On March 6th, the District Court in Massachusetts denied a motion by Fresenius Medical Care Holdings, Inc. d/b/a Fresenius Medical Care North America (“Fresenius”) to dismiss a qui tam complaint un-der the False Claims Act, 31 U.S.C. §3730, filed by former employee Christopher Drennen (“Drennen”). In reaching its decision, the Court not only found that Drennen’s al-legations of fraud were specific enough to meet the pleading requirements under Rule 9(b) of the Federal Rules of Civil Procedure (“Rule 9(b)”), but also held that the public disclosure bar did not preclude Drennen from filing his action as the Court found him to be an “original source” of the information alleged.
Drennen, a former area manager of Fresenius, the nation’s largest dialysis provider, alleged that the company billed Medicare over a ten (10) year period for certain hepatitis B and ferritin tests that were not medically necessary. Specifically, he claimed that Fresenius billed hepatitis B tests more frequently than Medicare’s National Coverage Decision allowed and without the required supporting documentation, including the physician orders. Drennen made similar claims regarding Fresenius’ billing for ferritin tests although provided less detail with respect to these tests.
The False Claims Act (“FCA”) prohibits the submission of false or fraudulent claims to the federal government and allows private individuals to sue on behalf of the federal government under its “qui tam” provisions.1 It is well-settled case law that qui tam fraud actions brought under the False Claims Act are subject to the heightened pleading requirements of Rule 9(b).2 This rule requires that a plaintiff plead claims of fraud with sufficient particularity such as “the dates of the claims, the content of the forms or bills submitted, their identification numbers, the amount of money charged to the government, the particular goods or services for which the government was billed, the individuals involved in the billing, and the length of time between the alleged fraudulent practices and the submission of claims based on those practices . . .”3 While the “time, place, and content” factors are not used as a checklist, a relator must plead specific information with respect to the claims for payment that are submitted to the government in or-der to meet the Rule 9(b) pleading requirements.4
In this case, Fresenius argued that the information provided by Drennen did not meet the specificity requirement of Rule 9(b) because he did not identify the names of the Fresenius employees who sub-mitted the claims for the tests, the physicians who ordered the tests, or the details about when the tests were billed to Medicare. In rejecting Fresenius’ argument, the Court noted that Drennen identified the location where the unnecessary tests were performed, the type of test performed, the time period during which the tests were per-formed, and the cost billed. In addition, Drennen provided the initials of six (6) patients who received sixty-four (64) unnecessary hepatitis B or ferritin tests. The Court found the information provided by Drennen sufficient to meet the Rule 9(b) pleading requirements.
Beyond the heightened pleading requirement of Rule 9(b), qui tam actions under the False Claims Act are also subject to a dismissal if the activity alleged has already been publicly disclosed (the “public disclosure bar”).5 A relator can still overcome the public disclosure bar, however, if the relator is considered an “original source” of the information.6 To be considered an original source, the relator either must have voluntarily disclosed the information on which the claims are based to the government prior to public disclosure, or have direct and independent knowledge of the publicly disclosed claims and voluntarily provide this information to the government prior to filing an action.7 With respect to the latter category, a relator’s knowledge is considered direct and independent if it has been acquired through the relator’s own efforts and is not dependent upon the public disclo-sure.8 If the information in the relator’s possession is not considered direct and independent, the relator is not considered an “original source” and the public disclosure bar prevents the relator’s action from going forward.
The Court found that all of the elements of the public disclosure bar were met but that Drennen was an “original source” of the information he alleged in his complaint. In reaching its decision, the Court rejected Fresenius’ argument that Drennen needed to have direct and independent knowledge of the billing practices of every Fresenius clinic, the medical history of all patients, and every hepatitis B and ferritin test given from 2001 to the present. Even though Drennen’s personal knowledge of Fresenius’ alleged false and improper billings was limited to just the ten dialysis clinics that Drennen supervised, the Court found the information that Drennen provided with respect to these ten clinics in addition to his knowledge of Fresenius’ nation-wide computer system and Medicare billing system was sufficient to establish Drennen’s direct and independent knowledge for all of the alleged medically unnecessary tests done on a nationwide level, including those occurring in clinics that Drennen did not supervise.
