DOJ Says Guidance Alone Can't Be a False Claims Case. It Can Still Prove You Knew.

On September 18, the Justice Department revised its Justice Manual on False Claims Act enforcement. The first change: “The Department may not bring actions based solely on allegations of noncompliance with guidance documents.” The second: when DOJ declines to join a whistleblower (qui tam) suit, it “should consider exercising its dismissal authority,” with “an emphasis on seeking dismissal of qui tam actions that lack legal or factual merit.”

The turn: “only guidance” is a weaker defense than it sounds

The tempting reading is that CMS's ABA toolkit and its red flags can't hurt you, because the toolkit is guidance rather than a regulation. The revised manual closes that off in three places:

• Knowledge. “The Department may use awareness of the guidance document (or its contents) as evidence that the party had the requisite scienter, notice, or knowledge of the law.” Once you've read a red-flag list, billing the pattern it describes is harder to call an honest mistake.
• Medical necessity. CMS manuals and coverage determinations remain “relevant evidence of … violations of the principal requirement that procedures billed to Medicare or Medicaid be medically ‘reasonable and necessary.’”
• Contracts. The limit covers guidance, not “binding legal or contractual obligations.” A state Medicaid rule is binding, and so is an MCO contract that incorporates the plan's provider manual. And “when a provider falsely certifies compliance with a guidance document,” that certification can prove falsity, materiality and scienter.

The limits

The manual directs DOJ lawyers. It doesn't bind state Medicaid Fraud Control Units or state false claims statutes, and DOJ can revise it again. It doesn't change the conduct at the center of ABA settlements, such as supervision that didn't happen and hours that weren't delivered, which breaks binding rules rather than guidance.

What you must know or do

• Compliance leads: for each red flag in the CMS toolkit you've dismissed as “only guidance,” find the state rule or MCO contract clause covering the same conduct. If one exists, that rule is your exposure, not the guidance.
• Owners: check whether each MCO contract incorporates the provider manual by reference. If it does, the manual's requirements are contract terms.
• Anyone who signs attestations: don't certify compliance with a guideline your records can't show. Under the revised manual, a false certification is evidence in its own right.