Health Law Daily Public disclosure bars relator’s FCA claims
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Friday, June 5, 2020

Public disclosure bars relator’s FCA claims

By Elena Eyber, J.D.

Relator’s FCA claims against hospice care barred by the pre-amendment and post-amendment public disclosure bar.

The U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s judgment of dismissal because the relator’s False Claims Act (FCA) action was barred by prior public disclosure of fraud. A relator sued hospice care entities under the FCA for orchestrating a corporate-wide scheme to submit false claims for payments from Medicare and Medicaid to cover hospice care. The relator allegedly enrolled patients in hospice when they were not terminally ill and kept them there. The hospice care argued that the relator was not a genuine whistleblower, that her claims were drawn from prior allegations against the hospice care, and that her qui tam action was prohibited by the FCA’s public disclosure bar. The appeals court held that the relator’s claims must be dismissed under either pre-amendment or post-amendment public disclosure bar (U.S. ex rel. Halloway v. Heartland Hospice, Inc., June 3, 2020, Moore, K.).

Public disclosure bar. For the relator to survive motion to dismiss, she had to overcome the public disclosure bar. The FCA bars qui tam actions that merely feed off prior public disclosures of fraud. The relator had to demonstrate: (1) that the factual premise of her claim was not publicly disclosed before she filed the lawsuit; or (2) even if it was, that she was the original source of the information. Because the relator did not argue that she was an original source, she either had to show that the purported prior disclosures were not "public," or that their contents did not "disclose" her allegations. The 1986 version of the statute barred claims that were "based upon" allegations or transactions that had already been publicly disclosed. 31 U.S.C. §3730(e)(4)(A) (1986). The 2010 statute bars claims "if substantially the same allegations or transactions" have been publicly disclosed. 31 U.S.C. §3730(e)(4)(A) (2010).

The hospice care pointed to three qui tam complaints filed in the federal district court in South Carolina against the hospice care’s parent company. The relator argued that the South Carolina complaints were not "public" under the amended public disclosure bar. The amended statute bars claims that were publicly disclosed in a federal proceeding "in which the Government or its agent is a party." The relator argued that a qui tam relator is not the government’s agent and, therefore, that the case is not "public" unless the government intervenes. The appeals court disagreed and held that the qui tam relator is, in all cases, the government’s agent, and that the South Carolina cases were public under both versions of the public disclosure bar, despite the fact that the government did not intervene. Further, the appeals court held that the South Carolina complaints disclosed the fraud alleged in the relator’s complaint under both versions of the public disclosure bar.

Pre-amendment public disclosure bar. Prior to the 2010 amendments, a claim was "based upon" a prior public disclosure when it was "supported by the previously disclosed information," The hospice care asserted that the relator’s claims were barred because they were at least partly based on the South Carolina complaints. The hospice care contended that the relator was simply adding new, slightly different, or more detailed allegations to what had already been disclosed in the South Carolina complaints. The appeals court agreed. Both sets of allegations were levied against the same corporate parent for the same type of fraud. Both accused the hospice care of making false claims for payment from Medicare for hospice patients. Both alleged a systemic and patterned practice of altering or omitting information from clinical documents to make these patients appear to be terminally ill. The appeals court found that even if the South Carolina complaints were focused on a single hospice facility, the allegations against the hospice care as a whole were sufficiently general and alike to the allegations here such that the government was put on notice of the corporate-wide conduct alleged in this case. Therefore, the appeals court held that the relator’s claims were barred by the pre-amendment public disclosure bar.

Post-amendment public disclosure bar. The 2010 amendments to the public-disclosure bar replaced "based upon" with "substantially the same." The court reads "substantially the same" as more sensitive to differences between the qui tam complaint and prior disclosures than the prior "based upon" language. However, the appeals court found that the relator’s claims could not survive the more lenient post-amendment public disclosure bar because the relator’s allegations were substantially the same as those made in the South Carolina complaints. The relator’s allegations added some new details to describe essentially the same scheme by the same corporate actor. Accordingly, the appeals court held that the relator’s claims must be dismissed under the amended public disclosure bar as well.

The case is No. 19-3646.

Attorneys: Guillermo J. Rojas, Office of the U.S. Attorney, for the United States. James Christopher Martin (Reed Smith LLP) for HCR ManorCare, Inc., HCR Home Health Care & Hospice, LLC, Heartland Hospice Services, LLC and ManorCare Health Services, LLC.

Companies: HCR ManorCare, Inc.; HCR Home Health Care & Hospice, LLC; Heartland Hospice Services, LLC; ManorCare Health Services, LLC; Heartland Hospice, Inc.

MainStory: TopStory CaseDecisions CMSNews BillingNews FCANews FraudNews HospiceNews MedicareContractorNews PaymentNews PartANews ProgramIntegrityNews QuiTamNews KentuckyNews MichiganNews OhioNews TennesseeNews

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