In the
United States Court of Appeals
For the Seventh Circuit
No. 10-3785
U NITED S TATES OF A MERICA, on the relation of
Robert S. Goldberg and June Beecham,
Plaintiff-Appellant,
v.
R USH U NIVERSITY M EDICAL C ENTER, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 4584—Ruben Castillo, Judge.
A RGUED S EPTEMBER 19, 2011—D ECIDED M AY 21, 2012
Before EASTERBROOK, Chief Judge, and KANNE and
WILLIAMS, Circuit Judges.
E ASTERBROOK, Chief Judge. Medicare pays teaching
hospitals for work by residents (that is, recent graduates
still in training) on a fee-for-service basis only when a
teaching physician supervises the residents. (Technically
the payments are “for” the services rendered by the
2 No. 10-3785
teacher, in the role of the patient’s attending physician,
but the recipient is the hospital rather than either the
teaching physician or the resident.) The costs of pro-
viding an extended education to the residents are reim-
bursed through grants rather than by payments for
specific services they perform for patients. During the
1990s, the Department of Health and Human Services
concluded that many if not all of the 125 teaching
hospitals affiliated with medical schools were billing
for unsupervised services that residents performed, thus
receiving double compensation. HHS began to audit
teaching hospitals’ invoices and demand reimbursement.
The General Accounting Office (now the Govern-
ment Accountability Office) conducted its own study
and concluded that HHS was right. See GAO, Medicare:
Concerns With Physicians at Teaching Hospitals (PATH)
Audits (July 1998).
Private litigation has addressed the same topic. Relators
may pursue qui tam suits under the False Claims Act, 31
U.S.C. §§ 3729-33, on behalf of the United States and col-
lect a bounty. The risk that unnecessary “me too” private
litigation would divert funds from the Treasury led to
a proviso in §3730(e)(4)(A): suits cannot be “based upon
the public disclosure of allegations or transactions” in
public agencies’ official reports unless the relator is an
“original source of the information.” (This language was
altered in 2010, but that change is not retroactive. See
Graham County Soil & Water Conservation District v.
United States ex rel. Wilson, 130 S. Ct. 1396, 1400 n.1
(2010). We use the language in force when the events
underlying this suit took place.)
No. 10-3785 3
United States ex rel. Gear v. Emergency Medical Associates
of Illinois, Inc., 436 F.3d 726 (7th Cir. 2006), concludes
that the 1998 GAO report and similar public documents
disclose that billing for unsupervised work by residents
was an industry-wide practice. This led us to hold that
an allegation that a particular teaching hospital had
billed for residents’ unsupervised work was “based
upon” that disclosure, and that only an “original source”
of the information could pursue qui tam litigation. Gear
was not an original source and lost. We added in Glaser
v. Wound Consultants, Inc., 570 F.3d 907, 920 (7th Cir.
2009), that a private suit is “based upon” a public dis-
closure when the allegations are “substantially similar,”
even if the private relator adds details. That under-
standing increases the importance of the “original
source” exception. But to qualify as an original source,
the relator not only must discover the fraud indep-
endently but also must disclose it to the government
before filing suit. Gear failed to do that—and Robert S.
Goldberg and June Beecham, the relators in this litiga-
tion, likewise failed.
Goldberg and Beecham filed this suit against a
teaching hospital in 2004, two years before Gear and
five years before Glaser. They have revised their com-
plaint several times, trying to plead around those deci-
sions. The district court concluded that they failed, and
it dismissed the suit. 748 F. Supp. 2d 917 (N.D. Ill. 2010).
Relators believe that they succeeded, and they also rely
on United States ex rel. Baltazar v. Warden, 635 F.3d 866
(7th Cir. 2011), which they believe narrows the scope
of Gear.
