Beginning in 2018, HHS-OIG added a dubious gimmick to its enforcement toolkit: the Heightened Scrutiny List. The list purports to set forth parties that warrant “heightened scrutiny” because they refused to agree to HHS-OIG’s desired imposition of a corporate integrity agreement (CIA). As a practical matter, HHS-OIG uses the “high risk” designation both as a potent tool to arm-twist reluctant entities into agreeing to a CIA and as a means to punish those entities who decline the agency’s demand for one. While the Heightened Scrutiny List has served as a powerful tool for HHS-OIG to force parties into CIAs, some recent holdouts in the last year suggest that the list may be losing its efficacy.
In any given year, only a handful of entities are added to the list. Indeed, the current list has only seven entries covering a total of thirteen parties. Accordingly, either HHS-OIG has been rather judicious in its use of the leverage afforded by the Heightened Scrutiny List, or—more likely—threats from an incredibly powerful government agency to publicly shame a party in a fashion designed to undermine its standing and reputation with patients, government programs, insurers and other entities are particularly efficacious in strong-arming even the most reluctant targets (who have admitted no liability as part of the DOJ resolution and have had no opportunity to flesh out or formally dispute the reasons for the “high risk” designation) to acquiesce to the imposition of an often onerous, expensive five-year CIA.
From the beginning, the Heightened Scrutiny List raised considerable concerns with respect to its lack of due process protections and the absence of any authority for a unilateral, unreviewable, and publicly disseminated determination that an entity poses a “high risk” of compliance violations and potential fraud. HHS-OIG purports to make such determinations through its exclusionary authority under section 1128(b)(7) of the Social Security Act,1 but nonetheless simultaneously sidesteps the notice, hearing, and appeal requirements statutorily afforded to providers upon whom such authority has been exercised2 and likely violates the Administrative Procedure Act to boot.3
Perhaps owing to those concerns, HHS-OIG has considerably softened its description of the list over time. The list originally contained the rather incendiary: “Parties are in the High Risk category . . . because they pose a significant risk to Federal healthcare programs and beneficiaries” (emphasis added). The list now features the more muted: “Parties are subject to heightened scrutiny because they refused to agree to integrity obligations sufficient to protect the Federal health care programs.” Of course, even that statement is somewhat misleading, presenting opinion as fact: those on the list “refused to agree to integrity obligations” that HHS-OIG believed were necessary based upon an admittedly limited and less than comprehensive assessment.
In addition, though the sample size is far too small to draw concrete conclusions, the statistics for the last few years suggest that the efficacy of the “Heightened Scrutiny List” as a cudgel to compel CIAs or a public pillory for the apostates has perhaps waned. In the years following the introduction of the list, the number of CIAs spiked to 42 in 2019 (18% of total FCA settlements) and 49 in 2020 (18% of total FCA settlements). Those figures, however, have been decreasing over the last few years: 31 in 2021 (13% of total FCA settlements), 37 in 2022 (14% of total FCA settlements), and 29 in 2023 (12% of FCA settlements).
Moreover, the most recent additions to the list reflect an interesting development. Generally, the list has featured smaller entities for whom the costs of a CIA outweighed the potential damage to its reputation and business relations resulting from the agency’s “high risk” designation. But within the last year, several larger and more established entities—Nostrum Laboratories, Inc., the University of Pittsburgh Medical Center and University of Pittsburgh Physicians—settled FCA matters with DOJ, refused to enter a CIA, and accepted placement on the list.
This is a development worth watching. If HHS-OIG does not tread carefully and the so-called Heightened Scrutiny List becomes crowded, especially if that crowd includes well-established and respected institutions who simply refused to be bullied into a CIA, the list will lose much of its sting and effectiveness. It might also motivate an entity with the requisite resources to mount a challenge to the list, the very existence and use of which is on shaky legal footing.
