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U.S. Court In Louisiana Holds HIPAA Pre-Empts State Law On Disclosure Of Patient Information


HLD, v. 31, n. 3 (March 2003)

U.S. Court In Louisiana Holds HIPAA Pre-Empts State Law On Disclosure Of Patient Information

Mary Jane Stewart and Margaret Catherine McGinity (relators) filed a qui tam action seeking to recover damages under the False Claims Act against Dr. Stephen Flood, Dr. Stuart I. Phillips, Dr. Bernard Manale, Dr. Ida Fattel, Dr. John Watermeier, and The Louisiana Clinic (collectively defendants) for allegedly trying to defraud the government by submitting false claims for medical services under Medicare and Medicaid. Defendants filed motions for protective orders to protect the confidentiality of non-party patients' medical records that the relators requested defendants produce. One of the motions also requested that the government be prohibited from receiving copies of any non-party patients' medical records because it did not intervene in the suit.

The U.S. District Court for the Eastern District of Louisiana granted the motions in part and denied them in part. Defendants argued that if they were compelled to produce the medical records without concealing patients' identities they could be subject to civil liability under Louisiana law, and contended that Louisiana law on provider/patient privilege is not pre-empted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Defendants also argued that the government was not a party and should not be provided with any records and, in the alternative, the government should not be allowed to use the records for any purpose other than litigation if they receive the documents.

Turning first to the issue of privilege, the court determined that the relators' claims were based solely on federal law, and there is no provider/patient privilege under federal law. Defendants presented a question of first impression, said the court, when they agued that HIPAA and its implementing regulations direct the application of Louisiana privilege law. Analyzing HIPPA, the court determined that HIPAA pre-empts contrary state law unless the state law relates to patient privacy and is "more stringent" than HIPPA's requirements. The relators and the government argued that the HIPAA standards do not go into effect until April 2003, but the court agreed with the holding in United States v. Sutherland, 143 F. Supp. 2d 609 (W.D. Va. 2001), that while the standards are not currently binding, they indicate a "strong federal policy of protection for patient medical records." Finding that it must apply the exception to pre-emption, the court determined that the Louisiana law failed the "more stringent" element of the exception because state law did not address the need for "express legal permission from an individual" but only provided a way of negating the need for permission. However, the court said that, while HIPAA pre-empted the state law, there was good cause shown for entering the protective order. Therefore, the court ordered the production of the medical records with certain restrictions.

The court also determined that defendants' argument that the government was a non-party because it had declined to intervene and therefore had no rights to participate in discovery was also an issue of first impression. In Searcy v. Philips Elec. N. Am. Corp., 117 F.3d 154 (5th Cir. 1997), the Fifth Circuit held that, even if the government does not intervene in a qui tam action, it is still a real party in interest. The nature of a qui tam action affects whether the government may be "a relevant party in the suit for some purposes of the litigation." See United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304 (5th Cir. 1999). The court agreed with the Searcy court that the structure of the False Claims Act gives the government a certain level of participation, reliance on a statutory right, and a stake in the outcome of the case. The court concluded that the government's status as a real party, and the "elements of control" exercised by the government, entitled it to receive documents that are produced for discovery.

Finally, the court addressed the issue of limits on the government's use of the discovery documents. The government argued that HIPAA permits disclosure of discovery documents to the Department of Justice as a "health oversight agency." Finding that HIPAA is clear and unambiguous, the court held that the government could use the discovery documents for "legitimate governmental health oversight activities." Accordingly, the court granted the defendants' motions for a protective order in part, and denied them in part.

United State ex rel. Stewart v. The Louisiana Clinic, No. 99-1767, 2002 WL 31819130 (E.D. La. Dec. 11, 2002) (23 pages).

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