In a rare turnabout, the U.S. Justice Department has withdrawn from a whistleblower lawsuit against HealthSouth Corp., Birmingham, Ala., because of a legal technicality.
HealthSouth, which announced the withdrawal, said it was disappointed not to have a chance to defend itself in court against the Medicare fraud charges, and it would seek to recover from the government costs associated with the case. The company denied violating the False Claims Act and called the claims meritless.
The government in January intervened in the suit brought by DeWayne Manning. According to HealthSouth’s announcement, the Justice Department determined that the “first to file” provision of the federal False Claims Act barred Manning’s suit because two suits had been filed earlier based on the same facts and allegations. Manning also intends to withdraw his complaint, HealthSouth said.
The department has not intervened in the other cases Department spokesman Charles Miller confirmed the government’s withdrawal, which he called “extremely rare.”
“Once the government intervenes, it almost always stays in. I can count on one hand the times it’s withdrawn,” said John Boese, an attorney at Fried, Frank, Harris, Shriver & Jacobson, based in Washington, and author of “Civil False Claims and Qui Tam Actions.”
The government’s withdrawal doesn’t mean the allegations in the suit had no merit, said Jim Moorman, president of Taxpayers Against Fraud, Washington, a whistleblowers’ advocacy group. “What I don’t understand is why the Justice Department can’t pursue the case on its own without the whistleblower?” Moorman said. “This case is being undermined by a legal technicality that affects the whistleblower, not the government.”
For its part, HealthSouth appeared to view the government’s action with suspicion. In its written statement, the company said the withdrawal indicated the Justice Department knew in January that the Manning suit might be disqualified because of the first-to-file provision, which bars whistleblower suits involving allegations and circumstances spelled out in an earlier case.
“For this reason, HealthSouth is requesting that the court (U.S. District Court in Birmingham) hold a hearing before any dismissal of the Manning case in an effort to obtain more information about the department’s actions in this matter, including the possibility of collusive arrangements between the department and various relator plaintiffs,” the statement said.