Does ABC story on McAllen, TX home health scam bar whistleblower claims?

by Kurt Schulzke

Size, they say, matters in Texas.  Based on a recent undercover story alleging Texas-sized Medicare fraud in home health care, ABC News agrees. One remarkable aspect of the drama (video below) is the apparent lack of, well, drama.  It’s all in a day’s work, business as usual in McAllen, Texas.

Media investigative reports offer good and bad news for whistleblowers. The more often fraud is discovered and reported, the less often — at least in theory — corporate bad actors will misbehave in ways that force someone to blow the whistle.  Blowing the whistle is not fun.  The bad news is a bit technical but important for would-be whistleblowers.

Section 3730(e)(4)(A) of the False Claims Act (“FCA”) generally bars whistleblower claims based on publicly-disclosed information like that in this ABC News story.  Importantly, an exception allows a “relator” (FCA jargon for whistleblower) who is an “original source” to file a claim despite the “public disclosure bar.” Here’s the text of the rule and exception (emphasis added):

(4) (A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-

(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or
(iii) from the news media,

unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

(B) For purposes of this paragraph,“original source” means an individual who either (1) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.

Reader’s Digest version: To get past the public disclosure bar a whistleblower must either tell the story to the government before the public disclosure occurs OR bring independent knowledge that materially adds to story to the government after public disclosure.  As is true of virtually everything in the False Claims Act, the details (like what is the meaning of “independent” and “materially adds”) depend on where the whistleblower files his or her claim.*

More details on the public disclosure bar, through eyes of Federal District Judge George A. O’Toole, Jr., appear in his March 2012 decision in U.S. ex rel Drennen v. Fresenius Medical Care Holdings, Inc. , No. 09-10179-GAO.  In ex rel Drennan, J. O’Toole denied the defendants motion to dismiss, holding that the relator (Drennen),  a Mobile, Alabama manager for the defendant, was an original source.

Among other things, Drennen reported to the government that between May 1, 2005 and May 31, 2006, Fresenius administered and billed to Medicare $40,338 for 2,574 medically unnecessary hepatitis B tests.  He made similar, though somewhat less detailed, allegations about excess testing and billing for ferritin tests.  Based on this information, Drennen’s allegation of a ten-year, nationwide Medicare fraud scheme was sufficiently robust to survive the defendant’s motion to dismiss.

In light of the obvious public disclosure provided by the ABC News investigation, is it possible that any whistleblower might be eligible for an award in relation to the McAllen, Texas case? Yes, it is.  It is even possible that ABC News could receive a whistleblower award if they voluntarily disclosed the story to the government prior to publicizing it or if they provide the government additional, independent information afterwards.  In light of the fact that the story involves interviews with HHS OIG personnel, it appears that ABC News did in fact make the disclosures before publication.  It’s even possible that the FBI and HHS were briefed before ABC recorded their video.

Another route for a new McAllen whistleblower might be to bring additional “independent knowledge” to the government that materially adds to what ABC News has already publicly disclosed.  They had better hurry: HHS OIG is already investigating.  Before talking to law enforcement, whistleblowers should consult an attorney.

IMPORTANT NOTE: No one identified in the ABC News story has been accused by law enforcement or found guilty of civil or criminal fraud.

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*Lawyers use the term “venue” to describe the court in which a claim is filed.  A False Claims Act claim can be filed in any federal judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by 31 U.S.C. § 3729 occurred. 31 USC 31 USC § 3729.

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