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From Health Law Daily, January 6, 2016

Claims by second bounty hunter too similar to proceed

By Harold Bishop, J.D.

The Seventh Circuit has affirmed the dismissal of a whistleblower suit brought against a medical equipment seller and its purchaser under the federal False Claims Act because the whistleblower’s claims were too similar to those brought in a prior whistleblower action against the seller, which was previously settled by the United States government for $85 million (U.S. ex rel. Bogina v. Medline Industries, Inc., January 4, 2016, Posner, R.).

Medline Industries, Inc. (Medline) is a seller of medical equipment to institutions reimbursed by Medicare and similar federal programs. Tutera Group (Tutera) is a chain of nursing homes and is a Medline customer. August Bogina (III) claimed to have discovered through a business associate Michael Tutera, a former member of the ownership group of Tutera, that Medline gave bribes and kickbacks to Tutera to induce it to purchase from Medline. According to Bogina’s complaint, when Tutera received a discount in the form of a bribe or kickback it nonetheless billed the government for the full price, resulting in a larger reimbursement than it was entitled to. In submitting the allegedly inflated claims, Tutera would have also falsely certified that it was in compliance with applicable anti-bribery and anti-kickback laws.

Prior suit. The whistleblower in the prior suit was Sean Mason, an employee of Medline who had in 2007, four years before Bogina filed his suit, filed a very similar suit, charging Medline with having given bribes and kickbacks to purchasers of its medical equipment. In that suit, without admitting liability, Medline had settled with the government for $85 million in compensation, out of which the government paid Mason $23.4 million.

Bogina’s complaint. Bogina’s argued that his complaint is different than Mason’s in three ways. The first is that Tutera was not mentioned in Mason’s complaint. Second, the settlement with Mason released the federal government’s civil claims against Medline only for false reports submitted to Medicare Part A and Medicaid, while Bogina alleged that false reports were also made by Tutera to Medicare Part B, to state-funded Medicaid, and to TRICARE. Third, Bogina alleged that the fraud is continuing, while Mason’s complaint contained allegations of fraud only through 2009, and the Mason settlement released claims only through May 31, 2010. On March 26, 2015, the district court dismissed Bogina’s complaint as too similar to the Mason suit to survive (see Whistling flat relators lawsuit barred by public disclosure of earlier whistleblower, March 26, 2015).

Seventh Circuit analysis. The court found these differences between the two complaints unimpressive. According to the court, because it was common knowledge that Medline sold to nursing homes as well as to hospitals, Bogina should not be allowed to proceed independently by merely adding details to what is already known. In addition, the court noted that the Mason case settlement agreement stated that “unallowed costs” may have been submitted to TRICARE even though TRICARE was not mentioned in the release of liability. Therefore, the government was on notice of the possibility of a broader bribe-kickback scheme before Bogina sued and had it wanted to broaden the case against Medline beyond the Mason settlement it could have pursued, among other Medline customers, nursing-home companies such as Tutera.

Moreover, the court noted that the Mason settlement was a compromise; and it was notable that among the claims that the government released as part of the settlement were some of the very claims alleged in Bogina’s complaint.

The court concluded that the only significant information that appears in Bogina’s complaint but not in Mason’s was the name “Tutera Group” and references to government health care programs besides Medicare Part A and Medicaid. According to the court, neither body of information materially added to the publicly disclosed allegations against Medline.

Finally, the court found that Bogina’s complaint was not saved by its allegations that the fraud continues to the present day, because those allegations were made “on information and belief,” and the federal pleading rules require in alleging fraud a party must state with particularity the circumstances constituting fraud. Allegations based on “information and belief” are insufficient in a fraud case.

The case is No. 15-1967.

Attorneys: Michael P. Downey (Downey Law Group LLC), Michael Francis Brady (Brady & Associates) and Marc J. Siegel (Siegel Law Group Ltd.) for August Bogina, III. Anton R. Valukas (Jenner & Block LLP) for Medline Industries, Inc.

Companies: Medline Industries, Inc.; Tutera Group

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