This post was written by Andrew Bernasconi & Nathan Fennessy.

A recent decision by the United States District Court for the Southern District of Ohio may make it much harder for qui tam relators to rely upon stolen medical records or patient information in False Claims Act (“FCA”) whistleblower actions. See Cabotage v. Ohio Hospital for Psychiatry, No. 11-cv-50 (S.D. Ohio July 27, 2012). In Cabotage, the district court held that a registered nurse was not permitted to support her allegations of FCA violations by relying on confidential protected health information that she surreptitiously removed from the hospital where she was employed.

The nurse in Cabotage purportedly removed the confidential protected health information as part of an “investigation” of alleged fraudulent conduct by the Medical Director. She subsequently provided this information to an investigator from the Department of Health and Human Services, but the agency declined to pursue a claim. After the nurse was terminated for other reasons, she commenced an action against her former employer under the FCA whistleblower provisions and the Ohio Whistleblower’s Act. During the course of discovery, the hospital learned about the nurse’s removal of confidential protected health information. After repeated requests to return the information were declined, the hospital filed a Motion for Return of Confidential Health Information.

The district court denied the motion on the grounds that the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”) did not vest the court with jurisdiction to provide the remedy sought by the hospital. The court concluded, however, that it possessed inherent authority to issue an order preventing the nurse from using the confidential information in the instant action because the information was confidential, potentially privileged, and had been obtained outside the discovery process governed by the court.

The court’s decision is qualified and stops short of creating a new rule applicable to whistleblower cases, but nonetheless provides a step in the right direction for defendants facing whistleblowers who have inappropriately used or taken confidential information from their employer.