Two court decisions land on opposite ends of False Claims Act spectrum

Although two recent appellate court decisions offered differing viewpoints of public disclosure under the False Claims Act, each case provided some interesting insight into the regulation following changes made by the Affordable Care Act, according to a post by McDermott Will & Emory.

In U.S. ex rel. Morgan v. Express Scripts Inc., the U.S. Court of Appeals for the Third Circuit affirmed a district court's decision to dismiss claims that certain pharmaceutical companies artificially inflated average wholesale prices. The appellate court ruled that the allegations, brought by a pharmacist whistleblower, were already widely publicized in the news media and other lawsuits. Therefore, the court said, the whistleblower failed to qualify as an original source. 

However, the decision in U.S. ex rel. Whipple v. Chattanooga-Hamilton County Hospital Authority was a bit more nuanced. The U.S. Court of Appeals for the Sixth Circuit overturned a district court decision, and reinstated a claim that the hospital fraudulently billed Medicare and Medicaid, because the allegations had not been publicly disclosed.

In this case, the hospital had already repaid funds to the Centers for Medicare & Medicaid Services following an audit by the Office of Inspector General and CMS, as well as an internal audit, before the lawsuit was initiated. However, the court ruled that disclosure to the government and disclosure to the public were not the same, and the audits did not preclude the suit under the public disclosure bar. 

This issue has come up before. A December report listed the clarification of public disclosure versus an original whistleblower source among the key False Claims Act cases of 2014, FierceHealthPayer: AntiFraud previously reported.

Authors of the McDermott Will & Emory blog post wrote that the decision may have been different had the court applied "post-2010" False Claims Act regulations, which prevents claims based on allegations that were already resolved by the government.

"Federal audits and investigations are often not publicized to the general public, especially if the audit or investigation is closed," the authors wrote. "Of course, regardless of where a court comes out on the applicability of the public disclosure bar in a given case, evidence of disclosures to the government can, and should, still be used to defeat essential elements of a relator's FCA claim."

Nicholas C. Theodorou of Foley Hoad told FierceHealthPayer: AntiFraud in a recent exclusive interview that, although most healthcare companies have documented false claims policies, enforcement is key to risk management. 

For more:
- here's the McDermott Will & Emory post