Whistle-Blower Factors Overhauled in 9th Circ.

SAN FRANCISCO (CN) - The full Ninth Circuit revived Medicare-overbilling claims Tuesday after throwing out the precedent used to determine whistle-blower qualifications.

There are just two requirements to recover under the False Claims Act as an "original source," the en banc court held: "(1) Before filing his action, the whistleblower must voluntarily inform the government of the facts which underlie the allegations of his complaint; and (2) he must have direct and independent knowledge of the allegations underlying his complaint."

"We think it is entirely reasonable that Congress sought to reward those who assume responsibility for prosecuting, on the government's behalf, fraud claims about which they have direct and independent knowledge, even if they were not in the chain that caused the public disclosure of the fraud," Judge Carlos Bea wrote for an 11-judge panel Tuesday.

In announcing the new requirements, the court said it has abrogate "wrongly decided" precedent on which a federal judge relied to dismiss separate lawsuits against Kinetic Concepts by two former employees, Steven Hartpence and Geraldine Godecke.

Hartpence and Godecke had filed their federal lawsuits in Los Angeles after the allegations had already surfaced about Kinetic's fraudulently claimed Medicare reimbursements.

In finding that the would-be whistle-blowers did not qualify as original sources, the trial court focused on the 1992 decision by the Ninth Circuit, Wang ex rel. United States v. FMC Corp., which said they needed to prove that they had a "hand in the public disclosure" of the fraud.

Hartpence and Godecke had appealed the determination, and the Ninth Circuit decided last year to have an 11-judge en banc review "Wang's continued validity."

Tuesday's unanimous decision says the public-disclosure factor is unnecessary to the "original source" analysis.

"We note that many of our sister circuits have declined to adopt Wang's third prong - the hand-in-the-public-disclosure requirement - finding that it impermissibly grafts onto the statute a requirement nowhere to be found in the statute's text," Judge Carlos Bea wrote for the court. "Today, we join our sister circuits; after reviewing the statutory text, we conclude that Wang's hand-in-the-public-disclosure requirement has no textual basis, and we give it a respectful burial."

Kinetic Concepts and KCI USA manufacture medical devices designed to speed up the healing process, including the Vacuum-Assisted Closure therapy device, which accelerates healing by applying subatmospheric pressure to the wound.

Hartpence's lawsuit alleged that Kinetic submitted claims for various unnecessary instances, such as when there was no evidence of wound improvement, when its treatment was not necessary, when required documentation about wound measurement was not available, and when wounds were too small for treatment.

Godecke meanwhile said KCI billed Medicare even for a month in which there were treatment lapses, and that it began therapy without receiving detailed written orders. She said KCI overbilled and kept the excess Medicare payments it received.

Her case had been dismissed as well on the basis that she filed after Hartpence and thus did not qualify under the first-to-file bar.

The Ninth Circuit rejected this finding Tuesday as well, however, finding that "some of Godecke's claims are materially distinct from Hartpence's claims."

On remand, the trial court must consider whether Hartpence and Godecke qualify as original sources under the newly announced two-part test.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit