Sixth Circuit Offers New Clarity for Copycat Fraud Cases

In United States ex rel. Maur v. Hage-Korban, the Sixth Circuit affirmed a district court dismissal under the public disclosure bar, holding that the relator was not an original source in part because his allegations did not materially add to the information already reported to the government under an integrity agreement.

The court’s holding could further strengthen arguments by FCA defendants who are named in copycat suits following the resolution of earlier FCA allegations, but who remain under HHS OIG oversight in connection with a corporate or individual integrity agreement.

Case Details and Holding

In Maur, the relator filed an FCA suit against a cardiologist and various hospitals in 2017 for allegedly submitting false claims to Medicare for medically unnecessary cardiac and stent procedures during a nine-month period in 2016. The relator was a physician who had worked at the defendant cardiologist’s practice and provided nine examples of alleged fraudulent billing in his complaint.

The relator’s allegations, however, were not novel. A decade earlier, a different relator had accused the same defendant cardiologist and many of the same hospitals of the same fraud scheme, leading to a $1.15 million settlement between the cardiologist and the government with respect to cardiac procedures performed between 2004 and 2012.

In connection with the settlement, the cardiologist also entered into a three-year integrity agreement with HHS OIG, which required significant oversight of his procedures, coding, and billing by an independent review organization that then reported its findings to to the OIG on a quarterly basis.

On appeal, the Sixth Circuit affirmed the district court’s dismissal, holding that the earlier FCA action, press releases, and integrity agreement collectively triggered the public disclosure bar, and that the relator was not an “original source” within the meaning of the statute.

The court reasoned in part that the public disclosure bar has a “generally broad scope,” and the U.S. Supreme Court has expansively interpreted the term “report” within the meaning of Section 3730(e)(4)(A)(ii) to include “something that gives information or notification,” which in this case encompassed the integrity agreement.

Importantly, in holding that the relator was not an original source, the court relied heavily on the fact that an integrity agreement remained pending when the fraud allegedly occurred, rendering the relator’s allegations immaterial to the government, since the government had already been scrutinizing the defendant’s billings.

Practical Impact

The Maur case importantly provides an analytical framework that courts can apply when determining whether allegations that a defendant has continued or restarted a fraud scheme following a settlement should clear the public disclosure bar.

If the relator’s allegations relate to transactions that are already being scrutinized by an independent review organization and HHS OIG, the relator’s allegations may not materially add to the public disclosures arising from the prior FCA suit and settlement under Section 3730(e)(4)(B) of the FCA, even if the relator is a corporate insider.

If the allegations post-date such review, however, or the review would not be capable of ferreting out the alleged fraud, the relator has a greater chance of demonstrating original source status.

This area of the law is relatively undeveloped, however, and courts outside the Sixth Circuit could depart from the Maur case’s analysis.

For example, a court could decide to analyze materiality not through the eyes of the government, but through the eyes of the court or jury, since the original source definition is arguably ambiguous as to whom the information must be material in order to give the relator original source status.

A court could also determine that, in certain circumstances, a relator with insider status could have access to greater information than an independent review organization, rendering the information material notwithstanding regular reporting to HHS OIG.

Given the prevalence of corporate and individual integrity agreements, we expect that the law will continue to develop in this area. In the meantime, the Maur case provides a helpful road map for a motion to dismiss in cases involving similar facts.

Read the article on Bloomberg Law here.