A version of this article was published in The Daily Record on November 10, 2015.
A federal appeals court recently held, in United States v. Health Management Associates, that a hospital executive's first-hand knowledge of the hospital's business practices provided a sufficient basis for him as a relator to state a qui tam claim against the hospital under the False Claims Act, even though the executive failed to allege the details of any specific false claims that were submitted by the hospital to Medicare for payment.
The executive brought this whistleblower action against Health Management Associates (HMA) and one of HMA's hospitals. (HMA operates some 56 hospitals in 15 states.) The executive alleged that six neurosurgeons were paid for unnecessary "on call" service, and four other doctors were provided a free golfing trip, to induce them to refer Medicare patients to the hospital in violation of the Stark and Anti-Kickback statutes.
A. The Case
The lower court dismissed the case because the executive failed to allege the details of any bills that were actually submitted by the hospital to Medicare for patients referred by the ten physicians.
The appellate court reversed. Although the whistleblower did not specify a single claim for a single patient referred by a single one of the ten doctors, and although qui tam actions under the False Claims Act must include an "indicia of reliability" that actual false claims were submitted, the court, nevertheless, found that such detailed information is not the only way to establish the requisite indicia of reliability.
Instead, a whistleblower can also meet the test by showing that he was personally in a position to know that actual false claims were submitted.
B. Critical Facts
Here, the executive had served as Vice President of HMA for six years, and as CEO of the hospital at issue for a year. He was intimately familiar with the defendants' billings, revenues, and payor mix. Moreover, he had first-hand knowledge of the golfing trip and the scheme to pay the neurosurgeons for "on call" coverage in exchange for Medicare referrals.
Under these circumstances, the court concluded that the complaint contained sufficient indicia of reliability during the year when the executive served as the hospital's CEO.
On the other hand, the court concluded that the complaint should be dismissed with respect to medical services provided after the executive ended his employment with HMA. The indicia of reliability that existed while the executive served as a corporate insider disappeared when he left that employment.
Critical to the court's decision was that the type of fraud alleged in this case did not depend on the particularized medical or billing content of any given claim form. In most False Claims Act cases, the allegation is that a defendant's Medicare claim contained a false statement because the claim sought reimbursement for (a) a particular medical service never rendered, (b) medical services that were unnecessary, overcharged, or miscoded, (c) improper prescriptions, or (d) services not covered by Medicare.
In those types of cases, representative claims with particularized medical and billing content matter more because the falsity of the claim depends largely on the details contained within the claim form.
This case, by contrast, turned on a hospital submitting claims for referred Medicare patients after allegedly engaging in an incentive-for-referral scheme, and then falsely certifying that the hospital had complied with the applicable health care laws. The name of the patient is needed to ascertain if the patient was one referred by one of the ten doctors. But the type of medical service rendered and described in the claim, the billing code, or what was charged for the service are not the underlying fraudulent acts.