The Public Disclosure Bar in False Claims Act Cases
A provision of the False Claims Act commonly referred to as the Public Disclosure Bar stops relators from pursuing actions on behalf of the government if the “transactions and allegations” of fraud have been publicly disclosed through various sources listed in the statute. 31 U.S.C. 3729(e)(4).
“Th[e] public disclosure bar is based on the proposition that, where the government is already in possession of information regarding allegations or transactions that would put it on notice that some person is obtaining government funds through fraud or false pretenses, no public benefit is derived from permitting the private party to proceed with the case unless that party was the source of the information.” E.g., United States ex rel. Lee v. Corinthian Colls., 2013 WL 12114015, at *3 (C.D. Cal. Mar. 15, 2013).
The interpretation and application of the Public Disclosure Bar is one of the most frequently litigated issues in qui tam cases and it is often fatal to a relator’s ability to pursue a case. Courts have generally been very quick to dismiss a case because of a prior public disclosure, and it can be assumed that many potentially meritorious fraud cases are never even filed because False Claims Act counsel are well aware of the steep hurdle that the Public Disclosure Bar has become. See Thomas, S., DeSantis, J., Misguided Meanders: The “Trail of Fraud” Under the Public Disclosure Bar of the False Claims Act, 43 UNIV. OF DAYTON L. REV. 161, 165 n.11 (2018).
The Court’s Decision Regarding Information Available Online
In a recent ruling from the Central District of California, the court addressed the significant question of whether various corporate websites, online message boards and other online sources constituted disabling public disclosures. United States ex rel. Integra Med Analytics LLC v. Providence Health and Services, 2019 WL 3282619 (C.D.Cal. July 16, 2019). The decision is of great interest to the qui tam relator’s bar because the court bucked the trend of courts just cursorily deciding that virtually any information that can be found on the web should be deemed a “public disclosure” through the “news media,” one of the statutorily defined forms of disclosure that can bar a relator’s case.
The issue of whether these sources fit within the statutory definition of public disclosures was of elevated importance in this case. The relator, Integra Med Analytics (“Integra”), is not a prototypical False Claims Act relator with knowledge of questionable claims derived from a direct relationship or interactions with the defendant. Instead, as the court explains, Integra “bases its claims on analysis it performed on data it received from CMS regarding inpatient claims from short term acute care hospitals as well as information it has gathered about [the defendants’] business practices.” Id. at *2.
The Integra decision leaves open a path for private parties to exercise their qui tam rights and serve as a check on government fraud, even where the relator’s knowledge stems from information available on the internet.
Background Information About the Alleged Fraud
In the Medicare program, the government pays hospitals on a “per-discharge” basis—meaning that there is a single payment for each inpatient hospital stay. The payment is intended to meet the average cost of resources needed to treat each patient.
As part of the payment calculation, Medicare assigns each hospital discharge to a “diagnosis related group” (“DRG”). As alleged, the DRG is the key factor in determining the average payment for a claim, and the DRG is “primarily determined by three types of codes: (1) the principal diagnosis code (defined as the ‘condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care’), (2) the surgical procedure code (representing any surgical procedures performed), and (3) secondary diagnosis codes (which represent “all conditions that coexist at the time of admission, that develop subsequently, or that affect the treatment received and/or the length of the stay”).” Id. at *1.
Of particular significance to the fraud alleged, a DRG code can have various levels of severity: (1) “without Complication or Major Complication,” (2) “with Complication,” or (3) “with Major Complication.” These severity categorizations are determined by the secondary diagnoses present, in addition to the diagnosis that determines the DRG that is assigned to the patient. Most importantly, “increasing the severity level can increase the amount of the reimbursement that the hospital receives from Medicare.” Id.
