be your best defense to the possible application of the RCO Doctrine, in view of the increased focus on that doctrine by law enforcement.  When it comes to the RCO Doctrine, it is what you do not know that can hurt you.  For this reason, it is critical to develop compliance systems to ferret out possible problems and solve them before they grow into larger problems.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

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