Section 3730 of the False Claims Act allows the United States government or private citizens to file civil lawsuits under the False Claims Act. The False Claims Act, or “FCA”, prohibits various forms of fraud against government programs. A substantial amount of litigation under the False Claims Act involves Medicare fraud. Medicare fraud is likely to grow in future years given estimates that federal spending on Medicare is likely to reach $900 billion by 2020. Although the FCA casts a wide net in the pursuit of fraud, it nonetheless prohibits false claims which are based on publicly disclosed information (commonly referred to as the “public disclosure bar”). Significantly, Congress amended the FCA’s public disclosure bar when it passed the Patient Protection and Affordable Care Act (PPACA). This post will address how the amendments under the PPACA affect claimant’s rights under the False Claims Act.

In 2015, the Eleventh Circuit Court of Appeals considered an appeal of a district court’s dismissal of a qui tam complaint under the False Claims Act. The Eleventh Circuit’s decision, Osherofff v. Humana, Inc., et al., 2015 WL 223705 (11th Cir. Jan. 16, 2015), provides better understanding of the application of qui tam actions to Medicare fraud. The person bringing the qui tam claim in Osheroff was Mark Osheroff, the plaintiff or the party commonly referred to as the “relator” in qui tam litigation. Osheroff owned and operated medical buildings in Miami and wanted to open a health clinic in that area.

While doing market research, Osheroff learned that local clinics provided a variety of free services to their patients. In his qui tam action, Osheroff alleged the various Humana health insurers knew of and promoted the free services provided to patients such as transportation, meals and entertainment. Osheroff further alleged that the clinics provided these free services without regard for medical purpose, or financial need, and that the value of the services was more than nominal.

Under the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), insurers are prohibited from knowingly offering or providing remuneration for the purpose of inducing the recipient to purchase a good or service which payment may be made under a federal health care program. A similar prohibition exists under the Civil Monetary Penalties Law. In his amended Complaint, Osheroff alleged the defendants’ actions violated both statutes.

The Eleventh Circuit in Osheroff recognized that the 2010 amendments changed the public disclosure provisions under the FCA. Nevertheless, the court applied the pre-2010 version of the FCA, which sets a more stringent standard for plaintiffs such as Mr. Osheroff. The court did so because it found that Osheroff had waived his right to receive retroactive application of the 2010 amendments. By waiving retroactive application of the amended FCA, Osheroff faced a higher hurdle to overcome in order to go forward with his qui tam action against the defendants.

Using the pre-2010 version of the FCA, the court applied a three-part analysis in deciding whether the public disclosure bar prohibited Osheroff’s claims. Relying on the decision of Cooper v. Blue Cross Blue Shield of Florida, Inc., 19 F.3d 562, 565 (11th Cir. 1994), the court must first address (1) whether the allegations made by the plaintiff have been publicly disclosed; (2) if so, is the disclosed information the basis of the plaintiff’s suit; and (3) if yes, is the plaintiff the original source of the information serving as the basis of the suit.

The Osheroff court found that the allegations at issue in plaintiff’s complaint had been publicly disclosed. Further, the court found that the disclosed information formed the basis of the lawsuit and was substantially similar to the allegations in the complaint. Finally, the court found that the information Osheroff provided did not materially add to the public disclosures as the public disclosures were already sufficient to give rise to an inference that the clinics were providing illegal remuneration to patients.

Osheroff is significant for multiple reasons. First, it shows the importance of the 2010 amendments to the FCA. As discussed in a subsequent post, the recent amendments to the False Claims act improve the legal landscape for whistleblower like Mr. Osheroff. The Osheroff decision is also important as it highlights the intersection between Medicare fraud and the False Claims Act.

Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at jcornell@clarkfountain.com.