Third Circuit Confirms that CMS Online Data and State Health Department Webpages Trigger the FCA Public Disclosure Bar

Introduction

In United States of America ex rel. David W. Stebbins v. Maraposa Surgical, Inc., d/b/a Allegheny Vein and Vascular; Robert W. Tahara, M.D. (No. 24-1626), the United States Court of Appeals for the Third Circuit (Judges Shwartz, Matey, and McKee) affirmed the dismissal of a qui tam action under the False Claims Act (FCA), 31 U.S.C. §§ 3729–3733. In a non-precedential opinion authored by Judge Shwartz on December 3, 2024, the court held that the FCA’s public disclosure bar precluded the relator’s claims because the essential elements of the alleged fraud were already available in public sources: (1) a CMS payment database showing place-of-service codes, (2) the Pennsylvania Department of Health’s (DOH) searchable database of licensed facilities, and (3) DOH’s published ambulatory surgery center (ASC) regulations.

The case centers on allegations that Maraposa Surgical, a physician office practice operated by Dr. Robert W. Tahara in Bradford, Pennsylvania, sought Medicare and Medicaid reimbursement for arteriograms performed in an office setting rather than in a licensed ASC, allegedly in violation of Pennsylvania law, and failed to obtain informed consent for anesthesia by not disclosing that it was not a licensed ASC. The District Court dismissed the amended complaint under Federal Rule of Civil Procedure 12(b)(6), holding the claims barred by the public disclosure bar, and the Third Circuit affirmed.

While non-precedential under Third Circuit Internal Operating Procedure 5.7, the decision is a robust application of the FCA public disclosure bar, emphasizing that:

• CMS online-published payment data qualify as “Federal reports” under 31 U.S.C. § 3730(e)(4)(A)(ii);
• State health department online publications and databases are “news media” under the same provision; and
• The bar applies when the public record reveals both the alleged misrepresented fact (X) and the true fact (Y), such that an inference of fraud (Z) is possible by anyone with access to those sources.

Summary of the Opinion

The Third Circuit affirmed dismissal on de novo review, concluding that Stebbins’s FCA claims were precluded by the public disclosure bar, 31 U.S.C. § 3730(e)(4)(A). The court reasoned:

• The “misrepresented facts” and the “true facts” comprising the alleged transaction were publicly disclosed in qualifying sources.
• CMS’s “Medicare Physician & Other Practitioners by Provider and Service” database disclosed that Maraposa billed for arteriograms performed in a physician office (place-of-service “office”).
• Pennsylvania DOH’s online database did not list Maraposa as a licensed ASC, and DOH’s ASC regulations were publicly available in the Pennsylvania Bulletin.
• Under Third Circuit precedent, disclosure of X (misrepresented fact) and Y (true fact) suffices for the bar because it permits the inference of Z (fraud).
• Stebbins did not contest that these sources are “public disclosure” within the meaning of § 3730(e)(4)(A), and he did not plausibly claim “original source” status.

The court expressly did not decide whether Maraposa engaged in wrongdoing. In a footnote, it further observed that publicly available sources (Pennsylvania LCD L35092, the Medicare Physician Fee Schedule, and Pennsylvania’s statutory exclusion of physician offices from DOH’s ASC licensure regime) indicate that office-based arteriograms are reimbursable, underscoring that the merits would have been problematic for the relator in any event.

