In a long-awaited opinion, on September 9, 2019, the U.S. Court of Appeals for the Eleventh Circuit in United States v. Aseracare, Inc., et al, unanimously vacated AseraCare’s False Claims Act (FCA) victory and remanded the case for further proceedings.[1] While this might seem a victory only for the Government at first blush, the opinion contains key takeaways for defendants that will likely reach far beyond just this case.

Importantly, even though the Eleventh Circuit vacated the district court’s grant of summary judgment to AseraCare, it affirmed the district court’s conclusion that a clinical judgment of terminal illness warranting hospice benefits under Medicare cannot be deemed false, for purposes of the FCA, when there is only a reasonable disagreement between medical experts as to the accuracy of that conclusion, with no other evidence to prove the falsity of the assessment. The Eleventh Circuit also concluded, however, that the Government should have been allowed to rely on the entire record, not just the trial record, to prove otherwise. The Government was precluded from doing so, the Court found, due to an earlier decision by the district court to bifurcate proceedings into two phases: one on falsity, and the other on the remaining elements of the FCA.

In affirming the district court’s holding regarding clinical judgment, the Eleventh Circuit remarked that it appears to be the “first circuit court to consider the precise question at issue here,”[2] and is an extraordinary move that provides hospice facilities, hospitals, and providers more generally with a degree of assurance that a reasonable disagreement between clinicians in a courtroom, without other evidence of objective falsehood, does not create a jury question and cannot serve as the basis for an action under the FCA: “While there is no question that clinical judgments must be tethered to a patient’s valid medical records, it is equally clear that the law is designed to give physicians meaningful latitude to make informed judgments without fear that those judgments will be second-guessed after the fact by laymen in a liability proceeding.”[3]

Factual and Procedural History

AseraCare operates a network of hospice facilities that provide end-of-life care to elderly patients. A hospice claim is eligible for Medicare reimbursement if certain requirements are met, including that the services are reasonable and necessary and the patient’s attending physician, if any, and the medical director certify that a beneficiary is “terminally ill”—meaning that the patient’s life expectancy is six months or less. In 2008, three former AseraCare admission nurses filed a qui tam suit alleging that AseraCare violated the FCA, because it falsely certified patients as terminally ill on hospice claims submitted to the federal Government for reimbursement by Medicare.[4] The Government intervened, alleging that AseraCare knowingly employed reckless business practices that enabled it to admit, and receive reimbursement for, patients ineligible for the Medicare hospice benefit.[5] The case ultimately went to trial.

To prevail on an FCA claim in this context, the Government had to show that: (1) AseraCare made a false statement; (2) with the requisite knowledge (whether actual knowledge, deliberate ignorance, or reckless disregard) of the statement’s falsity at the time it was made; (3) the false statement was material to the Government’s decision to pay; and (4) it caused the Government to make a Medicare payment. Fearing jury confusion, the U.S. District Court for the Northern District of Alabama made the unprecedented decision to bifurcate trial and have a jury decide the falsity element separately from the other three elements and the Government’s common-law claims.[6] In accordance with this rationale, during Phase One, the district court allowed general testimony regarding AseraCare’s business practices and claim-submission process, but only to contextualize, and not to prove, the falsity of the Medicare claims at issue.[7]

The trial proceeded, and the jury returned a partial verdict against AseraCare on the question of falsity. The jury relied on testimony from the Government’s expert witness who testified that, in his medical opinion, a large number of the patients at issue were not terminally ill.[8] Notably, the Government’s witness changed his opinion concerning the eligibility for hospice services of certain patients over the course of the proceeding and declined to conclude that AseraCare’s physicians had lied about their clinical judgment or even that their clinical judgments were unreasonable or wrong.[9] Nevertheless, the jury found AseraCare’s Medicare submissions to be false on the basis of a jury instruction that “a claim is ‘false’ if it is an assertion that is untrue when made or used” and that “claims to Medicare may be false if the provider seeks payment, or reimbursement, for health care that is not reimbursable.”[10]

Following the verdict, AseraCare argued that the jury instructions articulated the wrong legal standard and asked the Eleventh Circuit to set aside the verdict. The district court agreed, concluding that the proper jury instructions would have advised 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.[11] In a final twist, the district court went one step further and granted summary judgment in AseraCare’s favor, sua sponte, on the basis of the newly adopted legal standard.[12] The Government’s appeal to the Eleventh Circuit followed.

