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HomeNewsHow this year’s health care reform will impact whistleblower litigation under the False Claims Act.

How this year’s health care reform will impact whistleblower litigation under the False Claims Act.

Date Published
Sep 18, 2010

In March of this year, President Obama signed into law the healthcare overhaul bill, known as the Patient Protection and Affordable Care Act (“PPACA”). One focus of the PPACA is on rooting out and deterring billing fraud by healthcare providers. Even prior to the expansion of government-funded healthcare contemplated by the PPACA, estimates for the amount of fraud on the Medicare system have been as high as $80 billion per year. One aspect of the anti-fraud provisions of the PPACA is an amendment to the False Claims Act that limits the scope of the so-called “public disclosure bar.”

The “public disclosure bar” is a defense that can be raised by a defendant in a False Claims Act qui tam lawsuit. Courts have traditionally had the power, under the public disclosure bar, to dismiss qui tam cases based upon fraud that has already been publicly disclosed. What counts as “public disclosure,” however, has been a hotly-contested issue.

The PPACA changed the public disclosure bar in many respects to the benefit of both qui tam relators and the government. The public disclosure bar previously barred courts from considering qui tam lawsuits that were “based on” allegations of fraud that had already been publicly disclosed through a variety of avenues. The new public disclosure bar only bars actions and claims if they disclose information that is “substantially the same” as the previously disclosed allegations or transactions. The change from “based upon” to “substantially the same” was intended by Congress to both clarify and narrow the scope of the bar.

Perhaps more importantly, however, is how information disclosed in state and private legal proceedings is treated. The pre-PPACA bar treated such information as having been “publicly disclosed,” even if nobody outside the immediate participants in the legal proceedings knew of information, and the affected federal government agency knew nothing about it. Now, under the PPACA amendments to the False Claims Act, information is considered publicly disclosed only if it is disseminated in federal proceedings, reports, hearings, audits, or investigations. And with respect to federal criminal, civil or administrative trials and hearings, the government must actually be a party to the proceedings where the information is disclosed.

The PPACA also broadens what was previously the single exception to the public disclosure bar, called the “original source” exception. Under pre-PPACA version of the False Claims Act, an action based upon information that was “publicly disclosed” was not barred if the person had “direct and independent” knowledge of the information underlying the allegations. Now, the original source exception covers two types of whistleblowers. First, a person who disclosed the information to the government before it was publicly disclosed can still proceed with a lawsuit based under the False Claims Act. Second, a person who has knowledge that is “independent of and materially adds to” the publicly disclosed allegations or transactions, and who has provided the information to the government before filing a lawsuit under the False Claims Act, is excepted. While the exact meaning of these terms will likely be the subject of interpretation by the courts, it is clear that they are intended to broaden the “original source” exception.Finally, the amendments to the False Claims Act included in the PPACA for the first time give the government considerable discretion in deciding whether a case otherwise barred by the publicly disclosure may still go forward. Under the previous version of the law, the bar was considered “jurisdictional,” which meant that a court was required to dismiss a qui tam case if it fell within the public disclosure bar. Under the new version, the government may oppose dismissal of the case, even if it falls within the public disclosure bar, and thus permit the qui tam lawsuit to go forward. This gives the government the ability to assess the circumstances, including how the dismissal of the qui tam relator’s case will affect the government’s ability to fully prosecute the case.

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