7th Circuit: GAO report, HHS audits didn't trigger public disclosure bar in whistleblowers' case

by Ben Vernia | May 29th, 2012

On May 21, the Seventh Circuit Court of Appeals, in U.S. ex rel. Goldberg v. Rush Univ. Med. Ctr., vacated a district court’s decision that found a qui tam suit barred by the public disclosure of allegations concerning physician oversight of hospital residents. Judge Easterbook, writing for the court, noted that during the 1990s, HHS had found that “many if not all of the 125 teaching hospitals affiliated with medical schools were billing for unsupervised services that residents performed, thus receiving double compensation.” The GAO had concurred in HHS’s audit, issuing its own report in 1998.

The Seventh Circuit had, in the 2006 case of U.S. ex rel. Gear v. Emergency Medical Assoc. of Illinois, reasoned that because the reports disclosed an “industry-wide” practice, a relator could only allege that a specific hospital had billed for residents’ unsupervised work by meeting the original source exception to the public disclosure bar, 31 USC 3730(e)(4)(A). Three years later, in Glaser v. Wound Consultants, the court had added that a qui tam suit was based on a public disclosure “when the allegations are ‘substantially similar,” even if the private relator adds details.”

The relators amended their complaint three times to get around these decisions, and ultimately alleged the hospital submitted claims for residents’ unsupervised services, but they argued that they had alleged something different than the conduct covered in the audits and reports. Those disclosures, the relators argued, dealt with wholly unsupervised services, while they had alleged in their amended complaint that the hospitals submitted claims which they certified had, in fact, been, supervised, and which were supervised, but inadequately so.

The Court was persuaded that these allegations were not covered in the audits and public disclosures, which focused instead on services for which no supervision was provided. In reaching this conclusion, the Court relied on its 2011 decision in U.S. ex rel. Baltazar v. Warden (which Judge Easterbrook also wrote), where it held that it was inappropriate to interpret a public disclosure at a “very high level of generality,” because doing so could block many different kinds of fraud from that which was disclosed. Because the GAO report and audits could not be read to informed someone of the type of deceit the whistleblowers alleged, under Baltazar, they should not be interpreted more broadly.

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