Two Savannah, Georgia, hospitals got hoodwinked by an insurance company,
and ended up submitting a claim to Medicare that Medicare never should
have had to pay. But St. Joseph’s Hospital, Inc. and Candler Hospital,
Inc., refused to be patsies. Instead, they became whistleblowers. They
took the matter to the Government, using the False Claims Act to sue the
insurance company on behalf of the Government. The Government intervened
in the suit (“intervened” essentially means that the Government
took over the lawsuit) on August 1, 2011.
The insurance company moved to dismiss the case, but this past January
11, 2013, the Court in large part denied the insurance companies’
motion to dismiss.
As a lawyer for whistleblowers, I wanted to stand up and cheer. The Georgia
hospitals did something to benefit themselves – but even more importantly,
they did something to stop fraud in the medical system, and that act has
benefits that reach far beyond those two hospitals.
The case came about after both Candler and St. Joseph’s treated a
truck driver who got a head injury at work. After brain surgery, the man
had a colon rupture (apparently unrelated), and he died two months later.
Over the course of more than one surgery and two months in the hospital,
the medical bills ran up over $ 1.3 million.
(The case actually has several defendants: the employer, United Distributors,
Inc.; the self-insured health benefits plan of the employer, United Distributors,
Inc.’s, Employee Health Benefit Plan; the third-party administrator
of the benefits plan, Commerce Benefits Group Agency, Inc.; and two individuals
who worked for those companies. For shorthand, I’m using “United”
and the “insurance company” to describe the group.)
If the man had COBRA coverage, then Medicare was the primary payer on the
account, and United was secondary. If the man had not elected COBRA coverage,
then the opposite was true.
According to the allegations by whistleblowers St. Joseph’s and Candler,
in order to avoid paying the claim, United falsely claimed that the man
had elected COBRA coverage. The defendants even claimed that they had
documents in which the man had elected COBRA coverage, although in fact
he had never done so.
Based on the false claims about COBRA coverage, Medicare paid $341,802.09
to the hospitals and several physicians.
The United States “intervened” in the case, which essentially
means that it took over the case from St. Joseph’s and Candler.
In the motion to dismiss, United argued that the U.S. had not pleaded
its claims with sufficient particularity under Fed. R. Civ. P. 9(b). Rule
9(b) says that:”in alleging fraud or mistake, a party must state
with particularity the circumstances constituting fraud or mistake. Malice,
intent, knowledge, and other conditions of a person’s mind may be
alleged generally.” The Court found that the Government had met
this standard because it gave the “who”, the “what”,
“when”, “where”, and “how”. The Court
also concluded that the U.S. had stated a sufficient claim as to violations
of the False Claims Act. The Court ruled against the U.S. on part (c),
Conspiracy to Violate the False Claims Act, however, saying that the U.S.
had not offered sufficient facts that the defendants had conspired together
to create the false impression that the man had elected COBRA coverage.
The Court gave the U.S. additional time to amend its complaint and to
add more factual allegations about the conspiracy.
The Court also dismissed U.S. claims for unjust enrichment and payment
by mistake, saying that it was unclear whether the claims were based on
federal common law or Georgia state law. Again, however, the Court gave
the U.S. an opportunity to amend the complaint to clarify the basis for
the claims. The Court did express “hesitation” about whether
the Government could adequately state a valid unjust enrichment claim”
given the exact facts in this case.
As whistleblowers, St. Joseph and Candler will receive a percentage of
whatever amount the U.S. recovers from United. But even more importantly,
both hospitals deserve recognition for showing that the medical community
will not be party to fraud. In an era when whispers of medical fraud abound,
these hospitals stood up and said that the medical community was not in
favor of that fraud, and would stop it whenever possible.