Hospitals and other providers, which are swimming against a tidal wave of anti-fraud initiatives, got a rare bit of good news recently when a federal judge threw out a "whistleblower" lawsuit against a Texas hospital, ruling it unconstitutional.
In a first-of-its-kind ruling, the judge said individuals couldn't pursue whistleblower lawsuits in cases where the government decided not to get involved as a plaintiff.
Although the decision is being appealed, hospitals and other providers hope the ruling will help ebb the ever-rising number of whistleblower suits filed against them.
"There are bounty hunters who are running around out there doing everything they can to bring these type of cases to make money, and that's not appropriate," said attorney Keith Dubanevich, who defended the hospital in the case, 594-bed St. Luke's Episcopal Hospital in Houston.
Dubanevich, with Fulbright & Jaworski in Houston, applauded the judge's decision as a way to reduce frivolous lawsuits.
The attorney representing the plaintiff in the case, however, said the decision could stifle suits by healthcare workers who have evidence of fraud being committed by their employers.
"What person who is aware of fraud on the government is going to step forward now?" asked Jim Perdue, who represents the nurse in the case.
The nurse, Joyce Riley, alleged St. Luke's filed an unspecified number of false claims with Medicare and Medicaid claims. Other defendants named in the case are the Baylor College of Medicine, University of Texas Health Science Center, Texas Heart Institute and two doctors, all in Houston.
Riley sued the providers in 1994 in U.S. District Court in Houston on behalf of the federal government, alleging violations of the federal False Claims Act. After the federal government declined to join the case, known as a qui tam, or whistleblower, lawsuit, the providers filed a motion to dismiss the case. They claimed that without the federal government as a co-plaintiff, Riley had no standing to sue because she suffered no individual injury in the matter.
People who sue under the False Claims Act to stop fraud against the government stand to collect as much as 30% of any recovery made by the government. The number of healthcare whistleblower cases skyrocketed to 200 last year from 14 in 1992, according to a recent report from the U.S. Justice Department.
In a 21-page decision issued Oct. 24, U.S. District Judge Kenneth Hoyt agreed with the providers. Although whistleblower lawsuits are brought to avenge injury to the government's pocketbook, that's not enough to let an individual plaintiff pursue a case, Hoyt ruled.
Other courts that have let such cases move forward used "strained logic" to keep them alive, he said.
Perdue said he is appealing Hoyt's decision to the 5th U.S. Circuit Court of Appeals in New Orleans.
Hoyt's decision is garnering attention because attorneys said he is the first jurist to find a qui tam lawsuit unconstitutional. While other attorneys have argued the point before, no courts have found in their favor.