FCA Circuit Split Unresolved

false insurance claims under investigation file folders

The U.S. Supreme Court declined to weigh in on whether objectively verifiable facts are necessary to establish a fraudulent claim under the False Claims Act (FCA). In rejecting two petitions for certiorari without comment, the high court chose not to address a circuit split over whether a difference in expert medical opinion about the medical necessity of certain health care services is sufficient to establish that payment claims submitted for the service are fraudulent.

False Claims Act

The FCA makes it illegal to knowingly submit false or fraudulent claims for payment to the federal government. The vast majority of FCA cases involve the health care industry and allegations of fraud against government payers, such as Medicare and Medicaid. Under the FCA’s qui tam provision, private citizens can file whistleblower suits on behalf of the government against alleged violators and share in the payout if the case is successful. In FY 2020, the government recovered $2.2 billion in FCA settlements and judgments. The current split regarding the “objective falsity” standard has evolved over recent decisions in the Third, Ninth, and Eleventh Circuits.

Eleventh Circuit

In United States v. AseraCare, Inc. in September 2019, the Eleventh Circuit held that a difference of reasonable opinion alone is not enough to establish fraud under the FCA. For a hospice claim to be eligible for Medicare reimbursement, physicians must certify that, based on their clinical judgment, the patient is terminally ill. The case, originally brought as a qui tam action by three former AseraCare employees, centered on certain patients who were alleged to have been improperly certified by the company as eligible for the Medicare hospice benefit. The government presented expert testimony that the patients were not, in fact, terminally ill at the time of certification, asserting that AseraCare’s contradictory claims were false under the FCA. The court sided with AseraCare, a hospice care provider.

The Eleventh Circuit upheld the lower court’s ruling against the government, which stated that a “difference of opinion between physicians and medical experts about which reasonable minds could differ is all the Government has presented to prove falsity of the claims…the Government cannot prove the falsity element as a matter of law.”

Third Circuit

In a similar case, U.S. ex rel. Druding v. Care Alternatives, the Third Circuit rejected the Eleventh Circuit’s objective falsity standard in a March 2020 decision. The case, which was originally brought by former employees of hospice provider Care Alternatives, also involved patient eligibility for hospice care reimbursement.

The Third Circuit ruled that a physician’s clinical judgment can be scrutinized and considered “false” for FCA liability purposes if it is later challenged by a medical expert with a different judgment.

Ninth Circuit

The Ninth Circuit similarly rejected the standard that the FCA requires proof of objective falsity in its ruling in U.S. ex rel. Winter v. Gardens Regional Hospital and Medical Center, Inc., in March 2020.

The Winter case alleged that the defendants falsely certified that inpatient hospitalizations for certain patients were medically necessary. The Ninth Circuit said that because Congress did not explicitly define the terminology “false or fraudulent,” it would assume that Congress “incorporated the common-law definitions including the rule that a statement need not contain an ‘express falsehood’ to be actionable.” The court said that under “the common law, a subjective opinion is fraudulent if it implies the existence of facts that do not exist, or if it is not honestly held.” The FCA imposes liability for all “false or fraudulent claims” and “it does not distinguish between ‘objective’ and ‘subjective’ falsity or carve out an exception for clinical judgments and opinions,” the court held. A physician’s certification that hospitalization is necessary can be false or fraudulent, just as any opinion can be false or fraudulent, according to the Ninth Circuit.

The Takeaway

Since the Supreme Court announced in February that it would not take up the matter, the circuit split remains unresolved and health care providers will face differing levels of FCA litigation risk depending on where cases are filed. Because of the lingering uncertainty created by the varied applications of the “objective falsity” standard, health care providers should be cognizant that their physicians’ reasonable clinical opinions alone will not shield them from FCA liability. Health care organizations should review their policies to ensure proper due diligence is in place for reviewing decisions based on medical expert opinions.

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