Detailed Analysis

Precedents Cited and Their Role

• United States ex rel. Zizic v. Q2 Administrators, LLC, 728 F.3d 228 (3d Cir. 2013): The foundation for the Third Circuit’s public disclosure bar framework. Zizic explains the bar’s purpose—to encourage fraud detection while deterring parasitic suits—and articulates the key test: disclosure of “allegations or transactions” (Z or X+Y). The court quoted Zizic’s formulation that a “transaction warranting an inference of fraud” consists of a misrepresented fact plus the true fact.
• United States ex rel. Silver v. Omnicare, Inc., 903 F.3d 78 (3d Cir. 2018): Cited to reaffirm the Third Circuit’s approach to the public disclosure bar post-2010 FCA amendments, including the modern “original source” requirement. While Silver focused on different factual circumstances, it confirms the circuit’s analytical framework for assessing public disclosures and “substantially the same” allegations.
• United States ex rel. Mistick PBT v. Housing Auth. of City of Pittsburgh, 186 F.3d 376 (3d Cir. 1999): Provides the principle that the bar applies where the “essential elements” of the claim are already public. The court uses Mistick to frame whether the combination of CMS data, DOH licensure database, and published regulations supplied all indispensable pieces.
• United States ex rel. Atkinson v. Pennsylvania Shipbuilding Co., 473 F.3d 506 (3d Cir. 2007): Supplies the often-cited X+Y=Z formulation, which the court invokes (through Zizic) to explain that disclosures of both a purported misrepresentation and the true state of facts are enough—even if no source explicitly accuses fraud.
• United States ex rel. Dunleavy v. County of Delaware, 123 F.3d 734 (3d Cir. 1997), abrogated on other grounds by Graham County: Cited for the “quantum of information” concept: that the amount and type of public information must be sufficient to permit an inference of fraud. The court here found that threshold met.
• Schindler Elevator Corp. v. United States ex rel. Kirk, 563 U.S. 401 (2011): Central Supreme Court authority interpreting “Federal report” and the breadth of “news media.” The Third Circuit relied on Schindler to characterize CMS online publications as “Federal reports” and to construe “news media” broadly enough to capture the Pennsylvania DOH’s public postings.
• Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 559 U.S. 280 (2010): Supports the expansive reading of “news media” and the bar’s balancing function. Graham County’s discussion of breadth undergirds the court’s treatment of modern online sources.
• United States ex rel. Moore & Co. v. Majestic Blue Fisheries, LLC, 812 F.3d 294 (3d Cir. 2016): Cited for the standard of review (de novo) on public disclosure bar dismissals.
• Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009): Provide the general Rule 12(b)(6) framework: considering documents incorporated by reference and materials subject to judicial notice while accepting well-pleaded allegations as true.

Legal Reasoning

The FCA’s public disclosure bar, 31 U.S.C. § 3730(e)(4)(A), requires dismissal if a relator’s action alleges “substantially the same” allegations or transactions that have been publicly disclosed in, among other places, federal reports or the news media, unless the relator is an “original source.” The Third Circuit applied its familiar three-step analysis:

1. Were the allegations or transactions publicly disclosed? Yes. The court identified three public sources:
   • CMS payment data (the “Medicare Physician & Other Practitioners by Provider and Service” dataset) indicated that the arteriograms billed by Maraposa were performed in a physician office, not an ASC. The court held this CMS online data is a “Federal report.”
   • Pennsylvania DOH facility licensure database did not list Maraposa as a licensed ASC. The court treated DOH’s online publications as “news media.”
   • Pennsylvania DOH ASC regulations were publicly posted in the Pennsylvania Bulletin, identifying licensure requirements and the regulatory boundary between offices and ASCs.
   Together, these sources disclosed both the allegedly misrepresented fact (that bills were submitted for office-based procedures) and the true facts (Maraposa lacked an ASC license and the applicable ASC regulatory framework), satisfying the X+Y=Z paradigm.
2. Are the relator’s allegations “substantially the same” as the public disclosures? Yes. The relator’s complaint repackaged publicly available data points and regulations into an inference of fraud. As the court emphasized, it is the disclosure of allegations or transactions that triggers the bar; one cannot evade the statute by merely drawing the inference that anyone else could draw from public sources.
3. Is the relator an “original source”? No. Stebbins did not offer a well-pleaded, fact-based argument establishing that he possessed independent knowledge that materially added to the public disclosures. Nor did he dispute that the CMS and DOH sources qualify under § 3730(e)(4)(A). Those strategic concessions—and the absence of a viable original source showing—were dispositive.