This case serves as a reminder to practitioners that the time, place, and content factors used to establish specificity under Rule 9(b) are not a rigid checklist. A relator may still meet the pleading requirements of Rule 9(b) as long as the information alleged is sufficiently specific with respect to the sub-mission of fraudulent claims to the government. In addition, this case suggests that a relator’s personal knowledge of a limited number of improper billings can be extrapolated in certain circumstances such that the relator can be considered the “original source” for allegations of a nationwide practice of improper billing, even though the relator does not have personal knowledge of every possible alleged violation. In short, it demonstrates that whistleblowers can come from any level within an organization and need only limited knowledge of a company’s business practices to be considered an “original source” for allegations of FCA violations on a nationwide level.
Meghan M. Cosgrove is an associate in the Health Care Department at Donoghue Barrett & Singal, P.C.. Prior to joining the firm, Ms. Cosgrove served at the Centers for Medicare and Medicaid Services (CMS) in Boston and in Baltimore, Maryland as a Health Insurance Specialist in the Division of Medicare Financial Management and the Division of Technical Payment Policy, respectively. During her tenure at CMS, she worked on the Stark Law Phase III regulations, the Specialty Hospital Report to Congress, the EMTALA Technical Advisory Group Report, the Compliance Effectiveness Pilot project, as well as Medicare reimbursement and coverage issues. Prior to law school, Ms. Cosgrove was the Director of Project Development at the Federated Ambulatory Surgery Association in Alexandria, VA. Ms. Cosgrove received a Juris Doctorate with a concentration in Health and Biomedical Law with Distinction from Suffolk University Law School, where she was one of the Founding Editors of the Suffolk Journal of Health & Biomedical Law. She received her undergraduate degree in English from the College of the Holy Cross, and is licensed to practice law in the Commonwealth of Massachusetts.
1 31 U.S.C. §3729 et seq.; These private individuals are often referred to as “whistleblowers” or “relators.”
2 U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 227 (1st Cir. 2004).
3 Id at 233.
4 Id at 226.
5 31 U.S.C. §3730(e)(4)(A); The First Circuit has applied the following analysis in determining whether the public disclosure serves as a bar: (1) whether there has been public disclosure of the allegations or transactions in the relator’s complaint; (2) if so, whether the public disclosure occurred in the manner specified in the statute; (3) if so, whether the relator’s suit is “based upon” those publicly disclosed allegations or transactions; and (4) if the answers to these questions are in the affirmative, whether the relator falls within the “original source” exception as defined in 31 U.S.C. §3730(e) (4)(B). U.S. ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 728 (1st Cir. 2007). It is important to note that the Patient Protection and Affordable Care Act, Pub. L 111-148 (March 23, 2010) (“PPACA”) significantly narrowed the use of the public disclosure bar as a defense in FCA cases. First, the bar is no longer jurisdictional in nature, rather it provides that a court “shall dismiss an action or claim under this section, unless opposed by the Government . . . “ In addition, the categories of public disclosures have been significantly narrowed post- PPACA as reflected in the italicized terms below. Information is considered “publicly disclosed” and thus a qui tam action is barred if the allegations or transactions are contained in (i) a federal criminal, civil, or administrative hearing in which the government or its agentis a party; (ii) a congressional, Government Accountability Office, or other federal report, hearing, audit, or investigation; or (iii) in the news media.
6 31 U.S.C. §3730(e)(4)(B).
7 31 U.S.C. §3730(e)(4)(B); PPACA also amended the definition of “original source” to remove the requirement that a relator have “direct” knowledge of the allegations or transactions and instead allows a relator who simply has knowledge, whether direct or in-direct, that “is independent of and materially adds to the publicly disclosed allegations or transactions” to be considered an “original source.”
8 U.S. ex rel. O’Keefee v. Sverdup Corp., 131 F. Supp. 2d 87, 93 (D. Mass. 2001); U.S. ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 59 (1st Cir. 2009).