Last week, the Third Circuit joined several other appellate courts in finding that medical opinions related to medical necessity of hospice services can be subject to scrutiny and found to be “false” for purposes of proving a violation of the False Claims Act (FCA) in U.S. ex rel. Druding v. Care Alternatives. Our Health Care Enforcement Defense Group has been closely tracking recent qui tam cases brought under the FCA based on allegations that health care services or procedures lacked the requisite medical necessity, including the conclusion of the landmark AseraCare case last week. As we’ve previously discussed on the blog, several district courts across the country have determined that differences of opinions between physicians and medical experts alone cannot be used to prove the FCA’s falsity requirement. However, some appellate courts have reached different conclusions. The Third Circuit’s decision last week in Care Alternatives joins those appellate courts in rejecting this argument and finding that “a difference of medical opinion is enough evidence to create a triable dispute of fact regarding FCA falsity.”
Relators’ Allegations on Medical Opinions and Certifications for Hospice Benefits
Care Alternatives is a provider of hospice services in New Jersey. In order for a Medicare or Medicaid patient to be eligible for the hospice benefit, a physician must certify (and recertify every 60 or 90 days) that the patient has a terminally ill prognosis with a life expectancy of six months or less. Federal regulations also require sufficient documentation to support the physician’s certification.
The relators are former employees who alleged that Care Alternatives fraudulently submitted claims for reimbursement to Medicare and Medicaid by regularly admitting and recertifying ineligible patients for hospice care, which is a common (and often unsubstantiated) claim in qui tam cases brought against hospice providers. The relators filed a qui tam lawsuit in 2008, and the U.S. investigated but declined to intervene in the case. The case was under seal until 2015.
Care Alternatives had a written certification from the admitting physician for every patient admitted to its hospice program, and the relators did not contest this fact. The relators also did not provide any evidence that any of the admitting physicians received a kickback in exchange for certifying a patient, relied on inaccurate information for the certification, or personally believed that the patient was ineligible for hospice. Instead, to prove that the certifications were “false,” the relators provided testimony from a medical expert who reviewed a sample of patient records and determined that about 35% did not contain sufficient information or documentation for a reasonable physician to determine that the patient was eligible for hospice. Care Alternatives provided testimony from its own medical expert stating that a reasonable physician could determine that the patient was eligible in each of the sampled records based on the documentation, leading to a “battle of the experts.”
District Court’s Decision to Grant Summary Judgment for Care Alternatives
In September 2018, the District Court ruled that the relators did not provide sufficient evidence on the issue of falsity and issued summary judgment in favor of Care Alternatives. The District Court followed the reasoning in AseraCare and determined that a medical opinion must be “objectively false” in order to prove the FCA’s falsity element. The District Court explained that differing, reasonable medical opinions alone are not sufficient evidence to show that the medical judgment was false. Like the AseraCare court, the District Court found that the relators needed to show that documentation in the medical record or other information on which the certifying physician relied was false or inaccurate. The District Court pointed out that relators provided no evidence of Care Alternatives pressuring admitting physicians to certify patients or physicians actually falsifying medical records. The District Court concluded that “the ultimate issue is not whether the certification of hospice eligibility was correct or incorrect, but rather whether it was knowingly false.”
To justify why the District Court decided to follow the reasoning in AseraCare, the District Court stated that it had no binding case law directly on this issue. The District Court pointed to a district court case in Texas that came to a similar conclusion and then cited other Third Circuit cases that support the conclusion that an opinion must be objectively false:
United States ex rel. Thomas v. Siemens AG, 593 F. App’x 139, 143 (3d Cir. 2014) ("A statement is ‘false’ when it is objectively untrue."); United States ex rel. Hill v. Univ. of Med. & Dentistry of N.J., 448 F. App’x 314, 316 (3d Cir. 2011) (“[E]xpressions of opinion, scientific judgments or statements as to conclusions which reasonable minds may differ cannot be false.”).
Third Circuit’s Reversal
On appeal by the relators, the Third Circuit rejected the District Court’s decision and concluded,
A claim may be "false" under a theory of legal falsity, where it fails to comply with statutory and regulatory requirements. We also find that a physician’s judgment may be scrutinized and considered "false." We therefore find that a physician’s expert testimony challenging a hospice certification creates a triable issue of fact for the jury regarding falsity.
The Third Circuit came to this conclusion for three main reasons:
- The “objective falsity” requirement adopted by the District Court and the AseraCare court incorrectly conflates falsity with scienter.
- The “objective falsity” requirement contradicts the Third Circuit’s acceptance of the theory of legal falsity.
- Medical opinions are subject to scrutiny and can be “false.”
Conflation of Falsity with Scienter
Scienter and falsity are separate elements of a FCA violation. According to the Third Circuit, the objectivity of a medical opinion is relevant for proving scienter, not falsity. The Third Circuit explained that both the court in AseraCare and the District Court inappropriately combined scienter with falsity by requiring relators to prove falsity by providing evidence that the admitting physician knowingly made a false determination. Instead, any evidence on that topic is relevant to scienter, which “helps to limit the possibility that hospice providers would be exposed to liability under the FCA any time the Government could find an expert who disagreed with the certifying physician’s medical prognosis.” The Court cited the Tenth Circuit decision in Polukoff to support this conclusion.
Third Circuit’s Acceptance of Legal Falsity as a Basis for a False Claim
The Third Circuit accepts that liability under the FCA can be based on non-compliance with statutory or regulatory requirements, even if the claim is factually correct, which is known as legal falsity. Medicare regulations for hospice services require both a physician’s certification of the patient’s prognosis and sufficient clinical information or documentation to support that prognosis. The Third Circuit found that the District Court had overlooked how a medical expert’s opinion can be used as evidence of non-compliance with the regulations’ documentation requirements. The Third Circuit relied on Polukoff in coming to this conclusion as well.
Scrutiny of Medical Opinions
Finally, in addition to concluding that differing expert medical opinions can be used as evidence of non-compliance with documentation requirements, the Third Circuit went further and held that medical opinions are subject to scrutiny and can be proven false using a differing medical expert’s opinion. The Third Circuit cited common law fraud cases determining that subjective opinions, including medical opinions, can be considered false. The Third Circuit also cited and agreed with the Sixth Circuit’s decision in United States v. Paulus, which found that a medical opinion that misrepresents the physician’s actual opinion (e.g., seeing one thing but writing down another) is fraudulent, versus a “good faith” opinion, which is not.
Key Takeaways from the Third Circuit's Opinion
The Third Circuit joins the Sixth and Tenth Circuits in allowing a “battle of the experts” to prove falsity in FCA cases based on medical necessity in certain circumstances. As we discussed in our 2019 Year-in-Review, because these decisions support the use of expert opinions to prove falsity, we may see more focus on other elements of FCA claims – specifically, materiality and knowledge – in cases premised on allegations of lacking medical necessity. With the landmark AseraCare case ending recently in settlement, we will monitor how courts may address falsity based on differing medical opinions in future FCA cases.