Eleventh Circuit Makes It "Objectively" More Difficult for Relators and the Government to Prove Falsity in AseraCare

The AseraCare case concerns the hospice benefit under Medicare.³ A patient is eligible for the hospice benefit if he or she is terminally ill, meaning that he or she has six months or less to live.  Only a physician can diagnose a patient as “terminally ill.”  That diagnosis must be included in the patient’s written medical record, along with supporting documentation.⁴ Once admitted to hospice, the patient will be evaluated periodically.⁵

The Medicare regulations recognize that a physician’s judgment will not be perfect.⁶ For instance, sometimes patients live longer than six months.  And in the best of cases, patients are ultimately discharged from hospice and make remarkable recoveries.  Medicare will not deny benefits merely because such patients enjoy an unusually positive outcome.

Notwithstanding Medicare’s deference to a physician’s clinical judgment, one could imagine a scenario in which a physician certifies patients for hospice care knowing that the patients were not eligible.  That is what the AseraCare case is all about.  In AseraCare, the relators alleged that the owner and operator of over 50 hospices in nearly two dozen states (AseraCare) was knowingly claiming hospice benefits for patients who were ineligible.

The government intervened, relying on a statistical sampling model, which, while hotly contested in district court, was not addressed on appeal.  The model was based on a universe of 2,180 patients for whom AseraCare billed Medicare for 365 continuous days of hospice care.  The government took a sample of 223 patients from the universe of 2,180 patients.  Within that sample, according to the government’s expert, 123 patients were ineligible for hospice care under Medicare.  Should it have prevailed as to this group, the government intended to extrapolate from the sample to impose further liability on AseraCare on the broader universe of hospice patients for whom AseraCare received Medicare payments.

Seeking summary judgment, AseraCare argued that the government’s medical expert opinion, without more, was not enough to establish falsity of AseraCare’s claims.  The district court denied AseraCare’s motion and set the case for trial.⁷

The AseraCare Trial

It is unusual for FCA cases to go to trial.  In most cases, it is too costly for defendants and there is too much at stake.  Trial introduces the possibility of treble damages, attorneys’ fees, civil penalties, exclusion from federal health programs, and the notoriety that comes with a fraud judgment.  For relators and the government, trial is a substantial commitment of time and resources.

But following the landmark decision of Universal Health Services, Inc. v. United States ex. rel Escobar,⁸ trials – even ones with significant amounts of damages at stake – are less frequently the exception.  Escobar imposed a rigorous standard of materiality on FCA cases premised on certifications with statutory or contract requirements, such as cases involving violations of Medicare regulations.  Materiality determinations – which go to whether the violation mattered to the government’s decision to pay claims – are factually intensive.  As a result, FCA cases will more frequently go to discovery and trial.   

The AseraCare trial was unique not merely because it occurred, but for how it occurred.  The district court bifurcated the trial to two phases, the first of which would pertain to falsity, and the second would focus on AseraCare’s knowledge of the falsity.⁹ The district court further excluded from the falsity phase any evidence of AseraCare’s knowledge of falsity.  In theory, this procedure made sense because the jury would not be prejudiced by evidence of AseraCare’s knowledge as the jurors tried to determine whether the claims were false to begin with.  This led, predictably, to disputes over whether certain evidence went to falsity or knowledge.  With regard to “pattern and practice” evidence,¹⁰ in particular, the government argued strenuously that it went to both knowledge and falsity.¹¹ The district court disagreed and kept the evidence out of the first phase.

The first phase lasted eight weeks.  The government’s medical expert testified at length about how 123 of the 223 patients sampled (from a universe of 2,180) were not, in fact, terminally ill and thus were ineligible for hospice benefits.  The expert did not opine that AseraCare’s medical expert – who affirmed the diagnoses – was “wrong.”¹²  The jury was thus presented with “a fundamental difference of professional opinion” and had its role reduced to reviewing medical records and deciding which expert’s testimony was more persuasive.¹³  This might be appropriate in certain types of negligence cases, but it made little sense for the purpose of assessing falsity under the FCA.  In FCA cases, a claim is either objectively false or it is not.¹⁴ No party disputed that each patient’s certifications were supported and documented.  They merely disagreed about whether the certifying physicians were correct in their clinical judgments.

