False Claims Act (“FCA”) cases involving medical necessity continue to receive great attention. A March 7, 2017 opinion that overruled a jury’s criminal fraud conviction of a cardiologist demonstrates the broader implications for FCA decisions in this space. (U.S. v. Paulus, No. 15-15-DLB-EBA, 2017 BL 70676 (E.D. Ky. Mar. 7, 2017)) Although the FCA is a civil statute, the court held that, in the context of conflicting expert opinions about medical necessity, “the concepts are equally applicable to the criminal statutes that require a false statement.” Utilization of FCA decisions in other areas of health care fraud is notable. Health care companies should watch future decisions to determine if this becomes a trend.

In 2015, Dr. Paulus was indicted by a federal grand jury on allegations that he performed unnecessary cardiac procedures and falsely documented the extent of lesions and then submitted the false and fraudulent claims. After a jury trial, Dr. Paulus was convicted of health care fraud and making false statements relating to health care matters. A motion for judgment of acquittal ensued.

A conviction for health care fraud requires the government to prove that a defendant “(1) knowingly devised a scheme or artifice to defraud a health care benefit program in connection with the delivery of or payment for benefits, items, or services; (2) executed or attempted to execute this scheme or artifice to defraud; and (3) acted with intent to defraud.” A conviction for making false statements relating to health care matters requires the government to prove that a defendant “knowingly and willfully made false statements or representations in connection with the delivery of or payment for health care benefits, items, or services and in a matter involving a health care benefit program.” Both statutes require the proof of “falsity and fraudulent intent.” For each theory, the government needed to “prove that Dr. Paulus’s assessment of the degree of stenosis constitutes a false statement, and that he made those false statements with fraudulent intent.”

In support of its theory, the government presented various forms of evidence at trial. This included (1) direct evidence in the form of angiograms and expert opinion testimony that stents were inserted into patients whose blockages were below a standard threshold, and (2) circumstantial evidence of profits, volumes of procedures, and testimony from co-workers and patients. The Court engaged in a detailed analysis of the government’s evidence and found that neither the direct nor circumstantial evidence supported a criminal conviction.

The Court ruled that the “false statements must be a factual assertion that is subject to proof or disproof.” Ultimately, the disagreement between the government and Dr. Paulus boiled down to “whether the degree of stenosis is an objective fact, which can be false, or a subjective opinion, which is not subject to proof or disproof.” (emphasis in original).

The government’s primary expert witnesses acknowledged that angiograms are subject to “inter-observer variability;” meaning that it is common for two or more cardiologists to review the same angiogram and have different conclusions about the nature and extent of the blockage. One of the experts also testified that “estimating the percentage of stenosis can be an imprecise exercise.” The evidence at trial showed that inter-observer variability can account for greater than 10-20% variability.

Dr. Paulus relied on several FCA cases to support his theory that differing medical opinions is insufficient proof. A year ago, an Alabama district court granted summary judgment for AseraCare and emphasized that contradicting expert opinions over medical necessity, alone, cannot constitute falsity under the FCA. We have previously written on this issue https://www.bryancave.com/en/thought-leadership/aseracare-defeats-doj-false-claims-act-suit.html. Other courts have reached similar conclusions, holding that “liability must be predicated on an objectively verifiable fact” and “[e]xpressions of opinion, scientific judgments, or statements as to a conclusion about which reasonable minds may differ cannot be false.”

The direct evidence presented supports that angiograms and blockages are ambiguous, and that disagreement between cardiologists does not mean one is lying. Accordingly, the Court held that “the evidence . . . failed to prove that degree of stenosis is an objectively verifiable fact . . . Instead, the evidence in this case established that degree of stenosis is a subjective medical opinion, incapable of confirmation or contradiction.” (emphasis in original).

The Court also relied on the legislative history of the health care fraud statute, which, like the line of FCA cases cited, states that the health care fraud statute is “not intended to penalize a person who exercises a health care treatment choice or makes a medical or health care judgment in good faith simply because there is a difference of opinion regarding the form of diagnosis or treatment.” H.R. REP. NO. 104-736, at 258 (August 21, 1996), reprinted in 1996 U.S.C.C.A.N. 1990, 2071. Accordingly, the Court held that “the statutes targeting health care fraud do not criminalize subjective medical opinions where there is room for disagreement between doctors.”

The Court was careful to point out that “[e]very doctor cannot hide behind the guise of subjective medical judgment. Instead, where the necessity of the service is capable of confirmation or contradiction and the doctor’s stated ‘opinion’ can be proven to be objectively false, that case (if proven beyond a reasonable doubt) can sustain a conviction.” The Court distinguished Dr. Paulus’s situation from cases in the Fourth and Fifth Circuits cited by the government, because in those cases both the direct angiogram, the expert testimony evidence and the circumstantial evidence were much stronger to prove falsity. Significantly, the circumstantial evidence in the Fourth Circuit case consisted of statements by the defendant, falsification of symptoms, an attempt to shred patient files and a financial motive. The circumstantial evidence in the Fifth Circuit case included evidence that “after the government executed its search warrant, the defendant ordered fewer procedures, revised existing patient medical findings, and cancelled already-scheduled procedures.”