Courts allow False Claims Act cases to proceed despite providers’ claims of honestly held clinical judgment

A recent decision by the Ninth Circuit Court of Appeals joins a growing trend of appellate courts that limit medical providers’ ability to defend themselves in False Claims Act (FCA) cases challenging the medical necessity of services to patients. Historically, without substantial appellate court guidance, courts in many jurisdictions and the US Department of Justice (DOJ) were free to defer to a physician’s determination that a procedure was “medically necessary” and, thus, reimbursable by Medicare. Because courts stayed out of providers’ clinical thought processes and conclusions, providers had a strong ground to force dismissal of FCA cases that questioned their sincere medical judgment and accused them of submitting false claims for reimbursement from Medicare and other government-sponsored health insurance programs.

That deference was substantially undermined by a string of recent decisions by federal appellate courts around the country. Most recently, the Ninth Circuit Court of Appeals joined the growing chorus in Winter ex rel. U.S. v. Gardens Regional Hospital and Medical Center.

Winter: medical opinions can give rise to FCA liability

In Winter, the plaintiff-relator was an experienced registered nurse and the (former) director of care management at Gardens Regional Hospital, the defendant. Winter was responsible for reviewing medical records to evaluate whether hospital admissions were “medically necessary” and, thus, reimbursable by Medicare. After a change in hospital management, the relator allegedly noticed a spike in inpatient admissions, and she ultimately claimed that the hospital’s new practices resulted in medically unnecessary hospital admissions that involved more than $1.2 million in improper bills to Medicare in a two-month period.

According to the relator, in an effort to have the hospital remediate its new billing practices, the relator internally reported the alleged wrongful billing practices to the hospital’s management multiple times but each effort was rebuffed. Eventually, the relator claims she was fired and her job was filled by an employee who had not challenged the hospital’s new billing practices.

In response, Winter initiated a qui tam action alleging that the defendants submitted claims to Medicare falsely certifying that the suspect inpatient admissions were “medically necessary.” The United States Attorney’s Office for the Central District of California declined to intervene in the matter and the district court later dismissed Winter’s case for failing to state a claim. In doing so, the district court observed that representations concerning a provider’s clinical judgment of medical necessity could never satisfy the FCA’s requirement to prove a defendant “knowingly made an objectively false statement,” because “subjective medical opinions . . . cannot be proven to be objectively false.”

The Ninth Circuit Court of Appeals reversed the district court’s dismissal on appeal. The court held that a provider’s clinical judgment can trigger FCA liability just like “any other representation,” if the opinion (1) is not honestly held or (2) implies the existence of facts – namely, that a procedure is necessary, “in accordance with accepted standards of medical practice – that do not exist.” In other words, a claim is “false” if the provider knows it is false or if it was not a reasonably held opinion.

A growing trend

Winter’s holding is a rejection of the traditional deference that some courts have shown to physicians’ clinical judgments, even if those honestly held clinical judgments do not comport with “accepted standards of medical practice.” The case is also significant because it joins a growing trend of appellate courts holding that an FCA action can be sustained based on a physician’s sincere opinion. Indeed, only weeks before Winter was decided, the Third Circuit Court of Appeals entered its decision in U.S. ex rel. Druding v. Care Alternatives rejecting a “bright-line rule that a doctor’s [honestly held] clinical judgment cannot be false.” That court held, as in Winter, that a physician’s judgment may be scrutinized and considered false.

Winter and Druding also follow the Eleventh Circuit Court of Appeals’ recent decision in United States v. AseraCare. There, the government accused the defendant, an operator of approximately 60 hospice care facilities, of improperly seeking reimbursement for hospice treatment from Medicare.

Specifically, the government claimed that the defendant’s physicians wrongly determined that many of their patients were terminally ill at the time they prescribed hospice care. Accordingly, the government alleged that their claims for reimbursement for hospice care were actionable under the FCA.

The government acknowledged that the defendant had submitted accurate and comprehensive documentation of each patient’s medical condition and that its certifications of terminal illness were signed by the appropriate medical personnel. However, the government’s case rested on its expert’s testimony that the patients were not, as a medical fact, terminally ill at the time the defendant collected reimbursement for hospice care.

Ultimately, like the courts in Winter and Druding, the Eleventh Circuit held that a claim is “false” for FCA purposes if the underlying opinion of medical necessity is not honestly held or is unreasonable. The court elaborated that a clinical judgment can be shown to be unreasonable in a number of ways, including (1) when the certifying physician has an “ill-informed” clinical judgment, such as one formed without the benefit of the physician’s review and understanding of the patient’s records and conditions or (2) the plaintiff proves that no reasonable physician would have made the same clinical judgment.

That being said, the court highlighted that “a reasonable difference of opinion among physicians reviewing documentation ex post is not sufficient on its own to suggest” falsity. In other words, a physician’s properly formed judgment is not “false” merely because another physician disagrees with it.

Takeaways

The Winter, Druding, and AseraCare decisions result in less deference to medical professionals and will make it easier for relators and the government to successfully prosecute FCA cases. The cases highlight that it is critical for providers to stay up to date with current medical trends and regulatory and sub-regulatory guidance relating to medical processes so that providers act within the bounds of commonly accepted medical practices. Similarly, it is a good idea for physicians and other provider-management employees to have sufficient operating procedures, checklists, and internal guidance to ensure that their medical judgments are not only sound, but also properly supported to substantiate payor reimbursement.

The cases also serve as a reminder for providers to take internal complaints seriously. It is particularly important that an employer commit reasonable resources to investigate allegations that it may be submitting false claims for reimbursement from any government entity. If substantiated, these claims can subject a company to substantial civil fines and penalties and criminal prosecution. Prudent providers plan to work with experienced counsel to investigate any allegations that they are improperly billing Medicare and other government-sponsored health insurance programs.

For more information about any of these topics, please contact the authors.