Glaser v. Wound Care Consultants, Inc.

• Decision Date: 02 July 2009
• Docket Number: No. 07-4036.,07-4036.
• Citation: 570 F.3d 907
• Parties: Carol A. GLASER, Plaintiff-Appellant, v. WOUND CARE CONSULTANTS, INCORPORATED, Melissa E. Miller, and Dr. Steven Miller, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

570 F.3d 907

Carol A. GLASER, Plaintiff-Appellant, v. WOUND CARE CONSULTANTS, INCORPORATED, Melissa E. Miller, and Dr. Steven Miller, Defendants-Appellees.

No. 07-4036.

United States Court of Appeals, Seventh Circuit.

Argued April 15, 2008.

Decided July 2, 2009.

Paul R. Black (argued), Carmel, IN, for Plaintiff-Appellant.

Jennifer W. Adams (argued), Barnes & Thornburg, Indianapolis, IN, for Defendants-Appellees.

Before CUDAHY, KANNE, and SYKES, Circuit Judges.

SYKES, Circuit Judge.

Carol Glaser received medical treatment from Wound Care Consultants and was later contacted by an attorney who told her that Wound Care might have improperly billed Medicaid for her treatment. She filed this qui tam action under the False Claims Act ("FCA"), 31 U.S.C. § 3730, seeking recovery as a relator for money the government paid as a result of alleged false or fraudulent Medicare and Medicaid claims submitted by Wound Care. But the government was already aware of the possible improprieties in Wound Care's billing practices and had commenced an investigation more than four months before Glaser filed her lawsuit. Accordingly, the district court dismissed Glaser's complaint for lack of subject-matter jurisdiction under 31 U.S.C. § 3730(e)(4), which blocks jurisdiction if the FCA action is "based upon" a "public disclosure" of the alleged fraudulent conduct "unless ... the person bringing the action is an original source of the information." Glaser appealed.

The threshold jurisdictional question in this case requires us to determine whether Glaser's lawsuit is "based upon" a "public disclosure" of Wound Care's alleged fraudulent billing practices. We take this opportunity to revisit our prior interpretation of the phrase "based upon" in § 3730(e)(4)(A). In United States v. Bank of Farmington, we held that an FCA lawsuit is "based upon" a public disclosure and therefore subject to the jurisdictional bar of § 3730(e)(4) when the lawsuit "depends essentially upon publicly disclosed information and is actually derived from such information." 166 F.3d 853, 864 (7th Cir.1999). Although we reaffirmed the Bank of Farmington holding in United States ex rel. Fowler v. Caremark RX, L.L.C., we acknowledged that it is the minority interpretation. 496 F.3d 730, 738 (7th Cir.2007). To date, eight other circuits have read the phrase "based upon" in § 3730(e)(4)(A) more broadly, holding that an FCA lawsuit is "based upon" a public disclosure when the relator's complaint describes allegations or transactions that are substantially similar to those already in the public domain.

We now conclude that the majority interpretation of the phrase "based upon" in the FCA's jurisdictional bar — which we acknowledged in Caremark was supported by "powerful arguments," 496 F.3d at 738 — is the better one. The approach we adopted in Bank of Farmington is problematic because it essentially eliminates the "original source" exception to the publicdisclosure bar and therefore upsets the balance struck in § 3730(e)(4) between two competing policy goals: blocking opportunistic lawsuits filed by plaintiffs seeking to capitalize on information already in the public domain and encouraging lawsuits by relators who have firsthand knowledge of fraud against the government.

When an FCA relator's allegations are substantially similar to information about an alleged fraud that is already publicly disclosed, the statute permits the relator to avoid the jurisdictional bar only if he has "direct and independent knowledge of the information on which the allegations are based" and "voluntarily provided the information to the Government before filing" a qui tam action. 31 U.S.C. § 3730(e)(4)(B). Yet under Bank of Farmington's understanding of when an FCA lawsuit is "based upon" publicly disclosed information, the original-source exception serves no purpose. That is, if the jurisdictional bar kicks in only if the allegations in the relator's lawsuit are actually derived from a public disclosure, there is no point in asking whether the relator was an original source of the information — he cannot be. Under our present approach, the entire original-source inquiry — asking whether the relator had "direct and independent knowledge" of the information and "voluntarily provided" it to the government — is superfluous. Accordingly, we overrule the interpretation adopted in Bank of Farmington and Caremark and hold that an FCA relator's complaint is "based upon" publicly disclosed allegations or transactions when the allegations in the relator's complaint are substantially similar to allegations already in the public domain.¹

