On Our Minds: Privilege in Health Care Fraud Cases

On Our Minds: Privilege in Health Care Fraud Cases

An order from the United States District Court for the Middle District of Georgia that found a health care system “impliedly waived the attorney-client privilege by simply denying that it knowingly violated the law” could have “significant, far-reaching implications for privilege in health care fraud cases.” This matter comes courtesy of a Today’s General Counsel article by Amy Garrigues and Mary Beth Johnston of K&L Gates LLP.

Alleging a longstanding practice of submitting false and fraudulent claims to government payors in violation of the False Claims Act, whistleblower Richard Barker, administrative director of the John B. Amos Cancer Center, filed a qui tam action in May 2012 against the center as well as the Columbus Regional Healthcare System (CRHS), The Medical Center and Regional Oncology of Columbus (ROC).

According to Garrigues and Johnston, in order to prevail on claims under the FCA, the plaintiff-relator must establish scienter. In other words, Barker had to prove the defendants knowingly submitted false claims to government payors with the intent to violate the law. So he sought to compel the production of nearly 200 attorney-client documents. “The motion to compel argued that, by asserting an affirmative defense of good-faith compliance with the Stark Law and AKS, the defendant has raised the issue of its knowledge of the law and has, therefore, impliedly waived the attorney-client privilege.

Per the article, CRHS opposed the motion, arguing it did not waive privilege because:

1) it is not raising an advice of counsel defense;

2) it is not relying on communications with its attorneys;

3) it has not sought to introduce the lawfulness of its conduct into the litigation, but merely denies the plaintiff’s assertions that its conduct was unlawful; and

4) given the highly regulated state of the health care industry, legal guidance and candid attorney-client communication is of paramount importance to health care providers, and the implied attorney-client privilege waiver should be narrowly construed in this context.

After the court’s application of Cox v. Administrator U.S. Steel & Carnegie, in which the “court held that when a defendant asserts a good-faith belief that its conduct was lawful, it injects the issue of its knowledge of the law into the case, and thereby waives the privilege,” and the subsequent argument by CRHS that the waiver was inapposite, the court found that fairness supported the plaintiff’s motion to compel and “ordered CRHS to produce all communications with its attorneys relating to whether the sale of the Tidwell practice or the remuneration agreements with ROC would comply with the AKS or the Stark Law.”

Garrigues and Johnston offer their perspective on the implications of the court’s decision.

“Although the Court’s decision is not binding, its application of the Cox waiver to FCA claims may have broader ramifications if it is persuasive in future FCA cases. In any FCA case, the threshold issue is whether the defendant submitted a false or fraudulent claim; the immediate corollary issue is whether the defendant knew that the claim was false. Thus, in cases where the question is whether the defendant knowingly submitted a false claim, the Order suggests that a mere denial of knowledge will suffice to waive the attorney-client privilege as it relates to the events in question. As a practical matter then, the upshot of the Order is that where a defendant refutes the scienter element, the privilege appears preemptively waived.”

To borrow a line from Ray Charles, the road leads back to you. What do you think of the court’s decision and its implications for privilege in health care fraud cases? Please share your thoughts below.

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