An even bigger flood of whistleblower lawsuits against healthcare providers and suppliers may be the fruit of a fed-eral judge's landmark decision to award $52 million to three men who played a role in the one of the largest healthcare fraud settlements to date.
In his April 8 ruling, U.S. District Judge Donald VanArtsdalen in Philadelphia awarded whistleblowers Robert Merena, Charles Robinson and Glen Grossenbacher a 16% share of the $325 million settlement paid by medical supplier SmithKline Beecham last year (March 3, 1997, p. 23).
SmithKline, with U.S. headquarters in Philadelphia, paid the fine to settle charges that it billed for tests not requested or performed and paid kickbacks to physicians in exchange for Medicare patients' business.
"Long term, it means more and more potential plaintiffs out there," said Elizabeth Carder, an attorney with Reed Smith Shaw & McClay in Washington. "The more press (coverage there is) on these massive recoveries, the more that will spur people to seek out potential problems. My fear is that this will mean more frivolous whistleblower cases."
Marc Raspanti, the Philadelphia attorney who represented Merena, a former billing analyst for SmithKline, agreed that VanArtsdalen's decision is encouraging to potential whistleblowers.
"The opinion sends the right message," said Raspanti, a partner with Miller Alfano & Raspanti. "If you come forward and engage in a partnership with the government, in the end you will get your reward."
Merena filed his whistleblower, or qui tam, lawsuit under seal in November 1993. That complaint was later consolidated with that of Robinson, a former medical director at SmithKline's San Antonio operations. Grossenbacher is Robinson's attorney.
The government's SmithKline investigation was part of Operation LabScam, a multi-agency campaign started in 1993 to remedy widespread billing fraud. But it is not clear whether the investigation was sparked by the whistleblowers.
The dispute over the share of the settlement to be awarded the whistleblowers and attorney Grossenbacher began soon after the settlement was announced. While the local U.S. attorney's office lauded the whistleblowers, officials at the U.S. Justice Department downplayed the trio's role.
Attorneys from the department's civil division in Washington argued that Merena's contribution to their investigation resulted in only $64.9 million in recoveries, not the full $325 million. They wanted to give Merena and the other whistleblowers 15% of that amount-a total of $9.7 million and 3% of the total Smith-Kline settlement.
Under the federal False Claims Act, whistleblowers who file qui tam suits on behalf of the government are entitled to between 15% and 30% of the total recovery.
In November, Merena filed a motion in federal court asking the judge to set his share of the recovery.
Raspanti used depositions by Philadelphia-based U.S. Attorney Michael Stiles and his civil division chief, James Sheehan, to bolster Merena's claim. Stiles said in his deposition that the position taken by the Justice Department was not his position. Both Stiles and Sheehan worked with Merena to compose the case against the giant medical supplier.
"It's clear from the (judge's) opinion that their depositions favored (Merena)," said John Boese, a former Justice Department attorney now in private practice as a qui tam defense attorney. "This kind of public debate (between a U.S. attorney and the Justice Department) doesn't help law enforcement or the taxpayers."
Officials at both the U.S. attorney's office in Philadelphia and the Justice Department declined to comment.
"It does put the government in an awkward position," Carder said. "They've got people like Jim Sheehan giving instructions on how to bring cases, but clearly the government doesn't want to give relators a big piece of the pie."
A few whistleblower attorneys, including Ronald Osman of Marion, Ill., suspect the drawn-out battle in the Smith-Kline case will have a chilling effect on future filings.
"It wouldn't surprise me if the government appealed (this decision)," Osman said. "We look at Michael Jordan's salary and say, `What does he need that money for?' The Justice Department is the same way about (whistleblowers) in big cases like this. Their attitude is just human nature. But without (whistleblowers), the Justice Department wouldn't have the recoveries that they have. They're so overworked."
Boese said he also believes the government will appeal VanArtsdalen's decision. "The government fought this pretty hard," said Boese, of Fried Frank Harris Shriver & Jacobson in Washington. "This case demonstrates to a great extent what is wrong with the statute. It shows how two parties who are supposed to be on the same side really aren't."
Another battle is brewing in North Carolina. Two former employees of Allied Clinical Laboratories who settled their qui tam lawsuit against the company in March 1995 are fighting in court for a share of the settlement paid by Laboratory Corporation of America, also known as LabCorp.
Ramona Wagner and Jeanine Dehner, who worked as billing clerks in Allied's Cincinnati offices, filed a lawsuit in U.S. District Court in Greensboro, N.C., claiming they were the original sources of information that the federal government used to wrest the $182 million settlement from LabCorp in 1996. The government is contesting their claim.
Wagner and Dehner, who are asking for an unspecified amount, are awaiting a judge's decision on their motion to intervene in the LabCorp case.