27 February 2015

Sixth Circuit Holds that Disclosures Made Through a Government Investigation and Audit Do Not Trigger the Public Disclosure Bar

Posted by Jaime L.M. Jones and Catherine Starks

In a February 25, 2015 opinion, the Sixth Circuit became the fifth circuit court effectively to narrow the scope of the FCA’s public disclosure bar by holding that disclosures to the government do not trigger the protections of that provision. The Sixth Circuit also expanded upon prior rulings in this regard, clarifying that even disclosures to government contractors and private consultants during the course of an administrative audit and investigation will not lead to the application of the public disclosure bar to FCA liability.

The relator in Whipple v. Chattanooga-Hamilton County Hospital Authority alleged that the defendant hospital submitted false claims for reimbursement based on a variety of improper billing practices he observed during his employment with the hospital. After the relator left the hospital’s employ, a Medicare contractor acting on behalf of the Department of Health and Human Services Office of Inspector General (“OIG”) audited the hospital in response to an anonymous complaint regarding improper billing practices. OIG subsequently opened an administrative investigation into whether the errors and potential overpayments identified by the contractor’s review violated criminal law and consulted with the United States Attorney’s Office for the Eastern District of Tennessee before declining to pursue the matter further. To conduct its own internal investigation of the allegations, the hospital retained an outside billing consultant.

The district court dismissed relator’s qui tam claims for lack of jurisdiction, holding that the alleged fraud was publicly disclosed “through the investigations, oversights and audits conducted by the government, consultants, attorneys and contractors.” On review, the Sixth Circuit reversed, declining to follow Seventh Circuit precedent that interprets “public disclosure” to include disclosures of an alleged false claim to a “competent public official who has managerial responsibility for that claim.” The Sixth Circuit joined the Fourth Circuit, which recently observed in United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist. that no other circuit court has followed the Seventh Circuit’s precedent. Instead, the Sixth Circuit held that disclosure outside the government is required to trigger the public disclosure bar. The court then clarified that non-government actors—specifically, the Medicare contractor and the hospital’s third party billing consultant—do not qualify as “outsiders” or “strangers” to the alleged fraud. As such, confidential disclosures to these parties in the context of an administrative audit and investigation are not “public disclosures” under the FCA. This decision thus continues the trend of narrowly interpreting the public disclosure bar, substantially curtailing a previously powerful limit to FCA liability.

A copy of the opinion can be found here.

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