After the jury found overwhelmingly for the government (finding that AseraCare submitted false claims for 104 of the 123 patients at issue),¹⁵ the district court began to second guess letting the jury decide which expert’s testimony was more persuasive.  The trial itself left the court “convinced” that “a difference of opinion is not enough,” and that it had committed reversible error by failing to instruct the jury as such.¹⁶ The court set aside the jury’s verdict and ordered a new trial with new jury instructions.

But it also went one step further.  After ordering a new trial, the district court (sua sponte) ordered summary judgment briefing on the question of whether the evidence adduced in at trial could, as a matter of law, establish falsity.  The court granted summary judgment to AseraCare, holding that the government had “presented no evidence of an objective falsehood for any of the patients at issue.”¹⁷ The government appealed both summary judgment and the grant of a new trial.

The AseraCare Appeal

The legal issue prompting a new trial is the more consequential issue, and it was addressed first by the Eleventh Circuit.  Canvassing the statutory and regulatory framework for hospice benefits under Medicare, the court found that the “framework signals, and CMS itself has acknowledged, that no [] certitude can be expected of physicians in the practice of treating end-of-life illness.”¹⁸ Because the certification implicates the physician’s clinical judgment, that certification cannot be false unless it reflects an “objective falsehood.”¹⁹  As the Eleventh Circuit put it, the trial court should have instructed the jury “(1) that the FCA’s falsity element requires proof of an objective falsehood, and (2) that a mere difference of opinion between physicians, without more,” is not enough.²⁰

So, what “more” would suffice?  The Eleventh Circuit offered three examples:

1.  Where a certifying physician fails to review a patient’s medical records or otherwise familiarize himself with the patient’s condition before making the diagnosis.

2.  Where a plaintiff proves that a physician did not, in fact, subjectively believe that his patient was terminally ill at the time of certification.

3.  Where expert evidence proves that no reasonable physician could have concluded that a patient was terminally ill given the relevant medical records.²¹

The Eleventh Circuit agreed with the trial court that FCA plaintiffs must prove more than a reasonable difference of medical opinion regarding a patient’s longevity.  Notably, "there [was] no dispute that each patient certification was supported by a meaningful set of medical records evidencing various serious and chronic ailments for which the patient was entitled to some level of treatment."²²

Despite agreeing with the district court on this point, the Eleventh Circuit reversed the grant of summary judgment.  The Eleventh Circuit reasoned that at least some of the evidence that was excluded at trial was probative of falsity, as well as knowledge.  Thus, the district court should have considered summary judgment, if at all, based on the whole record – not just the record admitted at trial.  On remand, the plaintiffs must “identify facts and circumstances surrounding the patient’s certification [for treatment eligibility] 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.”²³

Following the Eleventh Circuit’s decision, the AseraCare case now returns to the district court for new briefing on summary judgment and a potential new trial.

Implications of AseraCare: Mere Disagreement Among Medical Experts, Without More, Will Not Suffice To Prove Falsity Under The False Claims Act

Although the Eleventh Circuit’s decision extends the case for AseraCare, there is plenty of silver lining for defendants.  The primary holding – that mere disagreement of medical experts, without more, will not suffice to prove falsity – is a huge win for defendants.  The holding runs against the tide of two recent decisions, which seemed to lower plaintiffs’ burden in medical necessity cases.²⁴  Secondarily, while not forbidding the kind of bifurcation that occurred in the district court, the resulting confusion over the proper record – and the Eleventh Circuit’s intimation that evidence is not so easily bifurcated between falsity and knowledge – defendants are unlikely to see such bifurcation again in the future.  Finally, the AseraCare decision provides a helpful framework for plaintiffs.  Plaintiffs bringing FCA cases that depend on issues of clinical judgment will likely advance one (or more) of the three arguments listed above. 

