Whistle-Blowers Can Pursue Overbilling Case

CHICAGO (CN) - The 7th Circuit on Monday revived claims that Rush University Medical Center fraudulently overbills Medicare for surgeries performed by residents without supervision by a teaching physician.

The 2004 lawsuit, filed by Rush orthopedic surgeon Robert Goldberg, M.D., and former administrator June Beecham, says residents routinely operate on patients unsupervised by their training physicians, and that the teaching hospital then fraudulently bills Medicare for the services.

Rush permitted teaching physicians to supervise multiple surgeries simultaneously, either bouncing back and forth between operations or watching residents on video monitors remotely, according to the complaint.

The False Claims Act allows whistle-blowers to file suit on behalf of the U.S. government and collect a bounty. To prevent what the 7th Circuit describes as "unnecessary 'me too' private litigation," Congress later amended the act to exclude suits "based upon the public disclosure of allegations or transactions" reported by governmental agencies unless the relator is the "original source of the information."

But the Department of Health and Human Services publicly uncovered the practice of overbilling for unsupervised work in the 1990s, and the General Accounting Office, now known as the Government Accountability Office, confirmed the practice in 1998.

The 7th Circuit found in 2006 that this agency's report effectively foreclosed qui tam litigation in this area for individuals who were not the "original source" of the information.

Finding that the case against Rush was "substantially similar" to already public industrywide fraud, U.S. District Judge Ruben Castillo tossed the Rush suit in 2010.

But Goldberg and Beecham argued that their claims were more specific than the 1998 report and could not have been discovered by government auditing processes.

The 7th Circuit agreed, explaining that Castillo had read the report too broadly.

"No one who read the GAO report, or followed the progress of the PATH audits, would know or even suspect that Rush University was misrepresenting the 'immediate availability' of teaching physicians during concurrently scheduled procedures," Chief Judge Frank Easterbrook wrote for a three-member panel.

"Unless we understand the 'unsupervised services' conclusion of the GAO report and the HHS audits at the highest level of generality - as covering all ways that supervision could be missing or inadequate - the allegations of these relators are not 'substantially similar,'" he added.

The 7th Circuit reinstated the case and remanded for further proceedings.

In 2010, Rush paid more than $1.5 million to settle allegations that it entered into illegal leasing agreements that traded referrals for office space, in violation of the Stark Law. Goldberg and Beecham received $270,000 for acting as whistle-blowers in that case.

The Department of Justice has recovered more than $30 billion since it increased whistle-blower incentives under the False Claims Ac in 1986. From 2009 to 2011, more than $6.6 billion came from health care fraud alone, according to the department.

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