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Is Data the Future of Whistleblowing?

Posted  August 28, 2019

Two recent decisions, one in California and the other in Texas, might be signaling a new frontier in False Claims Act (FCA) litigation: the data-driven whistleblower. Both cases are brought by the same whistleblower, Integra. Integra is not a typical whistleblower, which are generally corporate insiders or other employees of a company that is accused of defrauding the government. Instead, Integra is a corporation that analyzed publicly-available healthcare data and identified patterns that it alleges are indicative of fraudulent billing. Specifically, Integra filed cases against several hospitals in California, a shared consultant of theirs, and a hospital system in Texas.

Hospitals are generally paid by Medicare based on what diagnosis related group (DRG) they either treated, in the case of an illness, or performed, in the case of a surgery. DRG payment amounts are modified by whether a patient has certain comorbidities or complications. Put simply, removing an appendix from a diabetic patient will generally yield a higher reimbursement amount than removing an appendix from a non-diabetic patient. A comorbidity can add up to $25,000 in reimbursement to a single claim.

Integra’s analyses of hospital discharge data identified several California hospitals with abnormally high rates of encephalopathy, respiratory failure, and severe malnutrition being applied to its DRGs. All three of these conditions are classified as comorbidities that increase reimbursement amounts. Some of these hospitals also had a shared consultant, JATA. JATA has published publicly available coding advice that Integra tracked down and on which their law suit also relies. The lawsuit alleged that these hospitals were upcoding these conditions based in part on the JATA advice.

The defendants attempted to get this suit dismissed on the basis of a provision called “the public disclosure bar”, which states that a whistleblower suit cannot be based on information that is broadly, publicly available and that takes no specialized expertise to interpret. Defendants also argued that the whistleblower failed to plead any fraud allegations with sufficient specificity or particularity.

On the public disclosure argument, the court denied defendant’s argument and concluded that the lawsuit was not based on publicly disclosed information alone. The court found that additional expertise was necessary to identifying the alleged fraud and that Integra provided that expertise. The court also concluded that Integra pled its case with sufficient particularity. Defendants argued Integra could not identify any specific diagnoses as false and instead Integra only alleged that some proportion of the diagnoses, based on statistical analyses, would prove to be false. The court held that, between the analyses of the claims data and the JATA coding advice that Integra identified, the whistleblower’s allegations met the level of specificity required. The case will now move into discovery.

In contrast to its case in California, Integra was recently ruled against in a similar case in Texas. There, Integra sued Baylor, Scott, & White, a large medical group which operates several hospitals, for upcoding DRGs with the same three comorbidities. In its complaint, Integra also pointed out several hospital training programs that allegedly encouraged upcoding. The judge dismissed the case with prejudice, finding that the allegations were not plead with the required specificity. More narrowly, the judge found that Integra was not able to point to any, specific claims that they were alleging as false, and lacked evidence that the training programs actually led to any false claim being submitted for payment. If anything, the court viewed the training programs as likely legitimate and legal ways to increase revenue, provided they don’t cross the line into illegality. As for the statistical analyses, the court shot those down by providing a hypothesis that Baylor was simply more complete than its peers at coding comorbidities.

Despite the Integra’s loss in Texas, on the basis of which the California defendants are currently appealing their case, the current decisions are likely to lead to an expansion of data-based whistleblowing. The fact that more healthcare data is becoming digital and publicly available will also contribute to that trend. Data analytics have an incredible potential to reveal fraud, but don’t fall into the mold of traditional whistleblowers. How courts, and the DOJ, deal with cases like the ones brought by Integra will be a key signal about the future of FCA litigation.


Tagged in: FCA Federal, FCA State, Hospital Fraud, Importance of Whistleblowers, Medical Billing Fraud, Medicare, Public Disclosure and Public Information, Whistleblower Case, Whistleblower Eligibility,