Community Health Owes Attorneys’ Fees in $98 Million Fraud Case

A group of 7 whistleblowers may receive attorneys’ fees for helping federal prosecutors reach a “global” $98 million False Claims Act settlement in 2014 with Community Health Systems Inc. for alleged improper hospital admissions, the U.S. Court of Appeals for the Sixth Circuit ruled.

Community Health’s reliance on the FCA’s public disclosure bar and first-to-file rule was an improper “last-ditch” effort to deny fees to the whistleblowers, Judge Karen Nelson Moore said in a Tuesday decision to reverse and remand to a Tennessee district court.

The public disclosure bar precludes suits based on already disclosed information, and the first-to-file rule bars “parasitic” suits that are related to a first whistleblower’s suit.

It would be unfair to only allow the first whistleblower to recover all the attorneys’ fees if multiple whistleblowers uncovered multiple independent parts of the same complex scheme, and the government used their collective resources to investigate fraud, the court said.

The whistleblowers here differ from the opportunistic whistleblowers courts are concerned about, the court said. Here, the whistleblowers expended significant time and resources helping the government develop claims against Community Health, the court said.

The government intervened in all the whistleblowers’ cases, collaborated with all of them, and encouraged them to share the proceeds of the settlement, the court said.

Allowing the whistleblowers to recover fees in a broad-reaching fraud case such as this one would incentivize other whistleblowers to help the government, the court said.

The whistleblowers filed their suits between 2009 and 2011 alleging Community Health knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services.

The Justice Department announced the settlement in August 2014. But the settlement reserved the issue of allocation of attorneys’ fees.

The whistleblowers’ suits were transferred to the U.S. District Court for the Middle District of Tennessee, which found in April 2020 that the fees were barred.

Judges Eric L. Clay and Julia Smith Gibbons joined in the decision.

Barrett Johnson Martin & Garrison LLC, Law Offices of Patrick J. O’Connell PLLC, Grant & Eisenhofer PA, and Kreindler & Assocs. represented the whistleblowers. Robbins Russell Englert Orseck Untereiner & Sauber LLP and Riley Warnock & Jacobson PLC represented Community Health.

The case is United States ex rel. Bryant v. Cmty. Health Sys. Inc., 6th Cir., No. 20-5460, 1/25/22.