Most whistleblower cases, regardless of industry, emerge through the bravery and integrity of an employee coming forward to shine a light on misconduct they have witnessed firsthand. But a new kind of whistleblower is emerging: the data-driven whistleblower.
They aren’t necessarily at the scene of the crime but instead figure it out after the fact through tedious number crunching and analysis.
Two pending cases, one in California and the other in Texas, that both focus on Medicare fraud alleged by the same whistleblower have courts wrestling with whether this is the type of whistleblower the False Claims Act was designed to promote.
Under this act, those with evidence of fraud against taxpayer dollars can sue on behalf of the government and recover anywhere from 15% to 30% of any eventual recovery. It was enacted by President Lincoln during the Civil War to help the government go after war profiteers selling lame mules and faulty munitions to the Union Army.
As Sen. Jacob Howard of Michigan, one of the legislative sponsors, framed it at the time, “setting a rogue to catch a rogue … is the safest and most expeditious way I have ever discovered bringing rogues to justice.”
That may not be the most flattering portrayal of whistleblowers, but it does paint a picture of the kind the original drafters likely had in mind: individual insiders with firsthand knowledge of the fraud — possibly even those involved in the fraud.
Integra Med Analytics, the whistleblower involved in the California and Texas cases, is a forensic analysis firm that studies publicly available Medicare data to sniff out irregularities for potential fraud. There’s no smoking gun. No firsthand account of any kind. Just naked statistics and numbers.
Using an outside-looking-in approach, Integra brought a False Claims Act suit in California against several hospitals and a consultant, and a similar suit in Texas against a medical group. In each case, Integra charged the defendants with Medicare upcoding — claiming higher Medicare reimbursement by mischaracterizing the health status of some patients the defendants treated. In each case, Integra based its allegations primarily on statistical aberrations in the defendants’ publicly available Medicare claims data, suggesting (but not directly evidencing) defendants’ wrongdoing.
The issue that Integra has forced upon the courts is whether an outside company that applies analytic savvy to publicly available data should qualify as a whistleblower under the False Claims Act. In other words, should uncovering statistical anomalies to support a claim of fraud be treated the same as actually witnessing fraud directly?
The defendants in these two cases argued for automatic dismissal under the public disclosure bar of the False Claims Act. This prevents whistleblower suits based on publicly available information. The bar is designed to weed out so-called parasitic lawsuits based on information already available to the government, which offer no meaningful assistance in the government’s efforts to root out fraud. While recent amendments to the statute have clearly softened the bar, some courts appear to be struggling with how the bar should be applied to industry outsiders, like Integra, that uncover fraud through its own sleuthing and analysis of public data.
The two courts have taken divergent views on Integra’s suits. In California, the court rejected dismissing the suit under the public disclosure bar, finding that Integra’s expertise and analysis of public information was necessary to uncover the fraud. That court ruled in favor of Integra even though the company apparently could not identify a specific fraudulent claim, only statistically anomalous claims. The Texas court, however, applied the bar, clearly not satisfied that Integra provided any added whistleblower value to the public information it analyzed.
Both matters are on appeal (to the 9th Circuit for the California case and 5th Circuit for the Texas case) and it’s anyone’s guess what whistleblower path lies ahead for Integra. Whatever happens, the groundwork has been laid for a new kind of whistleblower and for a broader challenge to the traditional concept of what it means to be a whistleblower.
The benefit of encouraging corporate and government insiders to speak truth to power has been proven over and over. But in this data-driven age, it is not just the insiders that have something to offer.
Gordon Schnell and Max Voldman are attorneys in the New York and Washington D.C. offices of Constantine Cannon, specializing in representing whistleblowers.