Applying this standard to Glaser's case, we affirm the district court's application of the jurisdictional bar. Allegations that Wound Care was improperly billing Medicare and Medicaid for services performed by physician's assistants were publicly disclosed in early 2005 when the government notified Wound Care that it was investigating these billing practices. Glaser's complaint is based on this publicly disclosed information in that her allegations of fraudulent billing are substantially similar to those the government had already lodged against Wound Care in its investigation. Glaser cannot show she is an original source of the allegations in her complaint because she learned about Wound Care's alleged fraudulent billing from her attorney and then asserted the attorney-client privilege to avoid divulging how her attorney learned of this information. The district court properly dismissed Glaser's complaint for lack of subject-matter jurisdiction.

I. Background

Both Medicare and Medicaid comprehensively regulate how health-care providers may obtain reimbursement for services provided by physician's assistants. There are some differences in the regulatory framework for each program, reflecting the fact that Medicare is administered at the federal level by the Department of Health and Human Services and is applied uniformly throughout every state while Medicaid programs are administered at the state level according to rules each state promulgates. We can simplify our analysis in this case by assuming that the general rule under these programs is that physician's assistants must bill Medicare and Medicaid at a lower rate for the work they do than if the same work had been performed by a doctor. However, a health-care provider may use a doctor's identification number to bill Medicare and Medicaid for services performed by a physician's assistant — and thus obtain reimbursement at the doctor's rate — if the assistant rendered services "incident to" the services of a physician. Most relevant for purposes of this case, an assistant's services are "incident to" a physician's services only if the doctor directly supervises the assistant's performance.

Dr. Steven Miller and Melissa Miller own Wound Care Consultants, which, as its name indicates, provides wound-care services. In January 2005, nearly four months before this lawsuit was filed, a medical-review nurse with the federal Centers for Medicare & Medicaid Services ("CMS") contacted Wound Care to discuss billing irregularities that had been identified in a routine agency audit. According to a March 2005 letter from CMS,² Wound Care allowed an advanced registered nurse practitioner to use Dr. Miller's identification number to bill Medicare at a higher rate — therefore representing that the nurse practitioner's services were "incident to" the services of a physician — even though Dr. Miller did not supervise the nurse practitioner's activity. CMS eventually expanded its audit to review all Medicare claims submitted using Dr. Miller's identification number. From March 2005 to December 2006, CMS periodically sent letters asking Wound Care to repay funds it received at the higher doctor's rate rather than at the lower assistant's rate. Wound Care claims it repaid everything CMS asked it to.

The relator in this case, Carol Glaser, is a Medicaid recipient with post-polio syndrome, respiratory failure, and arthritis. As a result of her conditions, Glaser had numerous wounds that required treatment. Beginning in 2002, Glaser obtained wound-care services from Wound Care on at least 12 occasions, and she says each treatment was provided by a physician's assistant. Glaser never saw how Wound Care billed Medicaid, and she remained oblivious to Wound Care's billing practices in general until her attorney in this case, Mary Lapointe, contacted her.³

We have no idea how Lapointe learned of Wound Care's billing practices because both Glaser and Lapointe have invoked the attorney-client privilege to avoid revealing Lapointe's source. We do know that these conversations inspired Glaser to file this suit against Wound Care under the FCA in April 2005. The complaint alleged that Wound Care recorded Glaser's treatments as having been performed by a physician's assistant "incident to" Dr. Miller's services. This practice was fraudulent, Glaser asserted, because Dr. Miller was not on the premises when Glaser received treatment and therefore could not have directly supervised the assistant's performance.

The government declined to intervene, and Wound Care moved to dismiss Glaser's suit for lack of subject-matter jurisdiction under 31 U.S.C. § 3730(e)(4) because it was "based upon the public disclosure of allegations or transactions" and Glaser was not an "original source" of CMS's investigation. Glaser testified that she had no knowledge of Wound Care's billing practices until Lapointe contacted her, and neither Glaser nor Lapointe have revealed how Lapointe learned of Wound Care's allegedly fraudulent billing practices. Glaser and Lapointe nevertheless told the district court that they had no knowledge of the CMS investigation when Glaser filed her complaint; in Glaser's view this was enough to show that her claim was not "based upon" publicly disclosed information because it was not "derived from" the CMS audit.

The district...