Critically, the panel underscored that the FCA bars suits based on public “allegations or transactions,” not merely public “information.” But here, the “quantum” and type of public information were sufficient to constitute a disclosed transaction: the CMS place-of-service data (X) combined with the DOH licensure status and published ASC rules (Y) allowed anyone to infer potential fraud (Z). Echoing Schindler Elevator, the panel noted that if “anyone could have filed the same FOIA requests and then filed the same suit,” the public disclosure bar applies. In today’s context, when “anyone” can access CMS open data and state licensure databases, the bar’s concern with parasitic, data-mined FCA suits is squarely implicated.

Although the court did not decide whether Maraposa’s billing was actually false, it flagged—by reference to materials judicially noticed by the District Court—that Pennsylvania LCD L35092, the Medicare Physician Fee Schedule, and the statutory exclusion of physician offices from DOH’s ASC licensure regime (35 Pa. Stat. and Cons. Stat. § 448.103) indicate that office-based arteriograms are reimbursable. That observation further illustrates why the relator’s theory was vulnerable on the merits, independent of the public disclosure bar.

Impact and Practical Implications

Even though non-precedential, this opinion has meaningful practical value for FCA litigants in the Third Circuit and beyond:

• Online data as public disclosures: The court treats CMS open data as “Federal reports” and state health department web content as “news media.” This cements, in a modern data environment, that widely accessible online sources can independently trigger § 3730(e)(4)(A).
• Data-mined theories are vulnerable: Relators who assemble claims by stitching together place-of-service codes, licensure databases, and regulation text may find themselves barred unless they possess non-public, independently obtained knowledge that materially adds to what is public.
• Early dispositive motions: Defendants can and should identify publicly accessible federal/state data and regulatory publications and move to dismiss under Rule 12(b)(6) based on the public disclosure bar, supported by judicial notice. This case showcases how to build that record efficiently.
• Original source rigor: Post-2010 amendments require the relator to have “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions,” and to voluntarily provide it to the Government before filing. Failure to carry that burden—as occurred here—will doom a relator’s case premised on public materials.
• Sub-regulatory and state materials matter: The court’s reference to the LCD and the Medicare Physician Fee Schedule, combined with Pennsylvania’s statutory exclusions, underscores that payer policies and state regulatory carve-outs can negate the plausibility of “falsity” theories rooted in place-of-service disputes. Compliance and billing teams should document how such materials support billing positions.
• No need for an explicit public accusation: Under the X+Y=Z framework, the bar applies even absent a public accusation of fraud, so long as the public record contains enough to infer it. That point can be dispositive in cases premised on licensure or certification theories.

Complex Concepts Simplified

• False Claims Act (FCA): A federal statute that imposes liability on anyone who knowingly presents false or fraudulent claims for payment to the United States. It allows private whistleblowers (relators) to sue in the government’s name (qui tam) and share in recoveries.
• Qui tam relator: A private party who brings an FCA lawsuit on behalf of the United States. If the government declines to intervene, the relator can pursue the case and may receive a portion of any recovery.
• Public disclosure bar (§ 3730(e)(4)(A)): Requires dismissal of a relator’s claim if substantially the same allegations or transactions have already been publicly disclosed in certain sources (including federal reports and the news media), unless the relator is an “original source.”
• Original source: Generally, a relator with independent knowledge that materially adds to the publicly disclosed information, and who reports it to the government before filing suit.
• X+Y=Z framework: A shorthand in FCA jurisprudence: X is the alleged misrepresentation; Y is the true fact; Z is the fraud inference. If both X and Y are publicly available (even without anyone publicly accusing fraud), the bar applies because the public can infer Z.
• CMS “Federal reports” and state “news media”: CMS online databases are considered “Federal reports.” State websites and bulletins—like a DOH licensure database or the Pennsylvania Bulletin—fall within “news media” for the public disclosure bar.
• Ambulatory Surgery Center (ASC) vs. physician office: An ASC is a distinct entity operating exclusively to provide surgical services and is subject to facility licensure. A physician office is excluded from ASC licensure requirements. Reimbursement rules can differ based on the setting.
• Place-of-service code: A coding field on healthcare claims indicating where services were provided (e.g., office vs. ASC). Public datasets can reveal these codes by provider and service.
• NPI Registry: A public database listing unique 10-digit National Provider Identifiers for providers and organizations; it allows the public to match claims data to specific providers.
• Local Coverage Determination (LCD): A Medicare contractor policy that details coverage criteria within a jurisdiction (e.g., LCD L35092). LCDs can clarify whether services are covered in certain settings.

