On August 12, 2016, the U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment with respect to FCA claims asserted against an anesthesia practice based on the theory that the practice’s physicians billed Medicare for anesthesia services without being present in the operating room during the patients’ “emergence” from anesthesia. In U.S. ex rel. Donegan v. Anesthesia Associates of Kansas City, PC, the Eight Circuit concluded that the relator failed to establish that the practice acted with the requisite knowledge because the practice’s interpretation of the billing regulation at issue was “objectively reasonable.”

The relator alleged that the practice improperly billed the government at the “medical direction” level of billing for anesthesia services. Medical direction billing requires that an anesthesiologist satisfy seven different steps, including participating in “the most demanding aspects of anesthesia pain including, if applicable, induction and emergence.” The relator alleged that the practice failed to satisfy that step because its anesthesiologists were almost never present during “emergence” since they typically did not see the patient after surgery until the patient was delivered to the Post-Anesthesia Care Unit (PACU) for recovery. Under even the broadest definition, the relator argued that “emergence” ends when the patient is turned over to the PACU staff.

The Eighth Circuit affirmed the district court’s determination that the relator failed to submit evidence refuting the defendant’s “strong showing” that its interpretation of the billing regulation was objectively reasonable. The Eighth Circuit noted that CMS had not issued guidance on the meaning of the term “emergence,” and that term has not been defined in LCDs or by professional organizations. And, medical experts for both parties agreed that “emergence” is a medical term that refers to a post-surgery recovery process that can extend into the recovery room.

Under those circumstances, the Eighth Circuit concluded that the practice’s interpretation of the regulation was objectively reasonable. The Eighth Circuit rejected the relator’s argument that “emergence” should be interpreted to end before transfer to the PACU, referring to that contention as “a claim of regulatory compliance, not an FCA claim of knowing fraud.”

In an amicus brief, the United States argued against adopting a sweeping rule that a defendant’s reasonable interpretation of an ambiguous regulation precludes FCA liability. The Eighth Circuit clarified that summary judgment would not have been proper, if evidence of government guidance existed that warned “a regulated defendant away from an otherwise reasonable interpretation of an ambiguous regulation.”

The Eighth Circuit’s opinion is consistent with the Seventh Circuit’s recent opinion affirming summary judgment for the defendant on similar grounds in U.S. ex rel. Sheet Metal Workers International Association v. Horning Investments, LLC (which was discussed here).

Notably, the Eighth Circuit also rejected the relator’s assertion that the practice violated the FCA by failing to document satisfaction of the participation step in patients’ medical records. The relator obtained through discovery reimbursement claims billed at the “medical direction” level and sought summary judgment on hundreds of claims that contained no documentation of the anesthesiologist’s presence for emergence.

Affirming the district court’s denial of summary judgment on those claims, the Eighth Circuit noted that the regulation required documentation in the patient’s medical record, which is distinct from the defendant’s billing records. Although the relator had produced evidence that 31 medical records did not contain the required documentation, the Eighth Circuit agreed with the district court’s conclusion that evidence that the practice “may have negligently submitted 31 of 13,000 Medical Direction claims” did not constitute an FCA violation.

The Eighth Circuit reaffirmed its previous holding that “the FCA does not encompass those instances of regulatory noncompliance that are irrelevant to the government’s disbursement decisions,” but it did not cite or reference the U.S. Supreme Court’s recent decision in Universal Health Services, Inc. v. United States ex rel. Escobar, which addressed the issue of materiality to payment (and was discussed in detail here).