Birmingham Medical News: Federal Circuit Courts Continue to Grapple Whether Differing Medical Opinions In False Claims Cases Are Sufficient To Create A Dispute About Falsity or Scienter

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Reprinted with permission from the Birmingham Medical News

Courts continue to be split regarding what is required to establish falsity under the False Claims Act, causing potential confusion amongst healthcare providers. On March 4, 2020, the United States Court of Appeals for the Third Circuit ruled in United States v. Care Alternatives that conflicting medical opinions can create a genuine dispute of material fact in a False Claims Act action and is sufficient to defeat the defendant’s summary judgment motion regarding the element of falsity. This holding directly conflicts with the Eleventh Circuit’s September 2019 decision in United States v. AseraCare, which held that a mere difference of opinion between experts regarding a hospice patient’s prognosis was not enough to establish falsity under the FCA. In Care Alternatives, the Third Circuit rejected AseraCare and found that conflicting expert testimony about the validity of physician hospice certifications was sufficient to raise a dispute of material fact about the element of “falsity.” The Third Circuit held that the district court improperly incorporated a scienter element into its analysis regarding falsity. The Third Circuit sought to make clear that in its Circuit, findings of falsity and scienter must be independent from one another for purposes of FCA liability. According to the Third Circuit, scienter helps limit the possibility that hospice providers will be exposed to liability under the FCA any time the Government or relator can find an expert who disagreed with the certifying physician’s medical prognosis.

Former employees of Care Alternatives filed a qui tam action against the hospice provider, alleging the hospice had improperly admitted patients who were not eligible for Medicare’s hospice benefit and directed employees to falsify Medicare certifications in order to meet the eligibility requirements. Generally, Medicare will pay hospice benefits for individuals who are certified as terminally ill by at least one physician. The certification must be accompanied by documentation supporting a medical prognosis that the individual’s life expectancy is six months or less if the illness runs its normal course. The relators’ expert opined that in 35% of the sample cases he reviewed, a reasonable physician would not have certified the patients as terminally ill with a prognosis of six months or less based on the accompanying documentation. Reviewing the same sample set, Care Alternatives’ expert disagreed, finding that a reasonable physician could reasonably certify each case. Thus, there was a disagreement among the parties’ experts as to whether a reasonable physician would determine that the patients in question were eligible for hospice benefits. Care Alternatives argued that a difference of opinion between the experts was insufficient to create a dispute of fact as to the element of falsity under the FCA. The United States District Court for the District of New Jersey agreed with Care Alternative by adopting and applying AseraCare’s holding that an “objective falsehood,” something more than a retrospective difference of opinion, was required to create a genuine dispute of fact.

On appeal, the Third Circuit disagreed and reversed and remand the case for consideration of the other elements of FCA liability, including the element of scienter. The Third Circuit noted it is well-established that subjective opinions can be false, and applied this reasoning to the FCA’s falsity element. The Third Circuit opined that AseraCare’s “objective falsity” standard applied by the District Court improperly conflated falsity with the FCA’s scienter requirement, i.e., that the whistleblower prove a certifying physician was making a knowingly false certification. The Third Circuit held that these elements must be considered separately, and that the purpose of the scienter requirement is to limit the possibility that a provider could be found to violate the FCA any time the Government or a relator could find an expert who may establish falsity by disagreeing with a physician’s prognosis.

The Third Circuit also held that the FCA’s falsity standard includes both “factual falsity” and “legal falsity.” Factual falsity means the claim is literally false on its face such as when the claim indicates a procedure was done after the patient’s date of death. Legal falsity refers to situations in which a factually accurate claim violates a legal condition of payment for the service being billed. The Third Circuit found that an expert opinion that differed from the certifying physician’s opinion was relevant evidence of whether the requirements of the regulations were satisfied and therefore whether there was evidence of legal falsity.

Because the Third Circuit explicitly disagreed with the Eleventh Circuit’s ruling in AseraCare and other circuits have also grappled with the issue of whether an honestly held opinion that a claim was not false goes to the falsity of the claim or the scienter of the claimant, a potential appeal to the United States Supreme Court is in the making to resolve the differing circuits’ approaches. Accordingly, a determination that a claim was, in fact, false, does not immediately trigger FCA liability. Relators must still establish that the provider knew the claim was false when it was submitted. The difficulty with relying on the scienter element to have a case dismissed is the honestly held belief that the claim was not false may defeat the scienter element but credibility determinations are typically reserved for the jury thus almost forcing the case to trial.

The key takeaway for health care providers across the country is these differing standards will be fought in FCA cases where defendants have made reasonable subjective judgments.  Accordingly, the arguments should focus on both the falsity element and the scienter element.  Depending on the circuit, a provider might be able to rely on an after-the-fact “battle of the experts” to disprove the falsity element in a FCA case. A provider should also rely on clear and well-supported contemporaneous documentation that it did not knowingly submit a false claim.

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