Healthcare Law Update: The Yates Memo and Individual Accountability in Healthcare Fraud Cases

By E. Patrick Magallanes
Tuesday, June 13, 2017

Recently, Sally Yates became a household name when, as acting U.S. Attorney General, she announced that the Department of Justice (DOJ) would not defend President Trump’s immigration and refugee ban. For healthcare industry insiders, Yates should be better known for a memo drafted in September 2015. Originally directed at the financial sector, these instructions have had a significant impact on the healthcare community and should be fully understood for both their corporate effect and individual applicability.

E. Patrick Magallanes

The memorandum, Individual Accountability for Corporate Wrongdoing, or the “Yates Memo,” directed U.S. attorneys to target individual wrongdoers involved in corporate crimes. The Yates Memo was crafted in response to the 2008-2009 financial crisis, amid concern that the DOJ often settled with corporations that contributed to the crisis but failed to hold accountable the individual wrongdoers employed by these corporations. The Yates Memo states, “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.”1 Almost immediately, Yates Memo principles were applied to healthcare fraud and abuse cases. The federal government’s efforts to prevent federal healthcare program abuse include the False Claims Act (FCA), the Anti-Kickback Statute (AKS), and Physician Self-Referral Law (Stark Law). The significance of the Yates Memo is that it directed government prosecutors to focus on individuals, regardless of role or rank, in cases of corporate wrongdoing, and included incentives to ensure entities assisted in the government’s efforts to hold individuals accountable.

Since the Yates Memo was issued, several False Claims Act (FCA) settlements imposing individual liability have caused healthcare executives to take notice. In DOJ action involving an operator of skilled nursing facilities, the chairman of the board and a senior vice president, individually agreed to pay $1 million and $500,000, respectively, to settle FCA claims.2 In another case brought under the qui tam, or whistleblower, provision of the False Claims Act, the corporate parent and its owner jointly settled for $145 million to resolve a government lawsuit.3 The whistleblowers, in that case, were awarded $29 million.

In the national Health Care Fraud and Abuse Control Program (FACP) report (see last month’s column, “2016 Fraud and Abuse Control Program Report”) it was reported that, between 2014 and 2016, every $1 spent by the program generated a $5 return. Not surprisingly, FACP funding is increasing; President Trump’s proposed budget for the 2018 fiscal year includes an additional $70 million for the FACP.4 Considering increased funding for federal healthcare fraud prevention, the program-to-date return on the FACP’s expenditures, a recent congressional mandate to shift from pay and chase to identify fraud prior to payment, Yates Memo individual accountability, and monetary incentives for corporate whistleblowers through qui tam suits, it is critically important that physicians, providers, and healthcare executives become more vigilant and commit to compliance and risk management.

Next month: Qui tam, or Whistleblower, Lawsuits under the FCA

E. Patrick Magallanes, MBA, MPA, CPPM, FACHE (Mar 2018) is CEO of Oncology San Antonio and a J.D. Candidate at St. Mary’s University School of Law. Keenly interested in health law subjects, Magallanes is the founding member of the St. Mary’s School of Law Health Law Society. He is a student member of the American Health Lawyers Association and the San Antonio Bar Association Health Law Section and intends to practice corporate and health law. He can be reached at