Contextual Background and Statutory/Regulatory Setting

The opinion provides a concise primer on Medicare/Medicaid billing and licensure:

• Medicare/Medicaid claims use standardized forms requiring place-of-service reporting (e.g., “office” vs. “ASC”).
• ASCs are distinct from offices: under 42 C.F.R. § 416.2, an ASC operates exclusively to provide surgical services and must comply with state licensure (42 C.F.R. § 416.40).
• In Pennsylvania, the DOH licenses ASCs as “health care facilities” (35 Pa. Stat. & Cons. Stat. Ann. §§ 448.806(a), 448.802a), while the Board of Medicine regulates professional practice (Lyness v. Pa. State Bd. of Med.). Physician offices are statutorily excluded from the facility licensure regime (35 Pa. Stat. & Cons. Stat. § 448.103).
• States may identify reimbursable services; arteriograms are reimbursable in an office or an ASC. The court references public coverage sources indicating office-based arteriograms are reimbursable.

Procedural Posture and Standards of Review

• The District Court (W.D. Pa., Judge Cathy Bissoon) dismissed the amended complaint under Rule 12(b)(6) based on the public disclosure bar and took judicial notice of CMS and Pennsylvania DOH materials.
• On appeal, the Third Circuit exercised plenary review of the dismissal and de novo review of the public disclosure bar determination (Moore & Co.).
• Under Tellabs and Iqbal, the court considered the complaint, documents incorporated by reference, and judicially noticeable public materials, and assumed well-pleaded facts to be true.

Practice Pointers

• For relators:
  • Expect defendants to mine CMS open data and state licensure databases to trigger the public disclosure bar. Anticipate X+Y arguments.
  • Plead and be prepared to prove “original source” status with specific, non-public facts that materially add to public information.
  • Vet the substantive reimbursement rules (e.g., LCDs, fee schedules, statutory exclusions) before anchoring a theory to licensure or setting-of-service distinctions.
• For defendants:
  • Compile a record of publicly available datasets, licensure lists, and published regulations; move early to dismiss under § 3730(e)(4)(A).
  • Request judicial notice of CMS and state regulatory materials; show how X and Y are both public.
  • Consider supplementing with coverage policies (LCDs) and fee schedules to undermine “falsity” or “materiality” if the case proceeds.
• For courts:
  • This case illustrates efficient adjudication of the bar at the pleadings stage by relying on judicially noticeable public data and regulation.
  • Modern online repositories are often sufficient to meet the “quantum of information” for a “transaction” disclosure.

Conclusion

The Third Circuit’s decision in Stebbins v. Maraposa Surgical, Inc.—though non-precedential—provides clear guidance for FCA litigation in the era of open government data. By holding that CMS’s online payment datasets constitute “Federal reports” and that state health department online publications qualify as “news media,” the court confirms that the FCA public disclosure bar reaches widely available web-based sources. When those sources collectively reveal both the allegedly misrepresented fact (X) and the true fact (Y), allowing anyone to infer possible fraud (Z), the bar demands dismissal absent a relator who is a genuine original source.

The opinion also underscores two additional realities. First, relators must do more than repackage public data; they must materially add to it with independent knowledge. Second, substantive reimbursement rules—including LCDs, fee schedules, and statutory exclusions—can undercut theories that hinge on licensure or site-of-service assumptions. Together, these lessons reinforce the FCA’s balance: encouraging whistleblowing grounded in unique, value-added information while deterring parasitic lawsuits assembled from public repositories.