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From Health Law Daily, July 8, 2015

It’s a court’s prerogative to change its mind: relator requirement removed

By Kayla R. Bryant, J.D.

A whistleblower’s role in the public disclosure of the allegations that support a qui tam action is irrelevant for the purposes of determining whether the relator is an original source. The U.S. Court of Appeals for the Ninth Circuit overruled its own precedent set in Wang ex rel U.S. v. FMC Corp. and reversed the district court’s dismissal of Steven Hartpence and Geraldine Godecke’s case against Kinetic Concepts, Inc. and remanded the case for consideration of the relators’ status as an original source under a two-part test. The district court also erred in applying the first-to-file bar requiring a whistleblower to be the first to file an action on behalf of the government (U.S. ex rel Hartpence v. Kinetic Concepts, Inc., July 7, 2015, Bea, C.).

False Claims Act. Under the False Claims Act (FCA) (31 U.S.C. § 3729 et seq), relators are able to bring suits on behalf of the government after witnessing attempts to defraud the government. If the government does not intervene in the suit, the relator may enjoy part of the funds recovered. To qualify, the relator must (1) voluntarily inform the government of the facts supporting the allegations of the complaint and (2) have direct and independent knowledge of the facts that support the allegations. According to a previous Ninth Circuit decision, the relator must also have had a hand in any public disclosure. Additionally, the first-to-file bar prevents complaints alleging the same facts as a previously filed civil complaint.

Consolidated cases. The case against Kinetic Concepts is the result of a consolidation of two qui tam cases in which relators allege that their former employer fraudulently filed for Medicare reimbursements. Kinetic Concepts, a medical device manufacturer, submitted claims for reimbursement for vacuum assisted closure therapy, covered as a negative-pressure wound therapy (NPWT) device under Medicare as durable medical equipment (DME). Hartpence allegedly discovered that Kinetic Concepts was misusing a billing code modifier that the company had records certifying that the claim billed met all relevant criteria for the DME local coverage determination (LCD) set by the relevant Medicare administrative contractor (MAC). Godecke’s complaint alleged that the company billed for a full month of therapy when the therapy had stopped and restarted in the same month, that it ignored requirements to receive detailed written orders (DWOs) from physicians before dispensing supplies, and that it improperly retained overpayments.

The two relators filed separate complaints after these allegations were publicly disclosed. The district court held that neither relator was an original source because they had not been involved in the public disclosure, and also held that Godecke’s complaint was barred because she was not the first to file.

Overruling precedent. The appeals court reviewed the statutory text and considered the third requirement for whistleblower status it established in Wang regarding the relator’s participation in the public disclosure of the fraud. In the present case, the public disclosure of the fraud stemmed from a federal audit report and at least one administrative law judge (ALJ) decision. The court noted that other circuits have not adopted Wang’s third requirement and decided to overrule its own precedent after finding that there was no textual basis for the requirement. The court also found that Godecke’s claim was not precluded by the first-to-file bar, as her complaint was the first to allege the lack of DWOs and the retaining of overpayments. The case was remanded for the district court to consider the relators’ standing under the appropriate two-part test.

The cases are Nos. 12-55396, D.C. No. 2:08-cv-01885-GHK-AGR and 12-56117, D.C. No. 2:08-cv-06403-GHK-AGR.

Attorneys: Michael A. Hirst (Hirst Law Group PC) for Steven J. Hartpence. (Skadden, Arps, Slate, Meagher & Flom LLP) for Kinetic Concepts, Inc. and KCI-USA, Inc.

Companies: Kinetic Concepts, Inc.; KCI-USA, Inc.

MainStory: TopStory CMSNews FCANews FraudNews QuiTamNews BillingNews DMENews AlaskaNews ArizonaNews CaliforniaNews HawaiiNews IdahoNews MontanaNews NevadaNews OregonNews WashingtonNews

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