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Seventh Circuit Reinstates Hospital Whistleblower Case

By Robyn Hagan Cain on May 24, 2012 | Last updated on March 21, 2019

Most of our knowledge of medical residency programs comes from Grey’s Anatomy, which means we have a skewed view of residency: Everyone has perfect hair, and doctors don't lose their licenses for tampering with medical trials or cutting a patient's LVAD wire.

But it’s not completely unrealistic. One thing that Grey’s gets right is that medical professionals occasionally tattle on one another, like in a recent Seventh Circuit Court of Appeals hospital whistleblower case under the False Claims Act.

Let’s go straight to what happened, and why the Seventh Circuit reinstated the case.

Medicare pays teaching hospitals for work by residents -- recent graduates still in training -- on a fee-for-service basis only when a teaching physician supervises the residents. (Technically the payments are for the services rendered by the patient's attending physician, but the recipient is the hospital rather than either the attending physician or the resident.) In 1998, a Government Accountability Office (GAO) report and similar public documents disclosed that billing for unsupervised work by residents was an industry-wide practice.

The whistleblowers in this case, Robert S. Goldberg and June Beecham, claimed that Rush University Hospital engaged in similar practices.

Whistleblowers may file qui tam suits as relators under the False Claims Act on behalf of the United States and collect a bounty. The Seventh Circuit has ruled that a relator must be an original source of False Claims Act information; to do so, a whistleblower must discover the fraud independently and must disclose it to the government before filing suit. Here, the district court ruled that relators failed to meet those requirements because they didn't disclose any new information that the GAO report and studies hadn't previously disclosed.

The Seventh Circuit Court of Appeals disagreed. Goldberg and Beecham provided more specific about how this hospital billed for unsupervised services. On appeal, they argued that the 1998 GAO report, and the PATH audits more generally, dealt with bills submitted for services that residents had performed all by their lonesome. That means that residents' services were supervised, but inadequately, and that the hospital certified had been supervised. The relators claimed that an audit carried out under the GAO's protocol would not have detected the fraud being practiced at Rush University Medical Center, and that the GAO report also did not describe this kind of deception.

The Seventh Circuit Court of Appeals reinstated the case, noting that Rush University Medical Center may not have done anything wrong, but whether the attendings were "immediately available" when supervising residents was a question on the merits, not a defect in the relators' False Claims Act complaint.

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