The Eleventh Circuit’s Long-Awaited AseraCare Decision Changes the Landscape for FCA Cases Based On Medical Necessity
On September 9, 2019, the U.S. Court of Appeals for the Eleventh Circuit issued its much anticipated decision in United States v. AseraCare Inc., et al., Case No. 16-13004 (11th Cir. Sept. 9, 2019), agreeing with the lower court that a claim cannot be deemed false under the False Claims Act (FCA) based solely on a difference in clinical judgment, but vacating the court’s grant of summary judgment in AseraCare’s favor. On this point, the appellate court remanded the case, instructing the district court to reconsider the question based on the entirety of the evidence, not just on the difference-of-opinion evidence that had been designated as proof of falsity at trial.
History of the Case
The government had alleged that AseraCare, a hospice provider, submitted claims for Medicare reimbursement based on documentation that falsely represented that certain Medicare recipients were terminally ill. There were no allegations that patients did not exist; that certifications were forged; or that the patients did not actually receive the care for which AseraCare was reimbursed. The government’s case was based on expert testimony that 123 of 223 sample patients were not, in fact, terminally ill when AseraCare submitted claims for their hospice care.
AseraCare moved for summary judgment on the ground that expert opinion evidence alone could not establish “falsity,” and proposed a “reasonable doctor” standard for the assessment of falsity, instead. After the district court denied AseraCare’s motion for summary judgment, AseraCare moved to bifurcate the trial into two phases: the first on the element of falsity as a threshold question, and the second on the FCA’s remaining elements, including knowledge.
Over the government’s strong objections, the district court granted the motion to bifurcate, noting that, while evidence of AseraCare’s claims submissions practices could help to establish AseraCare’s knowledge of the false claims submissions, the falsity of the claims could not “be inferred by reference to AseraCare’s general corporate practices unrelated to specific patients.” In bifurcating the trial between knowledge and falsity, the court limited the government’s evidence of falsity to the expert opinion testimony regarding the 123 sample claims, while allowing anecdotal evidence of improper business practices that had a time and place nexus with the patients at issue, in order to provide a context for the alleged falsity of the claims.
This effectively left the jury to choose which of two experts’ opinions were false and which were not. The jury concluded that AseraCare had submitted false claims for 104 of the 123 patients whose claims were at stake.
Following the verdict, AseraCare moved for judgment as a matter of law on the ground that the court had instructed the jury under the wrong legal standard. The district court agreed, finding that it should have instructed the jury that (1) the FCA’s falsity element requires proof of an objective falsehood; and (2) a mere difference of opinion between physicians, without more, is not enough to show falsity. Finding that its failure to properly instruct the jury was reversible error, the court ordered a new trial.
However, the district court then went further, and decided sua sponte to consider summary judgment under its newly-articulated legal standard. Following briefing and a hearing, the court granted summary judgment for AseraCare.
Hospice Eligibility and Falsity under the FCA
In order for a hospice claim to be eligible for Medicare reimbursement, the patient’s physician and the medical director of the hospice provider must certify in writing that the individual is terminally ill “based on the physician’s or medical director’s clinical judgment regarding the normal course of the individual’s illness.” 42 U.S.C. § 1395f(7)(A). A “terminally ill” patient is one who has a medical prognosis that his or her life expectancy is 6 months or less. 42 U.S.C. § 1395x(dd)(3)(A). The physician certifications must be accompanied by clinical information and other documentation that support the medical prognosis. 42 C.F.R. § 418.22(b)(2). The initial certification is valid for ninety days, and the patient must be recertified for each additional sixty- or ninety-day period that he or she remains in hospice. 42 U.S.C. § 1395f(7)(A). There is no statutory limit to the number of periods for which a patient may be properly certified. 42 U.S.C. § 1395d(d)(1).
As the Court of Appeals noted, “the language of the statute and implementing regulations makes plain that the clinical judgment of the patient’s attending physician (or the provider’s medical director, as the case may be) lies at the center of the eligibility inquiry.” The court emphasized further, “none of the relevant language states that the documentary record underpinning a physician’s clinical judgment must prove the prognosis as a matter of medical fact.” (emphasis added).
Within the Medicare framework, the court noted that there are two representations in each claim for hospice reimbursement: the physician’s representation to AseraCare that the patient is terminally ill in the physician’s clinical judgment; and AseraCare’s representation to Medicare that such clinical judgment has been obtained and that the patient is therefore eligible.
