California Court Rules Qui Tam Billing Fraud Claims Barred if Rooted in Public Records

On November 6, in the Northern District of California, District Judge Lucy Koh dismissed a “surprise billing” case with allowance of amendment for the plaintiff’s pleading, ruling that information available publicly to the federal government barred False Claims Act (FCA) qui tam suits by private plaintiffs. 

The opinion laid out the pertinent facts as follows: Judy Jones, the plaintiff and concerned member of the public, used published online data by the Center for Medicare/Medicaid Services (CMS) to allegedly deduce that “Sutter [Health] (the defendant) and its surgeons freely took advantage of a flawed medical payment system by regularly up-coding and unbundling major surgical codes for breast cancer surgery, and coding ‘first-time’ immediate mastectomy reconstruction codes multiple times in the same patient.” Jones claimed that she unearthed purported fraud after studying billing codes and associated number of incidences, data which she received after filing a federal public records request with the CMS. The data received by the plaintiff is also available to any member of the public making a similar public records inquiry. Following the claimed analysis of the data, Jones filed a qui tam FCA suit, which the court explained as being a legal action where a private plaintiff initiated a lawsuit on behalf of the U.S. government asserting that a medical organization defrauded the government by seeking undue compensation for federally subsidized medical proceedings, against the defendant. The defendant sought a dismissal based on the plaintiff’s deficient pleadings failing to establish a viable legal claim, arguing that federal law indisputably disallowed qui tam FCA suits when said suit was rooted in data already made publicly known to the federal government. 

Judge Koh ruled in favor of the defendant, while giving Jones the freedom to amend, with amendment associated with a clear warning that failure to amend with a valid legal claim would result in the plaintiff’s claim being dismissed a second time with prejudice. The district court held that the defendant correctly laid out the law as it pertains to the public disclosure doctrine’s bar for qui tam suits under the FCA. The judge summarily explained the relevant law as: “The public disclosure bar provides that ‘[t]he court shall dismiss’ a qui tam action ‘if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed’ in any of several sources. One source covered by the public disclosure bar is a federal ‘report.’ Most relevant here, ‘a federal agency’s written response to a request for records…constitutes a report within the meaning of the public disclosure bar.’” Given the clarity of the law, the judge explained, the only result was that due to Jones’ FCA claim being rooted in data provided by records received from CMS, the case must be dismissed.