4 No. 10-3785
As finally revised, relators’ complaint alleges that
Rush University Medical Center submitted fee-for-service
bills to the Medicare program on account of unsuper-
vised work that residents had performed in the hospital’s
operating theaters. The district court concluded that this
kind of allegation tracks the 1998 GAO report and is
blocked by §3730(e)(4)(A). Relators say, however, that
they have been more specific about how this hospital
billed for unsupervised services. As relators see things,
the 1998 GAO report, and the PATH audits more gen-
erally, dealt with bills submitted for services that
residents had performed all by their lonesome. This
suit, according to relators, arises from residents’ services
that were supervised, but inadequately—and, perhaps
more importantly, that the hospital certified had been
supervised. Relators contend that an audit carried out
under the PATH protocol would not have detected the
fraud being practiced at Rush University Medical
Center, and that the GAO report also did not describe
this kind of deception.
According to relators, Rush University permitted
teaching physicians to supervise multiple operations
simultaneously. If Medicare is to pay for the procedure
as a teaching physician’s work, “the teaching physician
must be present during all critical portions of the pro-
cedure and immediately available to furnish services
during the entire service or procedure.” 42 C.F.R.
§415.172(a)(1). The complaint alleges that Rush sched-
uled teaching physicians for multiple surgeries simulta-
neously, so that even if the teaching physician were
present for the “critical” portion of one (indeed, for all
No. 10-3785 5
“critical” portions of all surgeries in a time slot), the
surgeon could not have been “immediately available”
for the rest of each procedure. If a teaching physician
supervised the “critical” portions of a procedure in
Surgery A and then left to do the same in Surgery B,
that physician was not “immediately available” to the
resident in Surgery A; “critical” procedures required
his presence in Surgery B. Rush University says that
there is nothing fraudulent about representing com-
pliance with the regulation if some other teaching physi-
cian was “immediately available” to the resident in
Surgery A, but that is an issue on the merits. The ques-
tion we must decide now is whether the allegations
of this complaint are “substantially similar” to, and thus
“based on,” the disclosures in the PATH audits and
the GAO report.
The district court answered affirmatively, because
the audits and report were about bills for unsuper-
vised work by residents, and the allegations of this com-
plaint concern one means for work to be deemed “unsu-
pervised.” In other words, the court understood “public
disclosure of allegations or transactions” (the statutory
language) at a high level of generality. This is where
Baltazar becomes relevant. We held in Baltazar that a very
high level of generality is inappropriate, because then
disclosure of some frauds could end up blocking
private challenges to many different kinds of fraud.
Public reports disclosed that more than half of all chiro-
practors in an audited sample had submitted improper
bills to the Medicare and Medicaid programs. We held
that this did not disclose a particular fraud by a particular
6 No. 10-3785
chiropractor, because no one could use the published
reports as the basis of litigation; the government
could not seek reimbursement without showing that a
particular chiropractor had committed a particular
fraud in a particular way, and we held in Baltazar that
someone who supplied those vital details could not be
thrown out of court under §3730(e)(4)(A).
Similarly, no one who read the GAO report, or
followed the progress of the PATH audits, would know
or even suspect that Rush University was misrepre-
senting the “immediate availability” of teaching physi-
cians during concurrently scheduled procedures. The
allegations in Gear parroted the GAO report; Gear added
nothing to the public disclosure except the name of a
teaching hospital, and as the GAO report suggested that
all (or almost all) teaching hospitals billed for unsuper-
vised work by residents, Gear had not added anything
of value. Goldberg and Beecham, by contrast, allege a
kind of deceit that the GAO report does not attribute to
any teaching hospital. Unless we understand the “unsu-
pervised services” conclusion of the GAO report and
the HHS audits at the highest level of generality—as
covering all ways that supervision could be missing or
inadequate—the allegations of these relators are not
“substantially similar.” Given Baltazar, boosting the
level of generality in order to wipe out qui tam suits
that rest on genuinely new and material information
is not sound.
Relators’ allegations may be incorrect—and, to repeat,
Rush University has done nothing wrong if a teaching
No. 10-3785 7
physician was “immediately available” during all parts
of the surgeries, even if the principal teacher was
making a circuit of operating theaters. But these are
questions on the merits, not potential defects in the com-
plaint.
The judgment of the district court is vacated, and the
case is remanded for proceedings consistent with this
opinion.
5-21-12