Whistleblower Qui Tam Law Blog

The Third Circuit recognizes two types of false claims under the False Claims Act: a factually false claim, which occurs when the claimant misrepresents the goods and services being provided to the government, and a legally false claim, which occurs when the claimant knowingly certifies falsely that it has complied with a statute or regulation that is a precondition to payment by the government. Further, there are two types of false certifications: express false certifications (where an entity certifies that it complied with regulations that are prerequisites to government payment) and implied false certifications (the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are prerequisites to payment).

In United States ex rel. Rodney Repko v. Guthrie Clinic, P.C. et al., No. 3:04-cv-1156 (M.D. Pa. Sept. 1, 2011), Rodney Repko, the former General Counsel of Guthrie Clinic and Guthrie Healthcare System, filed a qui tam lawsuit under the False Claims Act that his former employers, as well as Robert Packer Hospital and Dr. Terrance Devine, falsely certified claims for Medicare reimbursement based on improper financial relationships between the various defendants in violation of the Stark and Anti-Kickback Acts. Specifically, Repko claimed that Guthrie Clinic accepted millions of dollars in financial benefits from the other defendants over a period of years in exchange for patient referrals.

After discovery, defendants moved to dismiss for lack of subject matter jurisdiction, arguing that Repko's claims were barred by the public disclosure provisions of the FCA, and the U.S. District Court for the Middle District of Pennsylvania granted the motion.

In determining whether the jurisdictional bar applies, the court must determine whether the relator's claims are based on publicly disclosed allegations or transactions. The FCA provides three categories of sources for such disclosure: (1) a criminal, civil, or administrative hearing, (2) a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or (3) the news media.

First, the court held that the information regarding defendants' "illegal financial arrangements" and "patient referrals" were publicly disclosed in litigation proceedings and a variety of publicly available websites (which the court held qualified as "news media" under the FCA).

Continue reading "Pennsylvania Court Dismisses Kickback and Stark Allegations Based on Public Disclosure Bar" »

Congress and Abraham Lincoln enacted the False Claims Act in 1863 in response to widespread corruption and fraud by defense contractors in selling supplies and provisions to the Union Army during and after the Civil War. After being weakened by Congress during World War II, the FCA was revived in 1986 after congressional hearings and GAO reports exposed rampant fraud in the defense industry. Senator Charles Grassley and Congressman Howard Berman pushed the amendments through Congress, and Ronald Reagan signed them into law, thus enhancing the Government's ability to combat fraud and recover losses.

For the past 25 years, the False Claims Act has been the single most effective tool for combating fraud against the government. The law owes much of its success to the courage of whistleblowers, who not only alert the government to fraud, but also provide invaluable assistance by uncovering evidence and explaining highly complex fraudulent schemes. The False Claims Act's qui tam provisions allow whistleblowers with evidence of fraud against the government to sue on behalf of the government, and receive 15 to 30 percent of the amount recovered.

In Fiscal Year 2010, the government recovered over $3 billion under the False Claims Act, 80 percent of which was recovered as a direct result of whistleblower lawsuits. Since the 1986 amendments to the False Claims Act, the government has recovered over $30 billion in judgments and settlements.

Taxpayers Against Fraud, a nonprofit, public interest organization dedicated to combating fraud against government, chronicles the False Claims Act's remarkable success over the last 25 years and highlights the pivotal role of whistleblowers in The 1986 False Claims Act Amendments, A Look At Twenty-Five Years of Effective Fraud Fighting in America.

In United States ex rel. et al. v. Center for Diagnostic Imaging Inc., No. C05-0058RSL (W.D. Wash. Aug. 12, 2011), relators alleged violations of the False Claims Act, Anti-Kickback Statute, and Stark Law. Specifically, relators alleged that defendant Center for Diagnostic Imaging, Inc. ("CDI"), a national radiology and imaging company that operates diagnostic imaging centers, defrauded government healthcare programs by submitting thousands of claims to Medicare for radiological exams without obtaining a written order from the treating physician before submitting the claim for payment. Moreover, relators alleged that CDI entered into arrangements with groups of physicians, including defendant Medical Scanning Consultants Physicians Association ("MSCPA"), whereby CDI would funnel significant sums of money to the groups in exchange for patient referrals.

Defendants moved to dismiss, and the district court addressed relators' claims in turn. First, the court held that relators' allegations were sufficient to state a claim under the FCA for failing to obtain written orders. In denying defendants' motion on this claim, the Court observed that relators' claim for failure to comply with a regulation requiring that all diagnostic tests "must be ordered by the physician who furnishes a consultation or treats a beneficiary for a specific medical problem" was based on an implied false certification theory of liability. That is, the alleged false statement is the implied certification that the claims CDI submitted complied with the mandatory written order requirement when in fact, they did not. Citing Ninth Circuit law, the Court held that complying with the regulation was a precondition of payment and is therefore material. Moreover, the Court held that relators' sufficiently alleged that defendants acted knowingly because, for example, CDI is charged with knowledge of Medicare regulations and with the understanding that Medicare would not reimburse such services without proper documentation.

Second, the Court addressed relators' claim under Stark law, which had previously been dismissed with leave to amend. The Stark Act, also referred to as the Physician Self-Referral Law, prohibits two things if a physician or member of his or her immediate family has a direct or indirect "financial arrangement with an entity:" (1) the physician "may not make a referral to the entity of certain designated health services" covered by the Medicare program; and (2) the entity "may not present or cause to be presented" a claim to Medicare for any such services following any such referral. 42 U.S.C. § 1385nn(a)(1)(A)-(B).

Continue reading "U.S. District Court in Washington Allows FCA Claim To Go Forward, Dismisses Stark Law Claim" »