Ninth Circuit Rejects “Objective Falsehoods” Standard and Finds that False Certification of Medical Necessity May Give Rise to FCA Claim

On March 23, 2020, the Ninth Circuit rejected the conclusion that a mere difference in clinical judgment is insufficient to show “objective falsity.” In issuing this decision, Ninth Circuit joined the Fifth, Tenth, and Third Circuits in lowering the pleading standard for qui tam relators, holding that the False Claims Act (FCA) does not require relators to plead objective falsehoods and that false certification of medical necessity may give rise to FCA liability. Winter ex rel. U.S. v. Gardens Regional Hospital and Medical Center, Inc., No. 18-55020, 2020 WL 1329661 (9th Cir. Mar. 23, 2020).

In Winter, the relator, a former director of care management at Gardens Regional Hospital, filed a qui tam action under the FCA, alleging that the hospital falsely certified that inpatient hospitalizations were medically necessary and therefore submitted false claims for payment to federal health care programs. The district court dismissed the relator’s complaint, finding that a relator must show that a defendant knowingly made an objectively false representation as to medical necessity. Because the relator relied on a subjective medical opinion to rebut the hospital’s position, which cannot support an FCA claim, the district court dismissed the complaint. The relator appealed the decision to the Ninth Circuit.

On appeal, the Ninth Circuit reversed the lower court’s decision and resuscitated the relator’s claims. The Ninth Circuit held that the FCA “does not distinguish between ‘objective’ and ‘subjective’ falsity or carve out an exception for clinical judgments and opinions.”  Instead, the Court held that a clinical judgment or opinion could be false under the FCA “if it implies the existence of facts that do not exist, or if it is not honestly held.”  Consequently, the Court found that the relator stated a claim because she alleged “more than just a reasonable difference of opinion,” presenting specific evidence regarding claims that were not medically necessary according to the hospital’s own admission criteria. The Ninth Circuit also distinguished the Eleventh Circuit’s United States v. AseraCare decision, finding that “its ‘objective falsehood’ requirement did not necessarily apply to a physician’s certification of medical necessity.”

This case presents another departure from AseraCare’s “objective falsity” reasoning and demonstrates that providers outside of the Eleventh Circuit facing False Claims Act cases based on challenges to their medical judgment may face difficulty prevailing at the pleading stage. With a growing number of circuits dividing on the issue of “objective falsity,” the issue is ripe for review by the United States Supreme Court.