A brief roundup of this week's whistleblower news:
The Fourth Circuit issued an opinion (on January 11, 2013) joining the Eleventh Circuit in holding that a False Claims Act whistleblower cannot state a claim by describing a fraudulent scheme without alleging facts indicating that an actual false claim was presented to the government. Specifically, in United States ex rel. Nathan v. Takeda Pharm., __ F.3d __ (4th Cir. 2013), the Fourth Circuit wrote: "Applying these principles, we hold that when a defendant’s actions, as alleged and as reasonably inferred from the allegations, could have led, but need not necessarily have led, to the submission of false claims, a relator must allege with particularity that specific false claims actually were presented to the government for payment. To the extent that other cases apply a more relaxed construction of Rule 9(b) in such circumstances, we disagree with that approach." Applying this rule to the facts alleged by the whistleblower, the Fourth Circuit affirmed the lower court's dismissal of the whistleblower's complaint: "Based on our consideration of the facts stated in the amended complaint, we observe that Relator essentially has alleged that some claims must have been presented to the government for payment, because prescriptions of this kind frequently and routinely are obtained by persons who participate in health care programs sponsored by the federal government, or because federally insured patients received off-label prescriptions. As we have explained, allegations of this type are insufficient because they are inherently speculative in nature." This decision seems to buck the trend of Circuit Courts loosening the standards for alleging False Claims Act violations. When deciding where to file False Claims Act cases, the law of the Circuit is a critical consideration, and the Nathan case must be taken into account when considering filing a complaint in the states covered by the Fourth Circuit: Maryland, West Virginia, Virginia, North Carolina and South Carolina.
Lance Armstrong was a hot topic this week, sitting for a televised interview with Oprah Winfrey on her network. As we have previously noted, one of the biggest financial issues facing Mr. Armstrong following his admission of blood doping is the False Claims Act lawsuit filed against him by Floyd Landis, seeking to recover the roughly $30 million that the United States Postal Service paid to sponsor Mr. Armstrong's racing teams. The False Claims Act provides for the recovery of three-times the actual damage to the government, plus statutory penalties, so the exposure to Mr. Armstrong and his co-defendants is substantial. The Department of Justice has yet to decide whether to join Mr. Landis' lawsuit, but some are speculating that it will. False Claims Act complaints typically remain under seal—not disclosed to the public—before the Department of Justice decides whether to join the case, but the New York Daily News this week published a copy of Mr. Landis' complaint. Should the Department of Justice fail to intervene, Mr. Landis is free to pursue the suit on his own.
Judge Terrence Boyle, a United States District Court judge sitting in Raleigh, North Carolina, refused to approve a proposed $8 million settlement agreement reached between federal officials and WakeMed, a large non-profit hospital in Wake County accused of violating the False Claims Act by unnecessarily admitting patients to the hospital as inpatients, rather than simply treating and discharging those patients. Billing for inpatient services typically is significantly more profitable for hospitals than billing for "observation" status or for treating and discharging the patients. Allegations that hospitals have been unnecessarily admitting patients to take advantage of the higher reimbursement rates have become increasingly common. As we previously noted, 60 Minutes ran a story on Health Management Associates suggesting that its hospitals had established benchmarks for inpatient admissions. Judge Boyle expressed his frustration that the proposed WakeMed settlement did not involve any criminal charges, noting that regular citizens charged with fraud often go to prison, and calling the proposed agreement a "slap on the hand." Judge Boyle will reconsider the settlement on February 5, 2013.