We said we would provide updates based on any developments in U.S. ex rel. Paradies v. AseraCare, Inc., and we are reporting earlier than anticipated. Instead of moving the case along to the second phase of the bifurcated trial to address scienter, the court granted AseraCare’s motion for a new trial on the issue of falsity after expressing concern that it had “committed major reversible error in the jury instructions.” Thus, the parties are now faced with re-trying the question of whether 121 hospice claims were false–an issue that took almost two months to try the first time.

At issue are the judge’s instructions relating to the issue of falsity. In earlier stages of the case, the parties disputed the proper standard of falsity, with AseraCare arguing that to establish falsity, the government must show that that a certifying physician did not or could not have believed, based on his clinical judgment, that a patient was eligible for hospice. AseraCare argued that the government’s medical expert was second-guessing the certifying physician’s judgment, evidence not sufficient to prove that the claims were objectively false. The government, in contrast, argued that the falsity inquiry turned on medical record information, and not the physician’s certification: it suggested that a hospice claim is false when clinical information and other documentation in the medical record does not support a terminal prognosis.

After trial, the judge cited a concern that the jury instructions had two errors. First, the judge expressed concern that she hadn’t instructed the jury about objective falsity or objective evidence of falsity; second, the judge said the “bigger error I think I made was in overruling the defendant’s request for an instruction that said… opinion is not enough or difference of opinion is not enough.” AseraCare moved orally for a new trial, and the judge granted the motion.

While a trial of False Claims Act (FCA) claims is unusual, even more unusual is for a judge to order a new trial after a jury verdict. However, the judge was correct to recognize the errors in the jury instructions, as differences in medical judgment or opinions certainly should not be sufficient to establish fraud under the FCA.

The court also denied the government’s request to stay the trial proceedings. We will watch to see whether the re-trial based on revised instructions addressing objective falsity and physician differences of opinion alter the outcome of the first phase on the falsity of the claims.