On March 4, 2020, in United States ex rel. Druding, et al. v. Care Alternatives, No. 18-3298, 2020 WL 1038083, at *1 (3d. Cir. Mar. 4, 2020), the Third Circuit held that medical expert testimony stating that patients did not qualify for hospice services was sufficient evidence to survive a motion for summary judgment in a False Claims Act (FCA)  healthcare fraud case. The court explained that such testimony created a genuine issue of material fact as to whether the claims at issue were false. In doing so, the Third Circuit rejected United States v. AseraCare Inc., 938 F.3d 1278 (11th Cir. 2019), in which the Eleventh Circuit held that a plaintiff must prove an “objective falsity” – more than a “mere difference of opinion between experts” – to survive summary judgment.[1] The AseraCare parties recently settled that case for $1 million, a move widely seen as a surrender by the Department of Justice (DOJ).

Commentators in the Medicare fraud space already have spilled significant ink on the Care Alternatives decision. After AseraCare, the case is a big win for DOJ. Here are some important, bite-sized takeaways.

• The court noted that “making a prognosis is not an exact science,” but that hospices are “required to make certain that the physician’s clinical judgment can be supported . . . .”[2]
• The FCA covers “false or fraudulent” claims for payment, and the Third Circuit held that opinions can be false for purposes of liability.[3]
• It also held that an “objective falsity” standard “conflates the elements of scienter and falsity.” Id. at *5. The court considered this distinction “[m]ore than a formality,” because it “avoid[s] the precise outcome in AseraCare [], where the district court folded the element of scienter into its ‘objective’ falsity test, but failed to fully consider evidence of scienter and, as a result, prematurely granted summary judgment.”[4]
• According to the Third Circuit, a statement can be false even when the facts in it are true if it is not compliant with regulatory instructions.[5] “In other words . . . FCA falsity simply asks whether the claim submitted to the government as reimbursable was in fact reimbursable. . . . [A] certification is false simply ‘if the procedure was not reasonable and necessary under the government’s definition of the phrase.’”[6] Remember my blog in February when I split hairs about DOJ’s revisions to the Brand Memo’s subregulatory guidance policy? This is an example of why those changes may be important.
• The court cited the Sixth Circuit’s decision in United States v. Paulus, 894 F.3d 267, 276-77, 280 (6th Cir. 2018), a criminal case, in rejecting a “bright-line rule that a doctor’s clinical judgment cannot be ‘false.’”[7] That should make any Sixth Circuit decision adopting an “objective falsity” standard in FCA cases an interesting read.
• Seven years passed between the filing of the qui tam and the United States’ declination.[8] Regardless of your position on the length of FCA investigations, Congress should consider creating a clearer standard to promote uniformity across districts.

“[T]he Third Circuit held that medical expert testimony stating that patients did not qualify for hospice services was sufficient evidence to survive a motion for summary judgment in a False Claims Act (FCA) case.”

Care Alternatives sets the table for the Supreme Court to step in and resolve the circuit split. In the meantime, jurisdiction will be a key consideration for all parties to government investigations and FCA cases involving questions of medical necessity. Subscribe to the SRVH blog for further updates and contact our Government Compliance & Investigations or Healthcare groups with any questions or concerns.

[1] See Care Alternatives, 2020 WL 1038083, at *1.

[2] Id. at *2 (emphasis in original) (quoting 79 Fed. Reg. at 50,470).

[3] Id. at *4.

[4] Id. at *8.

[5] Id. at *6.

[6] Id. (emphasis added) (quoting United States ex rel. Polukoff v. St. Mark’s Hosp., 895 F.3d 730, 742-43 (10th Cir. 2018)).

[7] Care Alternatives, 2020 WL 1038083, at *7.

[8] Id. at *3.

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