A decision last week by a federal appeals court in New Orleans could dramatically affect the future of whistleblower lawsuits against healthcare organizations, lawyers said.
In a 2-1 ruling involving a whistleblower case against a Texas hospital, a three-judge panel of the 5th U.S. Circuit Court of Appeals said individuals can pursue such cases only if the federal government joins the lawsuits as a co-plaintiff and the individuals have suffered personal injury because of the alleged fraud.
In doing so, the panel affirmed a lower-court ruling that dismissed a civil whistleblower fraud lawsuit filed in 1994 against 637-bed St. Luke's Episcopal Health System in Houston and seven other defendants, including other three Houston hospitals.
The whistleblower, a former heart transplant nurse named Joyce Riley, accused the defendants of submitting an unspecified number of false claims to Medicare and Medicaid. In 1996, however, the U.S. Justice Department refused to join the case.
In October 1997, U.S. District Judge Kenneth Holt in Houston dismissed the case, ruling that Riley had no standing to sue. Riley then appealed to the 5th Circuit.
In affirming that ruling in three written opinions totaling 82 pages, the appellate court said the qui tam provisions of the 1863 False Claims Act and its 1986 amendment undermine the executive branch's authority under Article II of the U.S. Constitution's Take Care Clause. By allowing a private citizen to litigate on the government's behalf, Congress (which passed the law) infringes on the government's decision about whether to prosecute a case.
However, because the ruling contradicted a number of decisions by federal appellate courts in other circuits, all 16 judges of the 5th Circuit immediately decided to reconsider the panel's ruling. The smaller panel's ruling was set aside until the full court rules.
The judges will hear oral arguments in the case on Jan. 18. Many legal observers predict the case is headed for the U.S. Supreme Court.
"If it stands, it is only good law in the 5th Circuit," said Philadelphia lawyer Marc Raspanti of Miller, Alfano & Raspanti, who specializes in whistleblower lawsuits.
Nevertheless, Raspanti predicted that defendants in whistleblower lawsuits in other jurisdictions will cite the decision in an attempt to have the cases against them thrown out, particularly if the government has decided not to join the lawsuits as a co-plaintiff.
Consequently, the decision will not affect cases in which the government has joined whistleblowers in civil fraud lawsuits against corporations, said Stephen Meagher, a lawyer and whistleblower specialist with Phillips & Cohen in San Francisco.
Meagher represents plaintiffs in two whistleblower lawsuits against Columbia/HCA Healthcare Corp. and one against Quorum Health Resources. The government has intervened in each of the three lawsuits (See cover story, p. 30).
Chris Watney, a spokeswoman for the U.S. Justice Department, said it's premature to label the ruling as a setback for those whistleblowers who still earn money for the government even when the feds don't join their lawsuits.
"We're going to continue to defend the constitutionality of the statute," she added.