U.S. ex rel. Sheldon v. Kettering Health Network — Mar. 2016 (Summary)

FALSE CLAIMS ACT AND HIPAA

U.S. ex rel. Sheldon v. Kettering Health Network
No. 15-3075 (6th Cir. Mar. 7, 2016)

The United States Court of Appeals for the Sixth Circuit denied a Relator’s motion to amend her complaint and granted a health network’s motion to dismiss.  The court held that the Relator lacked personal knowledge of False Claims Act (“FCA”) violations, and the complaint failed to sufficiently allege a false claim for payment.

Underlying this litigation was a disclosure by the health network that its employees (Relator’s ex-spouse and others) had impermissibly accessed the Relator’s protected health information (“PHI”).  In its disclosure, the health network informed the Relator that the unauthorized access of her PHI violated its internal policy, as well as the law, and that the health network would be reporting the breach to the Department of Health and Human Services.

In her complaint against the health network, the Relator alleged that her ex-spouse, a director at the health network, and his subordinate accessed her PHI in furtherance of the extramarital affair they were having.  She further alleged that the health network had falsely certified its compliance with certain provisions of the HITECH Act, and received meaningful-use incentive payments as a result.  The Relator claimed that the individual breaches constituted violations of the Act and/or that the health network failed to implement security policies and procedures in violation of the Act.  The Relator also claimed that the health network failed to regularly run reports, which help monitor inappropriate access to PHI and that this failure constituted a breach of its duties under the Act.

Shortly after filing the complaint in federal court, the Relator filed a complaint in state court in which she alleged various torts arising from the same breach of her electronic health records.  The state court claims were dismissed because “HIPAA does not allow private causes of action.”

The federal district court dismissed the complaint, holding that the Relator failed to allege a specific false claim and failed to plausibly plead that the health network did not meet the HITECH Act’s standards.  On appeal, the Sixth Circuit Court of Appeals upheld the dismissal of the complaint, finding that the Relator failed to allege a specific false claim, failed to adequately plead a false claim for payment, and lacked personal knowledge of the FCA violation.