Kusserow’s Corner: Court Rules Internal Investigations are Privileged

There was good news for in-house legal counsel, compliance officers, and others responsible for implementing compliance programs and investigating allegations of wrongdoing. The D.C. Circuit at the end of June unequivocally reaffirmed that the attorney-client privilege protects internal ruled investigations conducted by legal counsel pursuant to a legally mandated corporate compliance program. This decision reverses a lower court decision order in U.S. ex rel. Barko v Halliburton Co. that directed defendant Kellogg Brown & Root, Inc. (KBR) to turn over documents from an internal investigation, even though the investigation was conducted by in-house legal counsel. The documents were not protected by the attorney-client privilege under Upjohn Co. v United States, 449 U.S. 383 (1981), and therefore must be produced to the plaintiff in the False Claims Act suit alleging fraud against the government by inflating costs and paying kickbacks in connection with its contracts in Iraq. What this means is that the court has reaffirmed that conducting an investigation under direction of legal counsel can protect the investigation from unnecessary disclosure of potentially damaging documents.

Attorney-client privilege is a legal concept that protects communications between a client and their attorney and keeps those communications confidential. It is one of the oldest common law privileges protecting confidential communications. The test always is whether a communication satisfies the elements necessary to establish the privilege—not how the communication is identified or labeled. The decision means that:

  1. outside counsel need not be involved for the attorney-client privilege to apply to protect corporate communications with in-house counsel;
  2. interviews conducted at the direction of in-house counsel by non-attorneys, such as compliance officers and outside investigators or consultants, are protected by the privilege; and
  3. there are no “magic words” that a company must use with its employees to obtain the benefit of the privilege—a communication made to obtain or provide legal advice may be privileged even if the employee is not specifically apprised that that is the communication’s purpose.

Putting this in the context of health care compliance, the HHS Office of Inspector General (OIG) recognizes that legal counsel involvement may be necessary to evaluate the evidence of potential violations of law and when appropriate to direct the investigation. Their role is also addressed when a decision is needed as to whether reporting misconduct to the government is necessary. The OIG noted “The compliance officer, under advice of counsel, and with guidance from the governmental authorities, could be requested to continue to investigate the reported violation.”

The court also held that an internal investigation undertaken to comply with legally mandated compliance, investigation, and disclosure obligations will maintain the protection of the attorney-client privilege “[s]o long as obtaining or providing legal advice was one of the significant purposes of the internal investigation.” They made it clear that the test does not require a court to determine whether the provision of legal advice was the primary purpose of the communication, but instead whether it was a primary purpose. It is “not correct for a court to presume that a communication can have only one primary purpose.”

The significance of the opinion is great. It means inside counsel may establish privilege without having to engage outside counsel, and the privilege extends to compliance officers, consultants, and experts conducting the investigation under direction of counsel. There are some general rules that should be followed for preserving legal counsel-client privilege in a compliance internal investigation:

  1. The investigation must be conducted under the attorney’s direction.
  2. Counsel should make it clear that the investigation is being conducted to provide legal advice to the organization.
  3. The purpose of the investigation is to gather facts and determine liabilities and defenses, not to conceal or commit further misconduct.
  4. Employee interviews and other components of the investigation must be to provide confidential information to the attorney.
  5. Privileged communications should remain confidential, and all interviews should be conducted in a way that ensures maximum confidentiality.
  6. All communications must be directed back to the attorney.
  7. Privileged communications should be kept separate from non-privileged business documents.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.

Closing ‘Donut Hole’ Gives Sweet Savings to Part D Recipients

Since 2010, 8.2 million Medicare recipients have saved $11.5 billion on prescription drugs thanks to one provision of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). By closing the “donut hole”—a gap in coverage that required beneficiaries to pay the full costs of certain drugs out of pocket—the ACA has provided an average of $1,407 in savings for each individual Part D recipient. In a press release, HHS Secretary Sylvia Burwell trumpeted this success, saying that the closure of the gap helps the agency in “improving and promoting the best care for people with Medicare.”

Donut Hole

Medicare Part D was created by the Medicare Modernization Act of 2003 (P.L. 108-173). Part D beneficiaries are entitled to lower negotiated prices on generic and brand-name prescription drugs that are (1) approved by the FDA, (2) used and sold in the United States, and (3) used for a medically-accepted reason. When Part D began in 2006, there was a $250 deductible. For costs between $251 and $2,250, beneficiaries had a 25 percent coinsurance payment. Once beneficiaries spent $3,600 out-of-pocket, they were entitled to pay the greater of either $2 for generic drugs and $5 for brand name drugs, or 5 percent of the cost of a drug.

However, for prescription drug costs between $2,251 and $5,100, beneficiaries were required to pay 100 percent of the cost of drugs—that is, when beneficiaries had purchased drugs in excess of the 25 percent coinsurance threshold, but before they had spent $3,600 out-of-pocket. This gap in coverage is referred to as the “donut hole.” Subsequently, the deductible, coverage limit, out-of-pocket threshold, and cost-sharing amounts have been annually adjusted, but the existence of the donut hole gap has remained; in 2014, the donut hole begins when a beneficiary has prescription drug costs above $2,850 and ends when the beneficiary has spent $4,550 out-of-pocket.

