A predicate to a viable whistleblower claim under the False Claims Act (FCA) is that the fraud charged not have been the subject of a prior "public disclosure." If the fraudulent conduct has been involved in an earlier and settled government audit and investigation, discussed and disclosed by those involved has there been a "public disclosure"? "No" answered the Sixth Circuit recently in US ex rel Whipple v Erlanger Medical Center.
Robert Whipple, the whistleblower, filed suit under the FCA charging that the hospital corporation had engaged in four types of fraud: (1) billing for inpatient care for patients that should have been billed on an outpatient or observation basis; (2) surcharges for observation services added to outpatient surgeries; (3) inpatient admissions of patients in order to bill for hemodialysis procedures not reimbursable if performed on an outpatient basis; and (4) carotid artery stenting procedures performed without authorization. Unknown to Whipple, the government had previously done an audit and investigation as to fraud related to inpatient admissions, and the hospital has paid back to the government for $477,140.42. Since the grounds for a FCA whistleblower claim require that there have been no prior "public disclosure" related to the fraud charged, the question before the Sixth Circuit was whether disclosures and discussions involved in this audit and investigation constituted a "public disclosure."
The investigation had started with an anonymous tip to a fraud hotline. The federal Department of Health and Human Services (DHHS) then referred it to a private contractor, AdvanceMed, to investigate. AdvanceMed identified four areas for further inquiry, asked for and received further information from Erlanger, which it reported on to DHHS. Erlanger hired Deloitte Financial Advisory Services as a consultant for the investigation. The matter was closed following payment.
The Sixth Circuit rejected the two arguments made by Erlanger that a "public disclosure" occurred during the discussions and disclosures related to the audit and administrative investigation. First, the court joined every other circuit that has addressed the issue, except for the Seventh Circuit, and held that a "public disclosure" requires "some affirmative act of disclosure to the public outside the government. Therefore, Erlanger's disclosure of information to the government during the audit and investigation was not a "public disclosure."
Second, neither the disclosures to AdvanceMed by DHHS nor the disclosures by Erlanger to its consultant, Deloitte, constituted a "public disclosure." All of these disclosures, of course, remained confidential and unknown until disclosed in this litigation. Accordingly, none of them constituted a "public disclosure" either.