Issued in January 2018, the so-called Brand Memo reminded Department of Justice (DOJ) attorneys that “[g]uidance documents cannot create binding requirements that do not already exist by statute or regulation.” It also instructed DOJ attorneys that they “may not use noncompliance with guidance documents as a basis for proving violations of applicable law in affirmative civil enforcement cases” such as those brought under the False Claims Act (FCA). “That a party fails to comply with agency guidance expanding upon statutory or regulatory requirements,” the Brand Memo explained, “does not mean that the party violated those underlying legal requirements; agency guidance documents cannot create any additional legal obligations.”
The Brand Memo was welcomed by the defense bar and signaled an appropriate return to first principles of federal administrative law—principles that may easily get lost in the zeal to recover money for the Federal Treasury (and potentially for oneself in the case of a qui tam relator).
The party didn’t last long, although relatively few people yet realize it.
In late December 2018, DOJ made little-noticed changes to a DOJ manual and, in so doing, effectively reversed course in a wide swath of FCA cases involving Medicare and/or Medicaid. The Justice Manual (formerly known as the United States Attorneys’ Manual) serves as a collection of DOJ policies and procedures. In the midst of the holiday season and without fanfare, DOJ added a new section 1-20.202 to the Justice Manual. Section 1-20.202, which applies equally to federal criminal cases, states in relevant part:
[DOJ] may use a guidance document as probative evidence that a party has satisfied, or failed to satisfy, professional or industry standards or practices relating to applicable statutory or regulatory requirements. . . . This rationale applies more broadly in the healthcare arena, where guidance documents, like other statements of professional standards such as CMS’s Medicare Benefit Policy Manual or Local Coverage Determinations, are relevant evidence of violations of the principal requirement that procedures billed to Medicare or Medicaid be medically “reasonable and necessary.” E.g., 42 U.S.C. § 1395y(a)(1)(A); 42 U.S.C. § 1396 et seq.; 42 C.F.R. § 410.50. Such usage does not give these documents the force of law, but rather aids in demonstrating that the standards in the relevant statutory and regulatory requirements have been or have not been satisfied.
Lest there be any lingering doubt regarding the Brand Memo’s continued viability, the December 2018 amendments to the Justice Manual concluded by stating: “This section fully implements, clarifies, and supersedes prior [DOJ] memoranda on this topic.”
In other words, bye-bye Brand Memo.
It remains to be seen whether this course reversal will hold up in court. It shouldn’t. FCA cases based on questions of medical necessity are a growing and highly controversial segment of FCA cases generally. While such cases typically involve significant amounts of money, that fact alone does not justify disregarding the fundamental principle of federal administrative law that guidance documents such as agency manuals are non-binding and do not have the force of law. And following the recent decision by the Supreme Court of the United States in Azar v. Allina Health Services, No. 17-1484 (June 3, 2019)—which reinforced the importance of the Medicare Act’s unique notice-and-comment rulemaking requirements and their applicability to any “rule, requirement, or other statement of policy . . . that establishes or changes a substantive legal standard governing the scope of [Medicare] benefits, the payment for services, or the eligibility of individuals, entities, or organizations to furnish or receive services or benefits”—DOJ may soon have to revisit its December 2018 amendments to the Justice Manual.