U.S. ex rel. Tahlor v. AHS Hosp. Corp. (Summary)

QUI TAM/FALSE CLAIMS ACT

U.S. ex rel. Tahlor v. AHS Hosp. Corp., No. 2:08-cv-02042 (D. N.J. Oct. 31, 2013)

The U.S. District Court for the District of New Jersey granted in part and denied in part a hospital’s motion to dismiss the qui tam False Claims Act (“FCA”) claims brought by a  physician and a case manager (the “Relators”).  The Relators argued that the hospital was billing Medicare for expensive inpatient practices when it should have been billing for less expensive observation services. Months after the physician filed his original complaint in court, the hospital declined to renew his contract, which he alleged was in retaliation for his lawsuit. Before the physician’s appeal, the government intervened and entered into a partial settlement with the hospital and its parent corporation.

The district court dismissed the Relators’ improper billing claims based on the FCA’s “public disclosure bar.”  Although the information was kept secret for business purposes, the court held that audit communications by a recovery audit contractor were essentially a public disclosure of the fraudulent information. Further, the Relators were not an original source of the information, needed to overcome the public disclosure bar, because they did not have direct and independent knowledge of the Medicare billing. The court noted the settlement reached between the hospital and the government put the government on notice that improper billing was occurring.

The district court also held that the Relators did not have enough information to allege that the hospital was knowingly engaged in the fraudulent billing of Medicare.

ADDITIONAL OPINION

U.S. ex rel. Tahlor v. AHS Hosp. Corp., Civ. No. 2:08-cv-02042 (WJM) (D. N.J. Aug. 26, 2014)

The United States District Court for the District of New Jersey granted in part and denied in part motions to dismiss filed by multiple health care practitioners and providers accused of submitting false claims to Medicare. A physician advisor and nurse case manager, employees of one of the defendant hospitals, filed the lawsuit on behalf of the government.

Two separate alleged fraudulent schemes were in dispute. Under the first one, the health care providers allegedly billed Medicare for unnecessary inpatient hospital services. In particular, these providers billed for inpatient stays rather than “observation.” The second one involved allegations that patients were kept in the hospital for at least three days, so that Medicare would cover the patients’ post-hospital care at skilled nursing facilities.

The court dismissed certain claims that had been dealt with in a prior phase of the lawsuit. However, the court denied motions to dismiss the remaining claims, concluding that the relators had alleged sufficient facts for this portion of the lawsuit to proceed to discovery. The court also rejected the defendants’ argument that the statute of limitations precluded some claims from being litigated. The court held that an administrative order issued earlier in the case was sufficient to toll the statute of limitations. Finally, the court denied a motion to strike regarding certain allegations involving incorrect claims. The court stated that the allegations were not sufficiently immaterial or prejudicial to warrant striking them from the lawsuit.

AMENDED OPINION (Correction of Clerical Errors in August 26, 2014 Opinion)

U.S. ex rel. Tahlor v. AHS Hosp. Corp., Civ. No. 2:08-cv-02042 (WJM) (D. N.J. Sept. 10, 2014)