On March 31, 2016, the district court granted summary judgment for hospice provider AseraCare in a case alleging that it had submitted false claims to Medicare by certifying patients as eligible for service who did not have a prognosis of six months or less to live if their terminal illness ran its normal course. U.S. ex rel. Paradies v. AseraCare Inc., 2106 WL 1270521 (N.D. Ala. Mar. 31, 2016). In its opinion, the district court reiterated that “the submission of a false claim is the sine qua non of a False Claims Act violation,” and held a “contradiction based on clinical judgment or opinion alone cannot constitute falsity under the FCA as a matter of law.” The district court further explained that when hospice certifying physicians and medical experts “look at the verysame medical records and disagree about whether the medical records support hospice eligibility, the opinion of one medical expert alone cannot prove falsity without further evidence of an objective falsehood.”

This opinion comes after an unusual procedural trajectory. As discussed in a previous post, the district court granted AseraCare’s motion to bifurcate the trial, allowing the question of falsity to be tried first. The bifurcation decision came after the district court issued its ruling allowing the government to use statistical sampling and extrapolation to prove falsity. After the jury returned a verdict finding AseraCare had submitted false claims for 104 of the 123 patients in the sample, the district court vacated the jury verdict and reopened the question of whether summary judgment should be entered, noting that it had “committed reversible error in failing to provide the jury with complete instructions as to what was legally necessary for it to find that the claims before it were false.” U.S. ex rel. Paradies v. AseraCare Inc., 2015 WL 8486874 (N.D. Ala. Nov. 3, 2015).

In reopening summary judgment, the district court asked the government to file a brief “direct[ing] the court to admissible, objective evidence in the Phase One record other than [the government’s medical expert’s] testimony, that would prove falsity.” In its brief, the government argued that it was a condition of payment that the hospice’s medical records contain certificates of terminal illness (COTIs) and “clinical information and other documentation that support” a terminal prognosis. The government noted that the entire medical records for all patients at issue were admitted into evidence, and “[b]ased on the objective facts contained in (or missing from) the medical records, and with the assistance of [three weeks of testimony from the government’s expert,] Dr. Liao, the jury had more than sufficient evidence to determine that AseraCare submitted false claims for patients whose medical records did not support a terminal prognosis.” The government also pointed to evidence it had presented at trial to rebut the “reliability of the COTIs” in the records, including evidence “connected in time and location to the patients at issue” that AseraCare employees “had a deliberate practice of not giving physicians the relevant, accurate, and complete information about patients when asking doctors to sign the COTIs, and that in practice AseraCare’s management circumvented or marginalized physicians in order to admit or retain Medicare hospice patients who were not terminally ill.”

In granting summary judgment, the district court rejected the government’s supposed objective evidence of falsity. The district court explained that the government could not point to any objective evidence of falsity – it did not challenge the existence of a certificate of terminal illness with a valid signature of the certifying physician for each of the claims and patients at issue; it could not point to evidence that the certifying physician relied on any false or incorrect information, or that clinicians withheld information from the certifying physicians; and it represented to the court that it did not intend to use the relators’ or clinicians’ testimony to prove falsity as to any of the identified patient. As the district court observed, “If the court were to find that all the Government needed to prove falsity in a hospice provider case was one medical expert who reviewed the medical records and disagreed with the certifying physicians, hospice providers would be subject to potential FCA liability any time the Government could find a medical expert who disagreed with the certifying physician’s clinical judgment.  The court refuses to go down that road.”

This decision is a significant outcome for providers facing FCA claims based on medical necessity, as the question of objective falsity undoubtedly will be the pivotal question in determining whether such FCA cases will be allowed to proceed in such cases.