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