Third Circuit Overturns Lower Court in Favor of Whistleblower Who Exposed Illegal Medicare Kickbacks

On June 30, 2011, the United States Court of Appeals for the Third Circuit ruled in United States ex rel. Wilkins v. United Health Group  overturned the decision of the lower court and held in favor of whistleblowers Charles Wilkins and Daryl Willis.  The whistleblowers allege that United Health Group (UHG) provided kickbacks to those physicians who switched patients to UHG’s services in violation of the Medicare Anti-Kickback Statute.   This statute provides that whoever knowingly and willfully pays a kickback in return for a referral for their health care services (paid for by a Federal Health Care program) are guilty of a felony.

Whistleblowers Wilkins and Willis began employment with United Health Group in 2007, Willis as a general manager for Medicare/Medicaid marketing and sales and Wilkins as a sales representative.  In April 2008, United Health terminated Wilkins’ employment in reaction to his complaints concerning what he perceived were United Health’s illegal practices. Similarly, at some point during 2008, United Health, after demoting Willis for his conduct in making complaints to his supervisors about what he perceived were United Health’s illegal practices, went further and terminated his employment.

On July 10, 2008, Wilkins and Willis filed a qui tam action under the Federal False Claims Act (FCA) alleging that United Health Group also violated the FCA by offering physicians illegal kickbacks and then charging the federal government’s Medicare program for services.

Under the False Claims Act, a private individual with knowledge of fraud committed against the federal government may sue on behalf of the government to recover losses caused by the fraud.  To encourage whistleblowers to come forward and expose fraud on the government, the FCA awards whistleblowers 15% to 30% of the government’s recovery.  The FCA also prohibits any action taken by an employer which has a negative effect on the terms, conditions, or privileges of employment of the whistleblower. This includes termination, demotion, suspension, harassment, and other forms of retaliation.

The Third Circuit, adopting the majority viewpoint among the Federal Appellate Circuits, applied the implied certification theory of liability under the FCA.  This theory of liability is favored by whistleblower advocates because companies defrauding the government can be liable under the FCA without having explicitly stated they were in compliance with applicable laws such as the Medicare Anti-Kickback Statute.  This ruling is a victory for whistleblowers who report corporate or government agency fraud.