In this case, Relator alleges that the hospital’s outside consulting firm and various Hospital entities developed a scheme in which they trained doctors to describe medical conditions with specific language that would support adding secondary complications and Major Complications or Co-Morbidities (“MCCs”), that would result in increased severity levels and thus increased Medicare reimbursements. One of the elements of the alleged scheme were so-called “tip sheets” created by the consultant, which trained physicians on how to document conditions so that the medical records would support adding an MCC to the diagnosis code. Id. at *3. For example, one “tip” provided to doctors was to document severe malnutrition, which constituted an MCC and likely would allow for a longer length of stay – both increasing the reimbursement that Medicare would pay. Id.
Defendants’ Challenges Under the Public Disclosure Bar
In the Integra case, Defendants argued, among other things, that Relator’s claims should be barred by the Public Disclosure Barin part because they were based on information gleaned from online sources about the consultant’s business practices, which were alleged to be public disclosures through the news media.
For example, the documentation “tip sheets” that informed doctors about clinical language that would support adding MCCs to diagnoses were available on several business websites. Essentially, Defendants argued that “[i]nformation publicly available on the Internet generally qualifies as ‘news media,’” relying on United States ex rel. Hong v. Newport Sensors Inc., 2016 WL 8929246, at *5 (C.D. Cal. May 19, 2016).
The Court’s Ruling Regarding Information Available on the Internet
The Integra court found the Hong decision unpersuasive, in part because the Ninth Circuit, on appeal, had expressly noted that it was not adopting that overbroad holding. Integra, 2019 WL 3282619, at *10, citing United States ex rel. Hong v. Newport Sensors, Inc., 728 F. App’x 660, 662–63 (9th Cir. 2018). The court went on to review virtually all the decisions concerning internet sites as “news media” and determined that most courts had not given reasoned consideration to the question. Integra, 2019 WL 3282619, at *13.
In light of the dearth of actual analysis, the Integra court endeavored to ascertain a common sense understanding of what is typically considered news media, and to set out some contours for future courts to consider. As the court explained, “news media” generally includes methods of communication that are used to disseminate information about recent events or that would otherwise commonly be found in a newspaper, news broadcast, or other news source. With that understanding, the court concluded, the term news media cannot be interpreted to encompass everything available on the internet, a communication medium that is designed to – and used to – convey essentially anything, such as a restaurant’s menu. Id. at *11, 14.
The court set out various factors that could inform judicial analysis of this issue under the False Claims Act. Briefly described, the court identified the following factors:
- Whether the source of the disclosed information is routinely used to convey information about recent events or other traditionally newsworthy subjects;
- Whether the source exercises some level of editorial independence, demonstrating a separation between the information itself and the medium that conveys it;
- Whether the source’s intent is to disseminate information widely versus to only a narrowly defined universe; and
- Generally, whether the source falls within the “broad ordinary meaning” of the term news media – which something like a restaurant’s menu posted online would never be considered. Id. at *14.
In light of factual issues about the precise nature of the information that was alleged to have been publicly disclosed and the nature of the internet sites that posted the relevant information, the court found defendants had not successfully shown, as a matter of law, that the cited sources constituted disabling public disclosures at the initial stage of the litigation. Id.
Significance of the Court’s Holding
If followed by other courts, the Integra holding could be a tremendous boon to the government by empowering relators who utilize non-traditional methods of obtaining data and identifying potential fraud. Information that can be gleaned from comprehensive research of corporate or industry websites over time might be considered fair game for relators to use in piecing together their allegations of fraud.
Similarly, sophisticated data analytics could be employed by a qui tam relator even if the underlying data is derived from an internet site – although use of federal government-released data could be a problem since it is arguably a disclosure through a government report, as the Integra court also held. Id. at *8. Overall, the rapidly-expanding capabilities of data analytics would be useable, at least in part, by private parties to ferret out fraud that would otherwise likely go undetected. Indeed, labeling such sophisticated data mining as public disclosure of allegations and transactions of fraud ignores the reality that high-level analysis reveals conclusions not evident from raw data alone.
Like many other issues concerning a relator’s ability to bring a case and hopefully collect a relator’s share from any proceeds of the litigation, the pitfalls embedded in the Public Disclosure Bar require assistance by knowledgeable and experienced qui tam counsel.
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