May 25, 2022

Volume XII, Number 145

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Defense Strategies for Labs Facing an OIG or FBI Investigation

In the continued wake of the COVID-19 pandemic, clinical labs face one of the most demanding regulatory environments in history. Initially, federal agencies loosened restrictions to allow molecular and respiratory labs to fulfill the tremendous burden placed upon them by the sudden demand for millions of COVID-19 tests. However, now that at-home tests are available, more than half the country is vaccinated, and over a quarter of the country has received a COVID-19 vaccine booster, the regulatory landscape is changing underneath the feet of clinical labs.

The result of this changing environment has been a dramatic increase in the number of FBI and OIG investigations into clinical laboratories, especially respiratory and molecular labs. Federal investigators are opening up investigations into labs based on a wide range of potential violations, most of which involve billing and coding errors as well as improper referral relationships between labs and their nursing home and physician clients.

While the development of a robust OIG compliance program is the best defense against a federal investigation, for those molecular or respiratory labs already under investigation, a compliance program isn’t a surefire solution. This isn’t to say that creating a compliance program in the face of an FBI or OIG investigation isn’t an effective tool to mitigate risk, only that it is but a piece of a much larger defense strategy.

Given the nature of the regulatory environment, clinical labs operate in, there isn’t a one-size-fits-all approach to defending against a federal investigation. Every lab’s business, record-keeping procedures and risk profiles differ, so it is important for labs to consult with an experienced clinical lab defense attorney as soon as they learn about a pending federal investigation. However, there are some basic principles labs can and should follow when facing an FBI or OIG investigation.

Do Not Destroy, Alter or Hide Evidence

One of the most important things to keep in mind in a federal investigation is that from the moment management learns of a pending investigation, there is an immediate duty to preserve any potentially relevant. Of course, knowing that possibly harmful evidence exists, it’s tempting to get rid of it. However, this is a bad idea for a few reasons. First, destroying or altering evidence is against federal law and may give rise to additional criminal charges.

Second, even if a lab’s efforts at secreting evidence do not rise to the level of criminal conduct, missing evidence can result in an adverse inference being drawn. In other words, if the federal government believes a lab destroyed evidence, investigators will certainly assume that the missing evidence would have been unfavorable to the lab. And should a case proceed to trial, prosecutors may successfully petition the court to instruct a jury that it can make such an inference.

Also, keep in mind that federal investigators with the FBI and OIG are aware of other ways to obtain the evidence they seek. If a lab cannot provide requested evidence, investigators may be able to obtain the evidence through alternate means. Thus, destroying evidence is both illegal and unlikely to keep the evidence out of investigators’ hands.

Prepare for the Investigation

Upon first learning about a pending investigation, molecular and respiratory labs should immediately begin to prepare. While it’s tempting to take a “wait-and-see” approach, doing so rarely works to a lab’s advantage. For example, lab management should anticipate what investigators will want to review and make sure these documents are on-hand and easily accessible. It is also a good idea to keep all potentially relevant documents in a separate area, away from unrelated records that only serve to draw the attention of investigators.

Additionally, by being prepared for an FBI or OIG investigation, management uses the opportunity to put its best foot forward. Investigators are human and will likely make negative assumptions as they walk into a disorganized lab being operated by a flustered and unprepared management team.

Be Selective in Answering Investigators’ Questions

FBI and OIG investigations occur on-site. Thus, federal agents will be milling around the lab and will almost certainly ask questions of management, supervisors and employees. It is imperative that management teams instruct employees and supervisors about how to address investigators’ questions. Typically, this involves referring all questions back to the management team. However, even then, care must be taken in how these queries are handled. For example, if FBI agents are conducting the investigation, they are there as law enforcement officers and cannot compel you to speak with them. While you shouldn’t totally ignore their requests—especially as they pertain to the logistics of the investigation—you also do not need to answer probing questions. In fact, doing so only risks raising additional questions.

For example, imagine you are an FBI agent conducting an investigation at a respiratory lab. If you ask the lab operator a question about billing records and the operator provides you with an answer that presents the lab in a favorable light, you may assume that the answer is self-serving and disregard it. On the other hand, if the operator provides an incriminating answer, you’ll assume it to be the truth. Thus, no matter how a lab answers an investigator’s questions, it is unlikely to shift the focus away from the lab.

While labs must comply with certain aspects of a federal investigation, they do not need to cooperate to their own detriment.

Avoid Speaking About the Investigation

Once an investigation commences, clinical labs operators should not reach out to affiliated parties to discuss the investigation. It is impossible to determine the scope of an investigation into a clinical lab. Therefore, labs cannot know who investigators have already spoken to and what these parties told the investigators. The last thing a lab operator wants to do is reach out to a colleague in an attempt to arrange a coordinated response to investigators when the investigators have already spoken to that colleague. In this situation, the colleague may turn right back to investigators, informing them of the conversation, which will only further raise their suspicions.

Seek the Assistance of an Attorney

Lab operators specialize in what they do. However, few clinical lab management teams have the knowledge and experience necessary to successfully handle a federal investigation. For respiratory and molecular labs facing an investigation, it is imperative to bring an experienced federal healthcare defense attorney onto their legal team as soon as possible. An attorney can help labs identify all areas of possible compliance risk in advance of the audit, give labs an idea of what to expect and how to prepare. Clinical lab investigation defense lawyers will also handle all communication with federal agents during the investigation and negotiate with the DOJ in the event of an unfavorable audit.

Dr. Nick Oberheiden of Oberheiden, P.C., a nationwide federal healthcare defense firm, explains, “Too often clinical labs wait to hire a lawyer, thinking that they only need a lawyer if the government files charges. However, this is a mistake. The sooner labs reach out to retain a lawyer, the sooner their lawyer can get to work on their case. Often, the involvement of a lawyer can measurably impact the course a federal investigation takes from the outset. For example, an attorney may be able to limit the scope of an investigation, provide innocent explanations for potential violations, and negotiate with prosecutors if the case is referred to the DOJ attorneys.”

The bottom line is that clinical labs have a tremendous amount to lose from an investigation gone wrong and should take every step possible to ensure the process goes as smoothly and quickly as possible

Oberheiden P.C. © 2022 National Law Review, Volume XII, Number 27
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About this Author

Dr. Nick Oberheiden Federal Criminal Defense Attorney Oberheiden PC
Federal Criminal Defense Attorney

Dr. Nick Oberheiden focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation. He has defended clients in PPP Loan Fraud cases and COVID-19 investigations. Nick also directs internal corporate investigations and he leads defense teams in whistleblower actions, corporate defense cases, as well as cases involving national security and elected officials.

Clients from more than 45 U.S. states have hired Nick to seek effective protection against government...

888-680-1745
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