On February 18, 2011, the Seventh Circuit issued a decision concerning the pre-PPACA version of the public disclosure bar under the False Claims Act. See United States ex rel. Baltazar v. Warden and Advances Healthcare Associates, No. 09-2167. The relator, a chiropractic physician, was employed by the defendants for four months in 2007. She alleges that the defendants engaged in a scheme to defraud the Medicare and Medicaid programs by (1) billing for chiropractic services that were not rendered and (2) billing for more expensive procedures than were actually provided (i.e., “upcoding”). The relator alleges that she quit once she discovered the defendants’ allegedly improper billing practices.
Shortly after she quit, the relator filed a qui tam action under seal in the Northern District of Illinois. The United States declined to intervene and the case was unsealed in February 2008. The defendants immediately moved for summary judgment under Rule 56(b) for failure to meet the jurisdictional requirements of section 31 U.S.C. 3730(e)(4)(A) of the False Claims Act (the “public disclosure bar”). In support of their summary judgment motion, the defendants submitted three government reports and thirteen news articles that described fraudulent billing practices in the chiropractic industry dating back to 1987. The district court was persuaded by these public reports, and granted the defendants’ summary judgment motion based on the public disclosure bar. The relator appealed.
The Seventh Circuit observed that because the case was filed in 2007, the pre-PPACA version of § 3730(e)(4)(A) applied, which provides:
No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
In the Seventh Circuit, the court must consider three questions to determine whether the public disclosure bar applies: (1) are “disclosures of public allegations in the public domain”; (2) is the suit “based upon” those disclosures; and (3) if so, is the relator nonetheless “an original source of the information”? If any of those questions are resolved in favor of the relator, the public disclosure bar does not apply and the relator’s complaint survives. The district court resolved all three questions against the relator and dismissed the complaint.
The United States, which did not intervene in the action, submitted an amicus brief on appeal, contending that the district court’s decision should be reversed because the public reports upon which the district court relied in dismissing the action “addressed general billing practices in the 50,000 member chiropractic community, and did not identify any alleged perpetrators of fraud by name.” The United States further argued that “[r]eports of fraud in an industry do not implicate the public disclosure bar where the industry is large, the practices disclosed are diverse or generic, and the disclosures do not render the defendant and his fraudulent acts directly identifiable.” The United States further asserted that the district court’s decision dismissing the relator’s complaint on the basis of the public disclosure bar in such circumstances “threatens to deter qui tam suits even in cases where the government has no viable alternative means to obtain the information.”
The Seventh Circuit resolved the second question – i.e., whether the suit was “based upon” a public disclosure – in favor of the relator, and reversed the district's court decision dismissing the complaint. The Seventh Circuit follows the majority rule (under the pre-PPACA version of § 3730(e)(4)(A)) that a relator’s claim is “based upon” the public disclosure if the allegations in the complaint are “substantially similar” to the publicly disclosed information. Glaser v. Wound Care Consultants, 570 F.3d 90, 914 (7th Cir. 2009). Applying this standard, the Seventh Circuit determined that the relator’s suit was based upon her own knowledge rather than the published reports, and “supplied vital facts that were not in the public domain” about Advanced Health Care Associate’s particular practices.