U.S. ex rel. Smart v. Christus Health (Summary)

FALSE CLAIMS ACT – QUI TAM

U.S. ex rel. Smart v. Christus Health, No. 13-40785 (5th Cir. Apr. 16, 2014)

The United States Court of Appeals for the Fifth Circuit affirmed the lower court’s decision to deny a relator’s claim for a share of the settlement of another qui tam action brought against the same health system by another relator.  The court rejected the relator’s claim that both qui tam actions were based on the same allegations of fraud; the other claim, which was filed later in time, was barred.

The court disagreed, noting that while both relators allege violations under the False Claims Act (“FCA”), the allegations of fraud in the relators’ complaints were different (the other relator’s complaint alleged that the health system committed billing fraud by improperly using inpatient codes for outpatient procedures (upcoding), whereas this relator alleged that the health system rented office space at below market value to induce referrals in violation of the Anti-Kickback Statute and Stark Law).

The relator pointed out that the settlement agreement in the other relator’s case released the hospital “from any claims the Government may have under, inter alia, the monetary penalty provisions in the Stark Law and the Anti-Kickback Statute.”  The court held the language of the release to be irrelevant to whether the first-to-file rule would bar the other relator’s claim, noting that it is the comparison of the complaints, not settlement agreements, that matters when determining whether one qui tam suit alleges the same material elements of fraud as a previously filed suit.

The relator also claimed that his allegations of fraud were sufficient to alert the other relator to the upcoding fraud and, in turn, he was the “original source” of the other qui tam action.  In rejecting this claim, the court noted that the complaints included different elements of fraud and the relator had pointed to no evidence showing that he even had knowledge of the upcoding fraud.