Health Care Overhaul Bill Amends “Public Disclosure Bar” To Qui Tam Lawsuits Brought Under The False Claims Act

On March 23, 2010, the President signed into law the healthcare overhaul bill, known as the Patient Protection and Affordable Care Act (“PPACA”).  The PPACA includes a number of provisions intended to strengthen the government’s ability to root out fraud on the healthcare system.  Some of those provisions take the form of amendments to the False Claims Act, which will apply generally to all cases brought under that statute, including qui tam cases brought by whistleblowers.

The most significant amendment to the False Claims Act relates to the “public disclosure bar.”  Qui tam lawsuits under the False Claims Act are typically brought by company insiders or others with unique access to information – known as “relators” in False Claims Act jargon – that is not already known to the government.  However, the False Claims Act’s public disclosure bar prevents would-be qui tam relators from profiting off of disclosures of fraud that have already been exposed, and that have reached the public domain.  Thus, courts have traditionally had the power, under the public disclosure bar, to dismiss qui tam cases based upon fraud that has already been publicly disclosed.  What counts as “public disclosure,” however, has been a hotly-contested issue.

The PPACA positively changed the public disclosure bar in many respects to the benefit of both qui tam relators and the government.  The public disclosure bar previously barred courts from considering qui tam lawsuits that were “based on” allegations of fraud already publicly disclosed through a variety of avenues—including state, federal and administrative proceedings, hearings, audits, or investigationsIn this fashion, the old public disclosure bar problematically discouraged insiders or other persons who may have had similar, but substantively different knowledge of fraudulent allegations from exposing the new important information to the government.   The new public disclosure bar only bars actions and claims if they disclose information that is “substantially the same” as the previously disclosed allegations or transactions, thus providing incentives for persons who have different allegations to come forward and expose the fraud.

Perhaps most importantly, unlike the old bar, the new public disclosure bar does not consider information disclosed in state and private proceedings to be “publicly disclosed.”   Now, information is considered publicly disclosed only if it is disseminated in federal proceedings, reports, hearings, audits, or investigations.  And with respect to federal criminal, civil or administrative trials and hearings, the government must actually be a party to the proceedings where the information is disclosed.  (As with the previous version of the statute, any information disclosed through news media is still considered “publicly disclosed.”  Thus, actions based on information that is substantially the same as news media reports will continue to be barred.)

The PPACA also broadens what was previously the single exception to the public disclosure bar, called the “original source” exception.  Under the previous version of the False Claims Act, an action based upon information that was “publicly disclosed” was not barred if the person had “direct and independent” knowledge of the information underlying the allegations.   Now, the original source exception covers two types of whistleblowers.  First, a person who disclosed the information to the government before it was publicly disclosed can still proceed with a lawsuit based under the False Claims Act.  Second, a person who has knowledge that is “independent of and materially adds to” the publicly disclosed allegations or transactions, and who has provided the information to the government before filing a lawsuit under the False Claims Act, is excepted.  While the exact meaning of these terms will likely be the subject of interpretation by the courts, it is clear that they are intended to broaden the “original source” exception.

Finally, the amendments to the False Claims Act included in the PPACA for the first time give the government considerable discretion in deciding whether a case otherwise barred by the public disclosure may still go forward.  Under the previous law, the bar was considered “jurisdictional,” which meant that a court was required to dismiss a qui tam case if it fell within the public disclosure bar.  Under the new version, the government may oppose dismissal of the case, even if it falls within the public disclosure bar, and thus permit the qui tam lawsuit to go forward.  This gives the government the ability to assess the circumstances, including how the dismissal of the qui tam relator’s case will affect the government’s ability to fully prosecute the accused.

Companies that feel threatened by qui tam lawsuits have already complained that the new law somehow makes them a target for qui tam relators.  However, the re-worked public disclosure bar only has the effect of encouraging the disclosure of actual fraud, and still limits rewards to persons who are the first to make the government privy to the specific allegations.  And as more successful qui tam lawsuits are filed, fewer companies will feel they can get away with misusing government and taxpayer funds.

Advertisements

Tags:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: