ObamaCare Drastically Improves the Health of Qui Tam Suits Under the False Claims Act

Cullen Byrne, Esq.

One of the lesser-known sections of the Patient Protection and Affordable Care Act of 2010 (“Affordable Care Act”), colloquially known as ObamaCare, provides expansive amendments to the False Claims Act (“FCA”).1 While these amendments are not retroactive,2 they will most likely increase the amount of FCA-based claims in the future.

The FCA provides that a person or company who knowingly submits a false claim to the government may be held civilly liable for treble damages. Private whistleblowers, also referred to as “relators,” may bring a suit on behalf of the government pursuant to the FCA, called a “qui tam” suit, and, if successful, share in the recovery. The relator’s portion of the recovery from a qui tam lawsuit will vary based upon the Department of Justice’s involvement in the case, as well the quality of the relator’s evidence. In the 2013 fiscal year alone, there were $3.8 billion in FCA settlements and judgments—the second highest amount in a year ever recovered under the FCA.3 Relaters took home $345 million of that total.4 (Note: Healthcare fraud was the main source of recovery for qui tam claims, totaling $2.6 billion, marking 2013 as the fourth consecutive year in which healthcare fraud recoveries were in excess of $2 billion).5

The Affordable Care Act amendments are projected to escalate the amount of recoveries for relators and their counsel from qui tam litigation by making it easier for a relator to file a claim on behalf of the government.

To begin with, the Affordable Care Act relaxes the FCA’s bar on certain public-disclosures that can be used as the basis of a qui tam suit. Prior to 2010, the public-disclosure bar provided that no court could have jurisdiction over an FCA action if it was based on public disclosures of transactions from local, state, or federal government entities or news reports, unless the action was brought by the Attorney General or the individual that was the original source of the information.6 The FCA’s public disclosure bar, as amended by the Affordable Care Act, is now an affirmative defense to an action rather than a jurisdictional bar.7 The amendments also limit “public disclosures” to federal public documents, thereby leaving relators free to base qui tam claims on state and local public documents, regardless of whether the relator is the original source of the information.8

Furthermore, the Affordable Care Act amendments expand the original-source exception of the public disclosure bar. In the pre-Affordable Care Act version of the FCA, an “original source” was defined as “an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action.”9 Courts construed this language very narrowly, holding that to have “direct and independent knowledge,” a realtor must have had either actively participated in the fraud or observed it with their own eyes.10 Post-Affordable Care Act, the “direct and independent knowledge” language has been omitted.11 Now, a relator must only have “knowledge that is independent of and materially adds to” a public disclosure to be considered an original source. Presumably, this knowledge may be second hand, so long as it did not come directly from the public disclosure.

While the legal obstacles to file qui tam claims have been lowered by the Affordable Care Act amendments, the financial cost of developing a qui tam claim still stands as a high barrier to entry for many relators and their attorneys. At Counsel Financial, we have the solution. Our four-year, flexible credit lines give litigators across the country the financial power they need to pursue complex qui tam cases. Unlike traditional bank loans, which limit credit lines to the value of your personal assets, Counsel Financial can offer your firm a line of credit up to $5 million based on the total value of your contingent fee cases. For more information on how Counsel Financial can help your firm pursue qui tam and other cases, call 888-871-4623 today.

1 See Pub. L. 111-148, § 10104(j)(2), 124 Stat. 119, 901-02.
2 See Graham County Soil and Water Conservation District et al. v. U.S. ex rel. Wilson, 559 U.S. 280, 283 n. 1.
3 U.S. Department of Justice, Justice Department Recovers $3.8 Billion from False Claim Act Cases in Fiscal Year 2013 (Dec. 20, 2013),
http://www.justice.gov/opa/pr/2013/December/13-civ-1352.html
4 Id.
5 Id.
6 31 U.S.C. § 3730(e)(4)(A) (2005).
7 31 U.S.C. § 3730(e)(4)(A) (2010).
8 United States ex rel. May v. Purdue Pharma L.P. (4th Cir. 2013).
9 31 U.S.C. § 3730(e)(4)(B) (2005) (emphasis added).
10 See Wang v. FMC Corp., 975 F.2d 1412, 1417 (9th Cir. 1992) (holding that to be an original source, relators must have seen the fraud “with his own eyes” and had knowledge that was “unmediated by anything but [his] own labor.”).
11 31 U.S.C. § 3730(e)(4)(B) (2010).

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