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From Health Law Daily, January 20, 2015

ACA amendments to the public disclosure bar applied

By Harold M. Bishop, J.D.

The Eleventh Circuit Court of Appeals has affirmed a district court’s dismissal of a qui tam complaint because the lawsuit was barred by the public disclosure provision of the False Claims Act (FCA). The Eleventh Circuit found that the Patient Protection and Affordable Care Act’s (ACA) (P. L. 111–148) amendments to the public disclosure bar in the FCA applied prospectively, removed the jurisdictional nature of the public disclosure bar, and allowed for examination of extrinsic evidence by the district court during a motion to dismiss. The Eleventh Circuit also concluded that whether under the prior or post-ACA version of the FCA, the qui tam relator was unable to overcome the public disclosure bar (U.S. ex rel. Osheroff v. Humana, Inc., January 16, 2015, Pryor, J.).

Background. Qui tam relator Marc Osheroff (Osheroff) operates medical office buildings in Miami and had considered opening a health clinic there. While doing health clinic market research, Osheroff learned that many area clinics provided a variety of free services to patients.

As a result, Osheroff filed a qui tam action against three clinics and several health insurers that contract with the clinics. The clinics are Pasteur Medical Center, Inc.; CAC-Florida Medical Centers, LLC; and MCCI Group Holdings, LLC, which reached a settlement with Osheroff prior to the appeal. The health insurers are Humana Inc.; Humana Health Insurance Company of Florida, Inc.; Humana Medical Plan, Inc.; and CarePlus Health Plans, Inc., a subsidiary of Humana Inc. The government declined to intervene.

Osheroff’s amended complaint alleged violations of: (1) the Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b), which prohibits offering remuneration for the purpose of inducing the recipient to purchase a good or service for which payment may be made under a federal health care program; (2) the Civil Monetary Penalties Law, 42 U.S.C. §1320a-7a(5), which also prohibits offering remuneration for the purpose of influencing the recipients to order or receive care from a particular provider; and (3) the FCA, 31 U.S.C. §§3729–3733, under an implied certification theory.

Questions on appeal. In 2010, Congress amended the FCA’s public disclosure bar as part of the ACA. On appeal, the Eleventh Circuit addressed four questions: (1) whether the 2010 ACA amendments to §3730 of the FCA applied retroactively; (2) whether the amended public disclosure bar remained jurisdictional in nature; (3) whether the district court erred in considering documents extrinsic to the complaint and not holding an evidentiary hearing; and (4) whether the FCA’s public disclosure provision barred this action.

Retroactive application. The district court held that the 2010 amendments to the public disclosure provision did not apply retroactively. The district court thereby applied the prior version of §3730 to alleged conduct that occurred before the effective date of the amendments, March 23, 2010, and the amended version to conduct that occurred after that date. The Eleventh Circuit found that Osheroff failed to raise the issue of retroactive application of the 2010 amendments and thereby waived this argument. Therefore, for purposes of the appeal, the Eleventh Circuit applied the amended FCA provisions only prospectively.

Jurisdictional question. Before 2010, the FCA’s public disclosure bar provided that “no court shall have jurisdiction” over an action based on publicly disclosed allegations or transactions (42 U.S.C. §3730(e)(4) (2006)). The ACA amended this section, which now provides that a “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” in certain enumerated sources (42 U.S.C. §3730(e)(4) (2012)).

The Eleventh Circuit concluded that the amended §3730(e)(4) created grounds for dismissal for failure to state a claim rather than for lack of jurisdiction. The prior language that rendered the public disclosure bar jurisdictional in nature was removed by Congress. Accordingly, the Eleventh Circuit treated the defendants’ motions to dismiss as motions for failure to state a claim upon which relief can be granted (Federal Rule of Civil Procedure 12(b)(6)), rather than as lack of jurisdiction claims (Rule 12(b)(1)), as to the claims based on alleged conduct that occurred on or after March 23, 2010.

Extrinsic evidence/Evidentiary hearing questions. The Eleventh Circuit made short work of Osheroff’s claim that the district court failed to provide an evidentiary hearing, because Osheroff forfeited this claim when he failed to request a hearing in the district court.

Regarding Osheroff’s extrinsic evidence argument, the Eleventh Circuit concluded that all of the evidence at issue was properly before the district court, regardless of which Rule 12 standard applied. For purposes of Rule 12(b)(1) review for a factual attack on jurisdiction, which applied to conduct alleged to have occurred on or prior to March 23, 2010, the district court was permitted to consider extrinsic documents, including all of the documents that were in the record. For purposes of Rule 12(b)(6) review, which applied to conduct alleged to have occurred on or after March 23, 2010, the Eleventh Circuit found that a court generally may not look beyond the pleadings. However, it further found that a district court may consider an extrinsic document even on Rule 12(b)(6) review if it is central to a plaintiff’s claim, and its authenticity is not challenged. All of the extrinsic documents were central to Osheroff’s claims and their authenticity could not be challenged.     

Did the public disclosure provision bar the action? The Eleventh Circuit found that under the prior or post-ACA version of §3730 of the FCA, Osheroff could not overcome the public disclosure bar.

The pre-ACA version of §3730(e)(4) prohibited qui tam suits based upon publicly disclosed allegations or transactions unless the plaintiff was an “original source” of the information contained in the complaint. In Cooper v. Blue Cross Blue Shield of Florida, Inc., 19 F.3d 562, 565 (1994), the Eleventh Circuit set forth a three-part test for deciding if the public disclosure bar in the prior version of the FCA applied: (1) have the allegations made by the plaintiff been publicly disclosed; (2) if so, is the disclosed information the basis of the plaintiff’s suit; and (3) if yes, is the plaintiff an “original source” of that information.

The amended public disclosure provision prohibits lawsuits where the allegations in the complaint are “substantially the same” as (rather than “based upon”) allegations or transactions contained in public disclosures, unless the plaintiff is an original source. As such, the Eleventh Circuit applied this standard in place of the second prong of the pre-ACA Cooper test when analyzing the claims.

In analyzing the three-part Cooper test, the Eleventh Circuit first found that Osheroff’s allegations had been publicly disclosed. Second, it found that the significant overlap between Osheroff’s allegations and the public disclosures was sufficient to show that the disclosed information formed the basis of the lawsuit and was “substantially the same” as the allegations in the amended complaint.

Finally, under the 2010 amendments to the FCA, an original source is defined in §3730(e)(4)(B) as someone who has “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.” The Eleventh Circuit concluded that Osheroff’s information did not materially add to the public disclosures, which were already sufficient to give rise to an inference that the clinics were providing illegal remuneration to patients.

The Eleventh Circuit thereby held that Osheroff was unable to overcome the public disclosure bar under either the prior or post-ACA version of the FCA. As such, the district court’s dismissal of Osheroff’s amended complaint was affirmed with prejudice.

The case number is 13-15278.

Attorneys: Jonathan Kroner (Jonathan Kroner Law Office) for Marc Osheroff. David Jeffrey Leviss (O'Melveny & Myers, LLP) for Humana, Inc., Humana Health Plan, Inc., Humana Medical Plan, Inc., CAC-Florida Medical Centers, LLC, and Careplus Health Plans, Inc.

Companies: Humana, Inc.; Humana Health Plan, Inc.; Humana Medical Plan, Inc.; CAC-Florida Medical Centers, LLC; Careplus Health Plans, Inc.

MainStory: TopStory FCANews AntikickbackNews CMPNews HealthReformNews QuiTamNews AlabamaNews FloridaNews GeorgiaNews

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