New 7th Circuit Case: When are Whistleblowers Considered "Original Sources"?

As a lawyer representing whistleblowers in False Claims Act cases, I regularly
consider issues such as “public disclosure” and “original
source”. The Seventh Circuit has recently issued a new ruling on
those topics,
U.S., ex rel. Goldberg v. Rush University Medical Center, No. 10-3785 (7th Cir. 5/21/12). In Goldberg, the Seventh Circuit was
addressing a hospital defrauding Medicare by falsely billing for residents
as if they were full-fledged, licensed doctors. I will be discussing that
ruling in my next whistleblower blog entries.

In order to understand the ruling, you need a little background on how
Medicare pays for services by residents. First, a resident is not a full-fledged
doctor. The resident is a graduate of medical school, but has to spend
several years in training to become licensed as a doctor. During this
training period, the residents train at teaching hospitals. Recognizing
that the hospitals will have expenses as they train and educate these
residents, the government gives the hospitals grants to cover their costs
for training and educating these residents. Residents are supposed to
be supervised as they perform medical procedures. If the hospital decides
to use the resident to perform medical services without the supervision
of a doctor, then as a matter of fairness Medicare refused to pay for
the procedure, because the Government already has given the hospital a
grant to cover all of its expenses and costs for the resident’s
education. On the other hand, if the resident performs a procedure for
a patient, and is being supervised by the patient’s physician, then
Medicare will reimburse the hospital for the service. In that case, the
hospital is not being double paid, because the physician’s time
is being used.

Unfortunately, any time there are rules, people are tempted to cheat. I
had a good friend who used to marvel about the “endless creativity
of man”, and nowhere is that creativity more obvious than in the
area of fraud.

In the 1990’s, Medicare realized that many hospitals were defrauding
Medicare by billing for their residents’ services – even when
the residents were not being supervised. The shocking part is how widespread
the fraud against the government was. The Department of Health and Human
Services (DHHS) decided that “many if not all of the 125 teaching
hospitals affiliated with medical schools were billing for unsupervised
services that residents performed, thus receiving double compensation.”
Goldberg, No. 10-3785 at 1. Furthermore, the Government Accountability
Office (GAO) studied the problem and issued a report, Medicare: Concerns
with Physicians at Teaching Hospitals (PATH) Audits (July 1998). The GAO
decided that the HHS findings had been right – the hospitals really
were defrauding Medicare at such an appalling rate.

Not surprisingly, Medicare decided it had better start auditing the hospitals’
invoices, and asking that they repay the amounts that had been fraudulently
billed. At the same time, whistleblowers who knew about fraud against
Medicare began coming forward, and telling Medicare about which hospitals
were defrauding the Government, and how.

In my next blog entry, I will discuss how the courts threw up roadblocks
as Medicare tried to stop the hemorrhaging of money it was spending on
hospital fraud against Medicare.