The district court dismissed a qui tam case alleging fraud on state and federal healthcare programs, finding the claims were precluded by the public disclosure bar. The relator’s claims were based on her analysis of Medicare payment information she gathered using several Freedom of Information Act requests, and the court held that FOIA releases triggered the public disclosure bar. The court reasoned that the government had in its possession all the information it would have needed to investigate and prosecute the alleged fraud, and that the release of the information in response to an FOIA request constituted a “report” within the meaning of the bar. The relator argued that she added materially to the disclosed information, but the court disagreed, finding the passages cited by the relator described her efforts without adding to the government’s information.
Sutter Health, Sutter Bay Medical Foundation, and Palo Alto Medical Foundation moved to dismiss a qui tam complaint alleging they defrauded state and federal healthcare programs.
Relator Judy Jones (a pseudonym) filed a qui tam case alleging that the Sutter defendants, Palo Alto Foundation Medical Group, Dr. Roy Hong, and multiple anonymous defendants submitted duplicative invoices for single procedures, improperly upcoded billings to inflate invoices, and unbundled major surgical codes to obtain greater reimbursements.
The relator alleged that she had been a patient at Palo Alto Medical Foundation, where she had undergone a bilateral preventative mastectomy. When she received and reviewed her medical bills, she noticed multiple billing irregularities. The relator later obtained numerous Medicare claims via Freedom of Information Act requests to the Centers for Medicare and Medicaid Services. The first sought billing and coding records for Hong and Sutter Health. The second sought Medicare billing and payment data for other Sutter Health plastic and reconstructive surgeons from 2010 through 2016. According to the relator, her analysis of the FOIA data showed that Sutter Health had pattern billed and received federal and state funds for breast surgery claims which did not appear to conform to CMS’ National Correct Coding Initiative, were incompatible code combinations, and failed to adhere to CMS mandates.
The defendants moved to dismiss on multiple grounds. First, they argued that the claims were foreclosed by the public disclosure bar. They also challenged the relator’s use of a pseudonym to file her claims and argued the relator failed to adequately allege that any fraud had occurred.
The court first considered the motion to dismiss under the public disclosure bar, and found the claims were barred because the information the relator relied upon in her complaint had been released by the government via her FOIA request. The court noted that the Supreme Court in Schindler Elevator held that records issued in response to an FOIA request constituted a report within the meaning of the public disclosure bar. In that case, the Supreme Court explained that qui tam actions based on FOIA request are an example of an opportunistic litigation that the public disclosure bar is intended to discourage, because they are based on evidence already in the government’s possession.
In her complaint, the relator asserted that she inferred fraud from the data in the FOIA responses. Because she simply analyzed data in the government’s possession, and failed to add any genuinely new or material information, the court concluded the government could have investigated the case and made a decision to prosecute based on that information alone, without the relator’s case. The court also noted that neither the federal nor California state government decided to intervene.
The court found no merit to the relator’s arguments in opposition. First, the relator argued that the dissent in Schindler Elevator controlled here, which the court found illogical. While acknowledging a vigorous dissenting opinion, the court explained the majority holding controlled.
Next, the relator argued that her data analysis discovered new evidence outside the public disclosure bar. The relator quoted a holding from Integra Med that “public disclosure of the Medicare claims data alone did not publicly disclose ‘substantially the same allegations or transactions’ of fraud that are alleged in [the Integra Med relator’s] complaint.”
However, the court reached the opposite conclusion, finding that Integra Med explained why the relator’s claims failed. The quotation above pertained to alleged facts missing from the Integra Med Medicare data. Specifically, the Integra Med complaint alleged facts taken from a defendant’s business practice information that, though posted online, potentially failed to meet the public disclosure bar’s provision for news media. That business practice information was key to the fraud claim. Without that information, the Integra Med relator would have had only Medicare claims data, and nothing in that data revealed the defendant’s role in the alleged scheme or even the defendant’s existence.
In that case, the court expanded the public disclosure bar beyond the FOIA. The Medicare data in Integra Med had not been disclosed through FOIA, but had been disclosed only to researchers subject to various privacy provisions. Even so, the court found the public disclosure bar applied.
The court found the question in this case simpler to resolve. Here, the facts from which fraud could be inferred are all included in the Medicare data derived from the FOIA requests. The court also found the relator’s alleged expertise in data analysis no help in overcoming the public disclosure bar. The Ninth Circuit has held that while a relator’s expertise may have enabled the formation of a legal theory of fraud, that expertise is irrelevant to the question of the whether the underlying information was already disclosed.
Finally, the relator argued that she qualified for the original source exception, arguing that she had direct and independent knowledge of the information underlying her allegations because she had witnessed the fraud as a Sutter patient. However, the court disagreed, finding the relator failed to meet the rigorous standard for direct and independent knowledge that is distinct from the publicly disclosed information.
For example, the relator stated that she served her original complaint and material evidence on federal and California officials, but the court found that merely showed the relator’s compliance with a procedural requirement of qui tam actions. The relator also asserted that she is a practicing physician and surgeon, but the court found this had no bearing on whether her information had been publicly disclosed.
The relator also argued that defendant Hong had testified in another matter that he had not performed any, or at most a couple of single stage immediate implant-based mastectomy reconstructions, while the CMS reports showed that he had in fact billed Medicare and received payment for the billing codes in question some twenty-nine times from 2010 to 2014. However, the court found the billing code in question could refer to multiple procedures, while Hong’s testimony in the other matter referred to one specific procedure.
Further, even if there was a discrepancy, the court found the relator failed to show how Hong’s testimony was material to the original source exception. Pointing out this inconsistency did not establish the relator was an original source of her information. Because the relator failed to qualify as an original source of the information underlying her complaint, the court held the public disclosure bar applied and dismissed the case. However, the court granted the relator leave to amend to cure the deficiencies cited here.