Proving Objective Falsity for FCA Claims in a Clinical Discretion Context

Federal regulations establish that before a physician certifies a patient as terminally ill, he or she must review the patient’s diagnosis, medical record, other health conditions, and other clinically relevant information. Central to the Eleventh Circuit’s decision in this case, the Government had not alleged that AseraCare lied to certifying physicians or forged medical documentation. The underlying medical records were stipulated to be accurate and comprehensive, and all were signed by the appropriate medical personnel. Therefore, a central question was: how can the Government prove that a physician’s clinical judgment is objectively false for the purposes of alleging a false claim?[13]

In determining falsity under the FCA, the district court held that the Government must show something more than a mere difference of opinion between physicians concerning the prognosis of a patient’s likely longevity in order to establish objective falsity. The Eleventh Circuit agreed with the lower court, finding that:

in order to properly state a claim under the FCA in the context of hospice reimbursement, a plaintiff alleging that a patient was falsely certified for hospice care must identify facts and circumstances surrounding the patient’s certification that are inconsistent with the proper exercise of a physician’s clinical judgment. Where no such facts or circumstances are shown, the FCA claim fails as a matter of law.[14]

In short, the Eleventh Circuit opined that objective falsehood could be shown if the certifying physician failed, for example, to review a patient’s medical records, or if a plaintiff could prove that the physician did not, in fact, subjectively believe that his patient was terminally ill at the time of certification. [15] In other words, a physician’s clinical judgment can be shown to be objectively false where verifiable facts demonstrate that the reasoning underlying the clinical judgment is flawed.[16]

The Eleventh Circuit also explained that the issue in this case, where the eligibility criterion—“terminally ill”—presents a question of debatable clinical judgment, and therefore may not lend itself to just one determination, based on the proper exercise of that judgment. This, the Court reasoned, was distinguishable from the case law relied on by the Government. [17] United States ex rel. Walker v. R&F Properties of Lake County, Inc., was distinguishable because the eligibility criterion, although subject to multiple interpretations because of ambiguous statutory language, only had one correct interpretation.[18] In United States v. Paulus, the Government’s expert testimony suggested that no reasonable doctor could arrive at the same medical opinion or determination as the defendants, which diverged from the Government’s expert testimony here.[19] And finally, in United States ex rel. Polukoff v. St. Mark’s Hospital, the court found that the doctor’s certification to the government can be deemed a “false statement” where the physician falsely represented that patients met certain indications set forth in medical guidelines for a procedure if the patient did not, in fact, meet said indications.[20]

The Eleventh Circuit acknowledged that its ruling will likely make it more challenging for an FCA plaintiff to present evidence of an objective falsehood in hospice cases, but noted that Congress and CMS could solve this problem (to the extent that it is one) by imposing a more rigid set of criteria for eligibility determinations that would minimize the role of clinical judgment.[21]

Medical Records Play a Supporting Role Determining Medicare Reimbursement Eligibility

With respect to medical records, the Eleventh Circuit rejected the Government’s argument that the documentary record underpinning a physician’s clinical judgment must prove the prognosis as a matter of medical fact. Rather, a patient’s medical records need only support the physician’s determination that the patient is terminally ill—not establish the prognosis as a matter of medical fact. The federal statute at issue provides that a patient is eligible for the Medicare hospice benefit only if:

  1. in the first 90-day period . . . (I) the individual’s attending physician . . . and (II) the medical director (or physician member of the interdisciplinary group described in [42 U.S.C. § 1395x(dd)(2)(B)]) of the hospice program providing . . . the care, each certify in writing at the beginning of the period, that the individual is terminally ill (as defined in [42 U.S.C. § 1395x(dd)(3)(A)]) based on the physician’s or medical director’s clinical judgment regarding the normal course of the individual’s illness, [and]
  2. in a subsequent 90- or 60-day period, the medical director or physician . . . recertifies at the beginning of the period that the individual is terminally ill based on such clinical judgment.[22]

Under the Eleventh Circuit’s interpretation, different physicians can read the same medical records and find support for different prognoses—and both can be right. Indeed, the Court said that the requirement that physicians attach medical records to Medicare claims is only there to ensure that physicians’ eligibility certifications have a clinical basis.[23]

This finding has potentially far reaching implications for the health care industry. In addition to hospice, there are a number of other contexts where physicians’ subjective clinical determinations serve as a basis for Medicare reimbursement. For example, Medicare reimbursement for services provided in inpatient hospitals, long-term care hospitals, inpatient psychiatric facilities, and inpatient rehabilitation facilities is conditioned upon criteria that rely in part upon a provider’s clinical judgment. This ruling is therefore of relevance to an array of provider types within the health care industry and possibly to other claims for government reimbursement where proper reimbursement is predicated on professional judgement.

Conclusion

While the Eleventh Circuit’s holding, emphasizing the requirement of an objective falsehood, is undoubtedly a victory for FCA defendants broadly, AseraCare will still now have to show at the district court that no triable issue exists regarding falsity after the court considers evidence: (1) from the first phase of the trial that the Government asserts tended to show knowledge of the falsity of the claim, and (2) that the Government intended to present in the second phase of the trial to further show AseraCare’s alleged awareness that it was submitting claims that did not reflect a physician’s good faith clinical judgment and prognosis for each patient.[24]

It also remains to be seen whether other district courts and sister circuits follow the Eleventh Circuit’s lead when faced with cases involving challenges to medical necessity determinations and other professional judgment cases that involve more defined eligibility requirements or standards where the Government may argue that the physician’s or provider’s judgement is not central to reimbursement. Nonetheless, the Court’s ruling is highly favorable to health care providers broadly as it reaffirms deference to practicing physicians’ clinical judgment.