Closing the Donut Hole

The ACA contained provisions to gradually relieve the burden of the donut hole for Part D beneficiaries. In 2010, beneficiaries who hit the donut hole received a $250 rebate. Thereafter, beneficiaries began to receive an annually-increasing percentage discount from drug manufacturers while in the donut hole. By 2020, the ACA will have completely closed the donut hole, and beneficiaries will have a 25 percent coinsurance rate for all prescription drugs after they pay the annual deductible.


Since the ACA began closing the donut hole, CMS says “more than 8.2 million seniors and people with disabilities with Medicare have saved over $11.5 billion on prescription drugs since 2010 as a result of discounts in the donut hole and rebates in 2010, for an average of $1,407.” This represents an increase of 1.6 million individuals and $4.5 billion in savings from this time in 2013, when individuals had saved an average of $1,061. CMS also provided a savings summary breaking down donut hole discounts by state for 2014 and overall since 2010.

HPV Vaccine Underused Despite ACA Access

The Centers for Disease Control and Prevention (CDC) announced on July 24, 2014 that the number of teenagers and preteens who are vaccinated against human papilloma virus (HPV) remains unacceptably low, even though the vaccine is covered as a preventive service and its value has been established. The CDC urges health care practitioners to make strong recommendations to parents that both boys and girls be vaccinated against HPV when they discuss meningococcal and tetanus, diphtheria and pertussis (TDAP) vaccines, which also are administered to adolescents and preadolescents. The CDC estimates that 57 percent of adolescent girls and 35 percent of adolescent boys have received at least one dose of the vaccine. About 38 percent of adolescent girls have received all three doses, up from one-third in 2012.

What is HPV?

HPV is the most common sexually transmitted virus. About 14 million people in the United States are infected with HPV each year. According to the CDC, 80 percent of women have been infected with HPV by age 50. HPV often has no symptoms. In addition to causing genital warts in both males and females, HPV infection causes cervical, vaginal, and vulvar cancers in women, penile cancer in men, and cancers of the anus and the oropharynx, which includes the back of the throat, base of the tongue and tonsils, in both sexes. About 20,000 women and 12,000 men develop HPV-related cancer each year.

The HPV Vaccines

There are two vaccines that offer protection against HPV-related cancers. Each must be given in three doses, the second two months after the first and the third four months later (six months after the first). According to the CDC, both HPV vaccines have been studied extensively and found to be safe. After the administration of 67 million doses, the CDC has received about 25,000 reports of adverse events—health occurrences that may or may not be related to the vaccination—and 8 percent were considered serious. There may be an increased risk of fainting, according to one study. Other commonly reported side effects include headache, fever, dizziness, nausea, and redness or swelling in the area of the vaccination.

Practitioners’ Recommendations

The CDC’s 2013 national survey found that preteens and teens were much more likely to receive the HPV vaccine when their health care practitioners recommended it to the parents. Among parents who had their daughters vaccinated, 74 percent said their daughters’ physicians had recommended it. In contrast, 52 percent of parents who did not have their daughters vaccinated said the physicians had recommended it. The physician recommendations may be even more effective for boys; 72 percent of parents whose sons were vaccinated against HPV received a doctor’s recommendation to do so, while only 26 percent of those who did not vaccinate their sons had been advised to do so.

Coverage Gap

Adolescents between the ages of 13 and 17 years were most likely to have received the TDAP vaccination (86 percent) and were very likely to have received at least the first of two doses of meningococcal vaccine (77.8 percent). 2013 was the first year that the number of teens who received the second dose of meningococcal vaccine was tracked; the CDC found that 29.6 percent of teens who received the first dose by age 16 received the second dose in 2013.

The CDC notes that the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) has increased access to preventive services, including HPV vaccination, making it easier and less expensive than ever for parents to have their children vaccinated.

Federal Exchange Still Buzzing with Activity After Open Enrollment Ends

HealthCare.gov has handled nearly 1 million transactions since the close of the open enrollment period, according to government data obtained by ProPublica under the Freedom of Information Act. Special enrollment periods allow people to buy or switch plans after qualifying life events, such as marriage or divorce, having a baby or adopting a child, or losing other health coverage.

While the numbers released don’t shed any light on how many of those transactions resulted in paid premiums, the information is surprising for some.

“That’s higher than I would have expected,” said Larry Levitt, the Kaiser Family Foundation’s senior vice president for special initiatives, to ProPublica. “There are a lot of people who qualify for special enrollment, but my assumption has been that few of them would actually sign up.”

However, ProPublica reported that, based on the estimate of an insurance industry official, less than half of the transactions are new enrollments. Though 960,000 transactions were counted, these numbers include new members, changes in enrollment status, and disenrollment. These transactions are all grouped under the umbrella of “834″ transactions. According to ProPublica, when an existing member changes his or her policy, two 834s are created–one for ending the old plan and another for starting a new one. Thus, the number of actual new enrollments is hard to discern.

ProPublica discerned some other details of the first open enrollment period based on the data:

  • The slowest day was October 18, when there were no 834 transactions;
  • The next slowest day was the first day of open enrollment, October 1, with only 6 transactions;
  • The busiest day was March 31, the original deadline for enrollments, with more than 202,000 transactions; and
  • Eighty-six percent of individuals who signed up for coverage were eligible for premium tax subsidies from the federal government.

The next open enrollment period runs November 15, 2014 to February 15, 2015.