1. U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1311 (11th Cir. 2002) (requiring plaintiff to provide some indicia of reliability that an actual false claim was submitted to the government to survive a motion to dismiss under rule 9(b)).
2. United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019).
3. For the applicable statutes and regulations, see id. at 1281 (citing 42 U.S.C. §§ 1395f(7)(A) (requiring physician certification that patient is “terminally ill”), 1395x(dd)(3)(A) (defining “terminally ill,” as a life expectancy of six months or less); 42 C.F.R. § 418.22(b)(2) (requiring accompanying “[c]linical information and other documentation that support the medical prognosis” to be included “in the medical record with the written certification”)); see also id. at 1284-85.
4. AseraCare, 938 F.3d at 1282-83 (citing statutes and regulations governing coverage).
5. Id. at 1282 (citing 42 U.S.C. § 1395f(7)(A)).
6. AseraCare, 938 F.3d at 1282 (quoting 75 Fed. Reg. 70372, 70488 (Nov. 17, 2010) (“Predicting life expectancy is not an exact science.”)).
7. The district court found AseraCare’s proposed “reasonable doctor” standard “appealing and logical,” though unprecedented in the Eleventh Circuit, and even certified the question for interlocutory appeal.  Id. at 1286.  Unfortunately for all involved, the court of appeals declined to step in at that time.  Id.  Had it done so, years of ultimately futile litigation might have been avoided.
8. 579 U.S. ____, 136 S. Ct. 1989 (June 16, 2016).
9. The bifurcation issue was not raised on appeal.  See AseraCare, 938 F.3d at 1287 n.5 (“The Government continues to complain on appeal that bifurcation of the trial was ‘fundamentally unfair’ and confused the issues, albeit it does not expressly challenge on appeal the district court’s decision.”).
10. This is evidence of what AseraCare typically did when admitting and certifying patients for hospice care.
11. Id. at 1287.
12. Id.
13. Id. at 1289.
14. On appeal, the Eleventh Circuit would address this issue, explaining that a “claim cannot be ‘false’ – and thus trigger FCA liability – if the underlying clinical judgment does not reflect an objective falsehood.”  Id. at 1296-97.  A battle of the experts relying on the same facts reaching two different conclusions cannot possibly reflect an objective falsehood – but instead reflects subjective disagreement.
15. Id. at 1289 (“At the conclusion of the parties’ cases, the court instructed the jury to answer special interrogatories regarding the prognoses of each of the 123 patients at issue. The jury ultimately found that AseraCare had submitted false claims for 104 patients of the 123 patients at issue during the relevant time periods.”).
16. Id. at 1290.
17. Id.
18. Id. at 1296.
19. Id. at 1297.
20. Id. at 1290 (emphasis in original).
21. Id. at 1303.
22. Id. at 1288.
23. Id. at 1297.
24. See U.S. v. Paulus, 894 F.3d 267 (6th Cir. 2018); U.S. ex rel. Polukoff v. St. Mark’s Hospital, 895 F.3d 730 (10th Cir. 2018). 

About the Authors

Robert "Bob" T. Rhoad is a partner at Nichols Liu LLP in Washington, DC.  Mr. Rhoad’s practice focuses on the defense of clients in cases under the federal False Claims Act (and its state and local analogs) and all other types of fraud and abuse matters from investigation, through litigation/trial, and on appeal.  He can be reached at [email protected] or 202-846-9807.

Matthew W. Turetzky is a senior associate at The Norton Law Firm P.C., a litigation boutique in Oakland, California.  Mr. Turetzky’s practice focuses on all aspects of high-stakes litigation, including bringing and defending cases under the federal and various state False Claims Acts.  He can be reached at [email protected] or 510-906-4905.