The Government’s FCA case, therefore, hung on the question: “When can a physician’s clinical judgment regarding a patient’s prognosis be deemed “false”? In considering the question, the Court of Appeals observed that “[n]othing in the statutory or regulatory framework suggests that a clinical judgment regarding a patient’s prognosis is invalid or illegitimate merely because an unaffiliated physician reviewing the relevant records after the fact disagrees with that clinical judgment.” A reasonable difference of opinion among physicians does not, on its own, establish that one of the opinions is, or must be, false.
As the court concluded, a claim for hospice reimbursement cannot be false “if the underlying clinical judgment does not reflect an objective falsehood.” The court identified three ways by which “objective falsehood” may be shown: (1) a certifying physician failed to review a patient’s medical records or familiarize himself with the patient’s condition before asserting that the patient is terminal; (2) a physician did not subjectively believe that the patient was terminally ill at the time of certification; or (3) expert evidence proves that no reasonable physician could have concluded that a patient was terminally ill given the relevant medical records.
In other words, without a further reason to challenge a physician’s medical opinion that a patient is terminally ill beyond another physician’s opinion disagreeing with that assessment, there is no basis for a false claim under the FCA.
AseraCare and the government agreed that an opinion may be considered objectively false if the speaker does not actually hold that opinion. As the appellate court explained, if no reasonable physician would think that a patient had a terminal illness based on the evidence before that physician, then falsity can be inferred, as well as the existence of a knowing violation.
During the Phase One trial, the government presented testimony from nine witnesses, whose testimony was purportedly connected in time and location to the patients at issue, that AseraCare had a deliberate practice of not giving physicians relevant, accurate, and complete information about patients whose certifications for hospice care they were being asked to sign. Because the government had previously designated this as evidence of context, rather than proof of falsity, the district court refused to consider it as evidence of falsity for the purpose of summary judgment. The district court also refused to consider evidence from AseraCare’s auditors and a physician, which the government would have presented in the Phase Two trial, that was critical of the way the company dealt with the physicians during the certification process. Because the company’s practices with regard to the information it provided to certifying physicians could have helped to establish objective falsity in the eventual certifications, the appellate court directed the district court to reconsider summary judgment based on all the evidence presented at both the summary judgment and trial stages.
Notably, however, the court also expressed skepticism that the government would be able to prove that the specific claims at issue were, in fact, objectively false. While the panel agreed that the testimony raised questions regarding AseraCare’s certification process “writ large,” it also noted that, “crucially, on remand the Government must be able to link this evidence of improper certification practices to the specific 123 claims at issue in its case.” Without evidence of a link between the substance of the physician’s certification and the practices that could bring his judgment in that instance into question, the physician’s clinical judgment cannot be objectively false.
In hindsight, the district court’s decision to bifurcate the trial between knowledge and falsity may have been even more consequential than the parties anticipated. The court’s decision, which highlighted the significance of falsity as a threshold issue, focused on the legitimacy of the physician’s clinical judgments regarding individual patients, without reference to the company’s systemic practices. The latter point is particularly important because, in healthcare fraud cases involving medical necessity, the government has tended to conflate evidence of knowledge with evidence of falsity.
In focusing on falsity as a threshold issue, the appellate court drew a distinction between the physician’s certification of his clinical opinion and the company’s “knowledge” that it was submitting a false claim for reimbursement. Evidence of the company’s knowledge generally consists of damaging emails and complaints or evidence of improper business practices. The government has also relied on corporate statements and practices, however, to undermine the legitimacy of the physician’s clinical judgement, or as further supporting evidence of its falsity.
Many of the government’s highly-trumpeted healthcare settlements have, in fact, rested within this framework of conflating evidence of clinical disagreements between individual physicians with evidence of questionable corporate emails and/or business practices. As a result, providers have been found punitively liable for claims that have been determined to be “false” based on differences of opinion and extrinsic evidence of conduct by others that may have had no connection to the clinical opinion in question.
In distinguishing between the physician’s clinical judgment and the company’s practices, however, the AseraCare court also reinforced the importance of linking the evidence of a bad corporate culture to the specific claims that are alleged to be false under the FCA. The decision is a powerful reminder for the government that, especially in medical necessity cases, allegations of falsity must be based on specific, objective facts linked to the particular claim, rather than the differing subjective opinions of clinicians, even when these are coupled with evidence of questionable company messages and practices.
- Sara M. Lord