Improving Transparency and Fairness in Healthcare Fraud Enforcement Actions – Part One

HHS recently issued a new set of rules as part of a broader effort on HHS’s part to implement an executive order, issued two years ago, entitled “Promoting the Rule of Law Through Transparency and Fairness in Civil Administration Enforcement and Adjudication.”  These efforts are in furtherance of stemming the tide of Medicare Fraud, while at the same time, doing so with transparency and an even hand.

Overall, HHS’s goal is to make sure that those entities that may become targets of a civil enforcement action have fair notice of the relevant laws and standards before the enforcement action moves forward.  Indeed, just as it is not fair to punish someone for something that they did not know was wrong, it is unfair to surprise a regulated entity with a civil enforcement action when the entity is unaware that it is violating any agency regulations or standards.

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Basics on the Recently Promulgated Rules – 45 CFR 1.2 to 1.9

 On March 4, 2021, 45 CFR sections 1.2 through 1.9 were modified. As noted, the amended regulations put new rules in place to enhance HHS’s civil enforcement actions and make them more transparent and fairer.  The regulations impact two broad areas – how HHS uses guidance documents in enforcement (transparency) and new procedural requirements for its enforcement actions (fairness).

To begin, it is helpful to understand some terms used frequently by HHS:

  • Civil Enforcement Action. “An action with legal consequence taken by the department” when it believes there’s been a violation of the law. The definition does not encompass warning letters or other communication, as those have no imminent regulatory implications for the party being investigated.
  • Legal Consequence. The result of an action that affects substantial rights or obligations. This includes imposing liability or potential liability in a healthcare enforcement action.
  • Unfair Surprise. The lack of reasonable certainty or fair warning of what is an HHS legal standard. Unfair surprise does not include when HHS proceeds with a new interpretation determined as part of the notice-and-comment rulemaking process.

A.  Guidance Documents are Just Guidance, Not the Law 

The HHS has issued countless guidance documents that have provided explanations of regulatory requirements and answer frequently asked questions.  These documents are intended to be helpful, reader-friendly documents that explain some portion of the many healthcare regulation in the U.S. federal code.

As you might expect, regulated entities of all types, from hospitals to pharmaceutical manufacturers, should be familiar with all relevant regulatory requirements, and those guidance documents from HHS are instrumental in explaining what the regulatory requirements are.

The provider community has maintained that non-compliance with a standard or practice stated in a guidance document cannot be a violation of law – as the standard or practice in the guidance document is not found in a related law or regulation.

The new rules clarify that when taking enforcement actions that have legal consequences for the regulated party, HHS cannot consider a violation of a standard or practice in a guidance document as a violation of the law.  Rather, HHS must recognize that a violation only occurs when a regulated party violates an actual statute or regulation.

Notably, there are exceptions.  For example, if a statute or regulation specifically authorizes HHS to enforce violations of guidance documents, then such actions are appropriate.  In that vein, the new rules detail the appropriate circumstances of when HHS may use guidance documents in a civil enforcement action.

In sum, it is still acceptable for HHS to use a guidance document to explain how a statute or regulation applies to prohibited conduct.  However, their use may now generally be appropriate for enforcement purposes, if HHS has provided appropriate notification of the document’s existence.

B.  Avoiding Unfair Surprise

The other way in which the new HHS rules enhance transparency, and fairness, is in the efforts to avoid unfair surprise to regulated parties.  Thus, HHS may only apply its standards and practices if they have been made available to the public, and they would not cause unfair surprise when HHS undertakes a civil enforcement action; to have been “publicly available” means publication in print or on the internet.

For example, if HHS articulates a new interpretation of a law or regulation, it cannot go back and penalize a company for past behavior solely because that company’s prior conduct violated HHS’s new interpretation of the law.  Moreover, if HHS is in the middle of an adjudicative proceeding with a party, it cannot change its interpretation of a law or regulation if that new interpretation would impose additional penalties on the party being adjudicated.


Transparency and fairness is always a good thing. In Part Two of this blog post, we will dig deeper into other sections of the new rules.

At Nolan Auerbach & White, LLP, we’re always on the lookout for new cases, laws, or regulations that impact Medicare Fraud.  If you have any questions about these regulations or any other Healthcare Fraud subject, please contact us online at (800) 372-8304.

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