District Court dismisses whistleblower's case against Humana for public disclosure

by Ben Vernia | October 1st, 2012

On September 28, District Judge Robert N. Scola, Jr., of the Southern District of Florida dismissed a qui tam relator’s suit, brought against Humana and its affiliates, as Medicare Advantage insurance providers, and against the operators of “Cuban-style” clinics in the Miami area. (Cuban-style clinics offer wellness programs and social activities in addition to health care services.) The whistleblower alleged that the Humana companies and the clinic operators violated Medicare’s Antikickback Statute and Civil Monetary Penalties Law by providing non-medical services including transportation, meals, massages and salon services.

Humana argued in its motion to dismiss that the relator’s claims were barred by the False Claims Act’s public disclosure rule, and inadequately pleaded under Fed. R. Civ. P. 9(b). Because the Court granted Humana’s motion on public disclosure grounds, Judge Scola did not reach the company’s 9(b) arguments.

Humana argued that newspaper accounts of the clinics’ services, the companies’ own websites and printed materials, and documents exchanged in state court litigation publicly disclosed the basis of the relator’s case. The Court first considered whether these disclosures were public within the meaning of the bar, and found that all except for the clinics’ printed materials met that definition. The relator argued that the disclosures did not amount to “allegations or transactions” sufficient to trigger the bar. Noting that the Eleventh Circuit had not established a specific test for this prong of the bar, Judge Scola nevertheless concluded that the disclosures met the test: the news reports and state court documents disclosed the defendants’ business practices, he reasoned, and the parties did not dispute that the free services constituted remuneration under the Antikickback Statute. He rejected the relator’s argument that the element of knowledge in the statute saved his complaint, concluding that the relator need only allege sufficient facts to support an inference or render plausible that the defendant acted while knowing that its conduct fell outside one of the statute’s safe harbors. Likewise, he concluded that the knowledge element of the Civil Monetary Penalties law required a showing of an awareness of the impact of misconduct on prospective Medicare enrollees.

Judge Scola then found that the relator’s allegations were “based upon” or “substantially the same” as the publicly disclosed allegations or transactions (using the language of the False Claims Act pre- and post-Affordable Care Act amendments to the law). He rejected the relator’s argument that the public disclosures were innocuous, noting that even offering remuneration, as the materials disclosed, violates the Antikickback Statute. Moreover, he reasoned, it was the relator’s allegations that were best characterized as innocuous.

Finally, Judge Scola rejected the whistleblower’s claim to be an original source under either version of the public disclosure bar. He neither had direct and independent knowledge of the information on which his allegations were based, nor did the allegations about which he claimed to have independent knowledge materially add to the information already made public. (The relator was not an insider of a defendant company, but was instead an entrepreneur who claimed to have an interest in opening medical clinics that would compete with the defendants’.)

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