HHS OIG Releases Guidance on Self-Disclosure for Federal Grants and Contracts

July 30, 2019

By: Linda A. Malek and Nora Lawrence Schmitt

As highlighted by newly released HHS OIG guidance, it is vitally important that recipients of HHS grants and contracts monitor their compliance with federal criminal, civil or administrative law related to their grants or contracts. Self-disclosure of any violations may mitigate otherwise stringent penalties.

New Inspector General Guidance

The Office of Inspector General (“OIG”) of the U.S. Department of Health and Human Services (“HHS”) recently issued guidance regarding mandatory and voluntary self-disclosure requirements for recipients of HHS grants and contracts.  The guidance, HHS OIG Grant Self-Disclosure Program, articulates OIG’s expectations for when and how recipients or sub-recipients of HHS awards should self-disclose violations or potential violations of federal criminal, civil or administrative law related to their awards.  The guidance also outlines OIG’s authority with respect to the imposition of penalties, including its authority to consider imposing lower penalties for timely self-disclosure.  This guidance is important for any recipient or sub-recipient of, and applicant for, federal grants.

Potential OIG Fines and Power to Exclude

The 21st Century Cures Act empowered OIG with authority under the Civil Monetary Penalties Law (“CMP Law”) to impose civil monetary penalties on recipients or sub-recipients of federal grants, contracts or other agreements for making (or causing to be made) false statements, omissions or misrepresentations of material facts related to the receipt of such funds.  Civil monetary penalties can be as high as $50,000 per offense, or $10,000 for each day an offense is knowingly concealed, and can include treble damages for actual losses suffered by the government.  OIG also has the authority to exclude offending awardees, sub-awardees, or applicants from participation in federal health care programs.  

Mandatory and Voluntary Self-Disclosure

Recipients of HHS awards are required to self-disclose to both OIG and the HHS awarding agency all violations of federal criminal law involving fraud, bribery, or gratuity violations of which they become aware that could potentially affect their award.  Additionally, recipients of HHS awards may voluntarily disclose conduct that potentially creates liability under the CMP Law but does not fall within the scope of the mandatory self-disclosure requirements. 

Incentives for Timely Self-Disclosure

The HHS OIG Grant Self-Disclosure guidance clarifies OIG’s policy that it will reward and incentivize self-disclosure, whether mandatory or voluntary.  For example, OIG states that entities or individuals that self-disclose violations and cooperate during the investigation process may be subject to lower monetary penalties than normally required.  Additionally, in the context of a negotiated settlement, OIG will operate with a strong presumption against requiring a discloser to enter into an integrity agreement in exchange for a release of OIG’s exclusion authority.  OIG may also coordinate with the HHS awarding agency and the Department of Justice when negotiating a global settlement related to criminal conduct.

Self-Disclosure Checklist

The HHS OIG Grant Self-Disclosure guidance was released in conjunction with a checklist outlining the information that must be contained in any self-disclosure. This includes a full description of the nature of the violation(s), and the names and roles of the individuals involved; a list of remedial measures including those meant to prevent harm to beneficiaries of the grant sponsored services; an estimate of the financial impact to the federal government, and an explanation of any internal investigation and measures taken to prevent recurrence.

New Focus in Compliance Policies and Disclosure

Release of this guidance suggests that OIG may focus increased attention on compliance with self-disclosure requirements.  So far in 2019, OIG has entered into two self-disclosure settlements, including one with Michigan State University related to the misuse of funds awarded by the National Institutes of Health.  In addition to carefully reviewing the HHS OIG Grant-Self Disclosure Program Guidance and corresponding HHS OIG Grant-Self Disclosure Submission Form, entities applying for or in receipt of HHS awards should ensure they have in place policies and procedures for compliance with federal and state fraud and abuse laws.  These policies and procedures should also outline HHS’s regulatory and policy requirements for grant recipients, including those contained in the HHS Grants Policy Statement and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards.  Further, entities applying for or in receipt of HHS awards should ensure they have comprehensive policies and procedures detailing processes for, and expectations with respect to, self-monitoring and self-disclosure.  All employees, particularly those who work with federal grant monies, should receive training on identifying and internally reporting suspected violations of law or institutional policy.

For more information, contact our Healthcare Department Chair, Linda Malek, at 212-554-7814.