Health Law update by Lamb McErlane attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

On March 27, 2024, the District Court for the Western District of Pennsylvania dismissed with prejudice a qui tam (aka whistleblower) action alleging that Maraposa Surgical, Inc. ddb/a Allegheny Vein and Vascular (“Allegheny”) and its physician, Robert W. Tahara, M.D., submitted materially false claims for reimbursement from Medicare Part B and Medicaid.

A qui tam action allows a relator, or private party, to bring an action against a person or company on the government’s behalf. Here, the Relator alleged that, in addition to making false claims, Allegheny failed to obtain sufficient informed consent from their patients for arteriograms and related procedures because they were performed in a physician’s office as opposed to a licensed ambulatory surgical center (“ASC”) or ambulatory surgical facility (“ASF”). The allegation was made despite the Relator not having any connection to Allegheny.

Despite the allegations made, the Court granted the defendants motion to dismiss the complaint, holding that the Relator’s False Claims Act (“FCA”) claims were precluded under the public disclosure bar and/or did not meet the statutory requirements to state a fraudulent claim.

The public disclosure bar prohibits a qui tam relator from bringing an FCA claim based on fraud that has already been publicly disclosed, unless the relator is an original source of the information. An inference of fraud exists if both misrepresented facts and true facts are publicly disclosed. The Court stated this complaint represented a classic parasitic lawsuit (i.e., a lawsuit where anyone could identify a few regulatory filing and certification requirements until he/she discovers a federal contractor who is out of compliance, and potentially reaps a windfall in a qui tam action under the FCA). Since both the misrepresented and true facts were public, anyone could infer the fraud. Therefore, the public disclosure bar required the dismissal of the claims.

An FCA violation includes four required elements: falsity, causation, knowledge, and materiality. Here, the Relator failed to meet the materiality and falsity elements to state a claim under the FCA. The Relator failed to show that Medicare and Medicaid would not have reimbursed claims for arteriograms and related procedures had it been aware of the alleged misrepresentations. Payments from the government since 2009 indicate that the alleged noncompliance is minor or insubstantial. Further, the fact that the Department of Justice decided not to intervene after two requests for extensions suggests that the Defendants’ noncompliance is immaterial. Similarly, the Relator failed to establish falsity based on either of his fraudulent inducement or express or implied false certification theories. Specifically, the Relator commingled facility licensure with individual provider licensure and regulations dealing with hospitals as opposed to physician offices, which are explicitly excluded from being subject to ASF rules. The Court further noted that Relator’s allegations of failure to obtain patients’ informed consent is unavailing since such allegations are more akin to a medical malpractice action as opposed to an FCA action.

Accordingly, the Court granted the Defendants’ motion and dismissed the case with prejudice, meaning that the claim cannot be brought back to or refiled with the Court in the future.

If you have any questions regarding the qui tam claims, or other health law matters, please feel free to contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for over 45 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This alert is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.