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Courts Split on Whether Medical Expert Testimony Alone Can Prove Falsity in FCA Cases

A nascent circuit court split again places medical necessity cases in the spotlight. An ever-evolving area of the law, medical necessity is one of the most common allegations of health care fraud combated by the False Claims Act (FCA), which prohibits fraud against governmental programs. In FCA medical necessity cases, the federal government may challenge a doctor’s opinion about whether a procedure or service that was billed to Medicare or Medicaid was medically necessary. To qualify as medically necessary, a billed procedure, treatment, or test must be reasonable, necessary, and/or appropriate, based on evidence-based clinical standards of care. In FCA cases predicated on medical necessity, the plaintiff must produce an expert witness to challenge the treating physician’s assertion.

Whether or not this difference in clinical judgment is enough to establish fraud under the FCA was the subject of recent, contradictory decisions by two circuit courts of appeals.

FCA cases mean big payouts

The two cases below were closely watched, because FCA cases are big business. In FY 2019, the Department of Justice (DOJ) recovered more than $3 billion in FCA cases, representing a slight uptick from $2.9 billion in the prior year. About 85 percent of the total recovery –$2.6 billion – involved the health care sector.

FCA cases bring major windfalls not only for the federal government, but for whistleblowers. Under the FCA’s qui tam provision, individuals who are not affiliated with the government – called relators – can file actions on behalf of the government and receive a portion of the recovered damages. Of 782 cases last year, 19 percent were initiated by the government and 81 percent by qui tam relators, who earned a collective $265 million in the process.

U.S. v. AseraCare, Inc.

In United States v. AseraCare, Inc., the U.S. Court of Appeals for the Eleventh Circuit ruled in September 2019 that, under the FCA, a claim cannot be deemed false based on a difference of clinical judgment if there is no proof of an “objective” falsity.

AseraCare is a provider of hospice care. In order for a hospice claim to be eligible for Medicare reimbursement, physicians must certify that, based on their clinical judgment, the individual is terminally ill. The case, originally brought by three former AseraCare employees, centered on certain patients who were alleged to be 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 Eleventh Circuit ruled against the DOJ, determining that “a clinical judgment of terminal illness warranting hospice benefits under Medicare cannot be deemed false, for purposes of the [FCA], when there is only a reasonable disagreement between medical experts as to the accuracy of that conclusion, with no other evidence to prove the falsity of the assessment.”

The court provided several scenarios that would constitute an objective falsehood, including “The certifying physician failed to review the patient’s medical records or otherwise familiarize himself with the patient’s condition before asserting the patient was terminally ill” and “Expert evidence proves that no reasonable physician could have concluded that a patient was terminally ill given the medical records,” among others.

U.S. ex. rel. Druding v. Care Alternatives

In March 2020, the U.S. Court of Appeals for the Third Circuit reached a very different conclusion in a case that was similar in many ways to AseraCare. United States ex. rel. Druding v. Care Alternatives was brought by former employees of Care Alternatives, another hospice services provider, and it also involved patient eligibility for hospice care reimbursement.

“The central question on appeal is whether a hospice care provider’s claim for reimbursement can be considered ‘false’ under the FCA on the basis of medical-expert testimony that opines that accompanying patient certifications did not support patients’ prognoses of terminal illness,” the Third Circuit stated. “The answer is a straightforward Yes.”

In reaching its conclusion, the Third Circuit declined to adopt the lower District Court’s objective falsity standard, which was based on the Eleventh Circuit’s ruling in AseraCare, “as the test is inconsistent with the statute and contrary to this Court’s interpretations of what is required for legal falsity.”

A physician’s judgment, the Third Circuit ruled, 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 concluded.

What now?

Following this circuit split, it remains to be seen how other circuit courts will rule in similar cases. While the Eleventh Circuit was dismissive of simply relying upon an expert’s disagreement with medical necessity, it still held that an expert could invalidate a claim of medical necessity by arguing that “no reasonable physician” would have deemed the disputed treatment to be medically necessary. This is consistent with the Third Circuit’s ruling and holds that determinations of medical necessity are still well within the expert’s purview, though such opinions must be explicitly stated to attack, or affirm, reasonableness. The existence of a circuit split is one of the factors the U.S. Supreme Court considers when choosing which cases to review. Until and unless the issue is definitively decided, attorneys should focus their arguments and experts along the narrower interpretation of the Eleventh Circuit.

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