How to negotiate an effective government settlement

Hospitals and other providers entering settlement negotiations with the government increasingly face an array of competing interests, warns Cliff Johnson, assistant U.S. Attorney in Jackson, MI. "It is not just an assistant U.S. Attorney," he warns. There are also investigative agencies in the Department of Health and Human Services, the FBI, and the Office of Inspector General, as well as fiscal intermediaries to name a few, he says. "You have a number of players who have varied and sometimes competing interests," asserts Johnson. "One of the challenges is to consider all the interests that are at play to find an approach that can mollify all sides."

Johnson says providers also must know who their audience is depending on the region. "Negotiating with folks in the South may be different than negotiating with folks in other places," he asserts. He says that means providers should consider local counsel if they don’t think they speak the language.

Health care attorney Greg Luce of Jones Day in Washington, DC, says one way providers can navigate this terrain is through the use of four settlement propositions. While they may seem intuitive, Luce says they are often overlooked in the health care field, where many attorneys aren’t day-to-day litigators.

Here are the four propositions that Luce says are critical:

Settlement proposition #1: Settlements resolve actual cases, not just prosecutorial theories. Luce says it is important to remember that settlements are not just theories. "It is important to apply some discipline to those discussions," he says. "If you receive a letter from the U.S. attorney’s office, it doesn’t mean you have a case."

According to Luce, health care attorneys should begin by assessing the strength of the case and liability asserted, including the risks of trial, risk of publicity, and risks of assenting to a corporate integrity agreement.

Settlement proposition #2: Settlements finally resolve all actual or threatened litigation with certainty. "At bottom, this is one of the biggest problems with corporate integrity agreements," says Luce. "You never quite finish settling your case."

But there are many other issues to be considered, he adds. Piecemeal resolutions should be avoided, warns Luce. "If you are in front of the U.S. Attorney’s office and they have a serious issue, get the related issues resolved then, not later," he argues. "Don’t allow it to become so narrowly articulated in [a] settlement agreement that other conduct, which has arisen in the course of their review, is now putting it back in the same chair a few months later."

Understanding the applicable time period of the conduct in question is also critical. That means understanding what you are being accused of and what you are being released from, Luce says. The settlement should be final and certain, he says.

Settlement proposition #3: The settlement team should be the trial team. Luce says this is one of the biggest areas of conflict or potential error, particularly for defense counsel. "It is important to gather everybody together," he says. That includes trial counsel, not just regulatory attorneys. "If you do not have the credibility to take your case to trial, you are significantly hampering your ability to settle the case on appropriate terms."

Luce says key management should be involved, including the financial officer. "It is very important that they understand whether they are at the settlement table or just involved behind the scenes," he asserts. "This is not like malpractice or commercial litigation," adds Luce. "It tests the heart and soul of the organization."

In addition, there is almost always a consulting expert who is critical to performing quantitative analysis, according to Luce. Providers need somebody to both determine the risk in monetary terms, as well as to explain sometimes to the government what the actual calculation is. "Medicare reimbursement is not intuitive," he asserts.

The compliance officer is a new face at the table in many of these negotiations, adds Luce. That is especially the case with corporate integrity agreements because the burden of that agreement is largely going to fall on that person.

Settlement proposition #4: The settlement should not be worse than the outcome would be at trial. This should seem intuitive, says Luce. But the truth is that settlements in the health care industry frequently are less a product of the legal risk than of the public exposure risk, he argues.

"The catastrophic damage risk associated with the False Claims Act is there but is rarely tested," Luce explains. "But the honesty and integrity of the organization is something that you cannot lightly play with." He says monetary amounts should reasonably be related to the challenged conduct, but adds that these amounts are typically not a major problem.

Finally, Luce warns that settlement terms should not require a waiver of the attorney-client privilege. "The attack on the attorney-client privilege is constant and never-ending," he asserts. "You must understand that the attorney-client privilege is going to be on the table during your negotiations," he warns.