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July 12, 2016 Top Story

Evidence Lacking in False Claims Act Suit

A difference of opinion among physicians does not establish fraud

Sara E. Costello

A disagreement between medical experts regarding hospice eligibility is not enough to establish falsity under the False Claims Act (FCA), 31 U.S.C. §§ 3729–3733. United States v. AseraCare Inc. The court in AseraCare bifurcated the trial into two phases—first addressing the falsity of the claims; and subsequently addressing the hospice provider’s knowledge of the claims, damages, and any additional issues. The bifurcation of issues worked in the defendant’s favor. ABA Section of Litigation leaders say that the decision highlights the Department of Justice’s (DOJ) priority of FCA enforcement, and that future defendants will seek to repeat the bifurcation strategy used in this case.

A Long Road to Summary Judgment

After several former employees filed a FCA lawsuit in the U.S. District Court for the Northern District of Alabama against the defendant hospice provider, the DOJ intervened. The suit alleged that the defendant fraudulently billed Medicare for patients that were not terminally ill and eligible for hospice care. Specifically, the government claimed that the defendant’s medical records did not “support its hospice eligibility certifications.”

In order to prove its FCA claims, the court permitted the government to use statistical sampling of the defendant’s patients’ medical records. The court also bifurcated the trial into two phases. The first phase concerned the falsity of the claims, and the second phase involved the hospice provider’s knowledge of the claims, damages, and any additional issues. At the conclusion of the trial on falsity, the jury found that the majority of the sample hospice claims submitted by the defendant to Medicare were false.

Upon sua sponte reexamining the jury instructions, the court concluded that it misstepped. Specifically, the court erroneously informed the jury on the legal standard for falsity in FCA cases involving physicians’ clinical judgment about life expectancy. Because of this reversible error, the court granted the defendant’s motion for a new trial. But the court delayed the new trial to reopen summary judgment briefing on the issue of falsity.

A Difference of Opinion Is Not Enough

Under the FCA, evidence of “an objective falsehood” is required, the court noted. In granting summary judgment for the hospice provider, the court explained that a “difference of opinion between physicians, without more, is not enough to show falsity.”  Because the government relied solely on a medical expert that disagreed with the hospice eligibility determinations, the court held that it did not meet the falsity standard. In support of its ruling, the court cited guidance from the Centers for Medicare and Medicaid Services (CMS). CMS highlights the role that physicians’ clinical judgment plays in making hospice certifications.

Highly critical of DOJ’s preparation, the court found that the government’s discovery answers were “a major obstacle” to its ability to prove falsity. In its responses, the government did not state that it would use testimony from relators or clinicians to show  falsity. Instead, the government only referenced the planned medical expert testimony.  

What to Expect after AseraCare

“Clearly, bifurcating the issues was helpful to the defendant,” says Maura K. Monaghan, New York, NY, cochair of the Section of Litigation’s Health Law Litigation Committee. As a result, “more and more defendants will be vociferously arguing for bifurcation,” she observes. But “a number of judges do not want to bifurcate cases because they believe it will cause twice as much work for the court and the jury,” notes Grant C. Killoran, Milwaukee, WI, newsletter editor of the Section’s Health Law Litigation Committee.

“DOJ will also likely be more aggressive in coupling factual proof with expert testimony to show the defense bar that this case does not represent a broader weakness,” Monaghan believes. “Relators and the government will be certain to offer the widest array of evidence available,” says Douglas P. Dehler, Milwaukee, WI, Section member and longtime FCA practitioner.

Still, the impact of AseraCare may be mitigated by its unique facts and procedural posture. “It is not your typical FCA case,” Killoran says. “It is more difficult to conceptualize because you are dealing with the age-old question of how long someone will live.” 

Is the Practice Area Growing?

In its decision, the court noted that FCA cases were “particularly hot in 2015.”  In Monaghan’s view, it is likely to stay that way. “DOJ has identified two areas of priority for FCA enforcement—skilled nursing facilities and hospitals’ payment of compensation,” Monaghan explains. Despite the ruling in AseraCare, “DOJ is committed to pursuing those priorities.” At the same time, “relators recovered a record amount under the FCA last year, so they certainly are incentivized to pursue FCA cases too,” Monaghan says. 

Relators have seen “an increase in their amount of recovery,” agrees Dehler. Relators “are choosing to pursue cases even when the government does not intervene,” he explains. But pointing to “DOJ fraud statistics,” Dehler notes that “qui tam filings are on the decline.


Sara E. Costello is an associate editor Litigation News.

Keywords:  FCA, false claims, Medicare

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