April 15, 2015

6th Circuit Joins Majority of Circuits by Taking Narrow View of FCA Public Disclosure Bar

Medical News, April 2015

by Stites & Harbison, PLLC

During February of this year, the 6th Circuit Court of Appeals joined the majority of circuits and held that the disclosure of information to the government during an audit or investigation does not constitute a “public disclosure” and subsequently does not create a jurisdictional bar to a qui tam action under the federal False Claims Act (“FCA”). The Court’s decision in United States ex rel. Whipple v. Chattanooga-Hamilton County Hospital Authority allowed the plaintiff to proceed with his case on remand and has the potential to invite more FCA qui tam actions given the narrow interpretation given to the public disclosure bar.

Background to the FCA and the Public Disclosure Bar

The FCA imposes civil liability on a party when false or fraudulent claims for payment are submitted to the government. The Act further permits qui tam actions in which private party “whistleblowers”, referred to as relators, bring civil actions on behalf of the government. In the event a qui tam action is successful and results in a monetary penalty or settlement, the whistleblower is entitled to a share of the proceeds. After a whistleblower discloses his or her claim to the government, the government is given a certain period of time to investigate and decide whether to intervene or allow the whistleblower to proceed with the claim independently.

However, there are certain restrictions that are placed upon whistleblowers that limit their ability to bring a private action. One such restriction is the “public disclosure” bar that prevents a whistleblower from brining a qui tam action when allegations of fraud in the action are based on allegations that have been already been publicly disclosed. Examples of such disclosures might include those made through a government hearing, a congressional audit or investigation, or by the news media.

The Facts in Whipple

In 2006 over the course of his six-month employment at Erlanger Medical Center, the relator, Whipple, alleged to have discovered that the hospital knowingly submitted false claims for reimbursement to various federally funded health care programs, including Medicare, in violation of the FCA. After disclosing the allegations as part of a qui tam action to the government in 2010, the government declined to intervene as a party and Whipple chose to proceed with the action on his own. However, unknown to Whipple was that the government, acting on a previous anonymous tip in 2006, conducted an investigation into allegations that the hospital had improperly billed Medicare for various inpatient admissions. A contractor with the Office of Inspector General (“OIG”) investigated the reimbursements, which then led to the hospital retaining Deloitte Financial Advisory Services to perform an internal audit. After the investigation and audit, the hospital voluntarily refunded the government over $475,000. Since the FCA requires that a whistleblower’s claim not be based on prior disclosures related to the underlying allegations of the claim, the court had to decide whether disclosures and discussions pursuant to an investigation and audit constitute a public disclosure.

6th Circuit’s Interpretation and Decision

While the district court held that the government’s previous knowledge of the hospital’s fraudulent billing though administrative investigations and an audit created a public disclosure bar, the 6th Circuit disagreed. The Court held that the FCA “does not bar jurisdiction over qui tam actions based on disclosures of allegations or transactions to the government.” In other words, a disclosure beyond the defendant and the government, including its agents, is required to trigger the FCA public disclosure bar. The hospital’s argument was that both the government contractor and third-party auditor has prior knowledge of the underlying allegations of the relator’s claim. However, the Court held that because the contractor was acting on behalf of the government, they had in incentive to hold the information they obtained confidential and thus their knowledge of the claims did not rise to a public disclosure. Similarly, the third-party auditor had an incentive to keep any knowledge confidential. The Court concluded that if “a disclosure to the government in an audit or investigation would be sufficient to trigger the [public disclosure] bar, the term ‘public’ would be superfluous.”


With the 6th Circuit’s decision in Whipple, there are now seven circuit courts that take this narrow interpretation of the public disclosure bar in FCA qui tam actions. In order for defendants, including hospitals, physicians, and other health care providers participating in federal health care programs, to assert the public disclosure bar they must show some sort of affirmative act of disclosure to the public outside the government. This will present a challenge for those providers stuck in the middle of an investigation who seek to balance their right to assert the public disclosure bar in a potential future qui tam action or resolve the matter quietly and confidentially in the hopes of avoiding an FCA suit altogether.

This article is reprinted with the permission of Medical News, copyright 2015

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