11th Circuit's Decision in AseraCare: Important in Determining When Clinical Judgment Regarding Medical Necessity Can Result in an Overpayment

11th Circuit's Decision in AseraCare: Important in Determining When Clinical Judgment Regarding Medical Necessity Can Result in an Overpayment and How Evidence Regarding Corporate Knowledge Must be Tied to Claims to Establish False Claims Act Liability

Key Points:

Reasonable disagreement among clinicians, by itself, does not result in a false claim. Clinical judgment must be objectively false to constitute an FCA violation. A clinical judgment may only be objectively false when there are verifiable facts at odds with the exercise of valid clinical judgment. A reckless truth cannot create FCA liability; thus courts should exercise care to ensure that alleged corporate knowledge is directly linked in time and place to discrete false claims so the analysis of whether claims are false in the first instance is not tainted. Two common issues arise in False Claims Act (FCA) litigation, one specific to health care FCA litigation and one that cuts across all FCA actions involving corporate entities.

The first issue is when can clinical judgment be deemed "false" for purposes of the FCA. If the clinician reasonably believes the services or procedures are appropriate in light of the patient's condition, when, if ever, can that opinion be a false opinion under the FCA, potentially subjecting the clinician to treble damages and substantial civil penalties? This issue is significant because it is relevant not only to FCA actions but also regarding internal reviews health care entities undertake to determine whether an overpayment is due to the government because a particular service or procedure potentially lacked medical necessity.

The second issue is when can the FCA plaintiff use scattered communications within a company regarding generalized alleged misconduct to establish that discrete claims are "knowingly" false. Historically, FCA plaintiffs—even when litigating against national companies or companies operating at multiple sites—have sought to identify a handful of purportedly provocative emails (e.g., we need to generate more revenue, profitability must be sustained, etc.) to seek to establish that the company acted with reckless disregard or deliberate ignorance of the truth or falsity of a particular claim. Generally, the FCA plaintiff will ask the court or jury to infer that the requisite intent existed from the emails or other communications without specifically linking the communication—in time and place—to the purported false claim.

The 11th Circuit's decision in United States v. AseraCare, Inc.1 addresses both of these issues.

First, as to clinical judgment, the decision sets forth the proper method to evaluate when disagreements regarding clinical judgment can result in a false claim. The 11th Circuit concurred with the district court that a mere reasonable disagreement among clinicians is insufficient to establish FCA falsity. The court concluded that absent a showing of an objective and knowing falsehood, the FCA is not an appropriate instrument to serve as the government's primary line of defense against questionable claims for reimbursement.

This decision has significant ramifications both in defending FCA cases and in health care entities' internal reviews and audits. As to the FCA, medical necessity cases have been a staple of FCA lawsuits since 1986 when the FCA's scope was substantially expanded. The court's ruling will significantly deter the government from bringing such lawsuits when all that exists is a mere battle of experts. Additionally, the court's ruling may also result in health care entities transforming the manner in which they conduct medical reviews. Many entities evaluate clinical judgment as either being "right" or "wrong" in light of the medical documentation. If the judgment appears wrong, the entity may believe that there is a duty to remit an overpayment to the government. But, as the 11th Circuit correctly concluded, this approach is overly simplistic and wrong because at times there can be two or more reasonable opinions, with none of them being false or wrong.

Second, as to the link that must exist between FCA knowledge evidence and the actual claim for payment, the court found that the government must actually tie evidence of improper practices, by place and time, to the specific claims at issue to establish FCA liability. This is significant because the FCA plaintiff, at trial and the summary judgment stage, frequently will seek to take scattered emails and texts reflecting a corporate strategy to be profitable and regulatory lapses to assert that unrelated claims are "knowingly" false. Importantly, the court in AseraCare, joining a growing list of other courts, rejected this approach.

How to Assess Clinical Judgment Under the FCA

In AseraCare, the 11th Circuit considered the circumstances in which a certification can be considered "false" when the hospice provider certifies that the patient is "terminally ill" and clinicians can reasonably disagree regarding whether a patient is "terminally ill."

Specifically, the government alleged that the defendant hospice submitted documentation that falsely represented that Medicare recipients were "terminally ill" when, in the government's view, they were not.2 For a hospice claim to be eligible for Medicare reimbursement, the patient's attending physician, if there is one, and the hospice medical director must "each certify in writing at the beginning of [each] period, that the individual is terminally ill ... based on the physician's or medical director's clinical judgment regarding the normal course of the individual's illness."3 "Terminally ill" means that the individual "has a medical prognosis that the individual's life expectancy is 6 months or less."4 The court noted that, importantly, none of the relevant language states that the documentary record underpinning a physician's clinical judgment must prove the prognosis as a matter of medical fact and that CMS has recognized in crafting the implementing regulations that "[p]redicting life expectancy is not an exact science."5 The statutory and regulatory framework also did not state or imply that the patient's medical records must unequivocally demonstrate to an unaffiliated physician, reviewing the records after-the-fact, that the patient was likely to die within six months of the time the certifying physician's clinical judgment was made.6 Rather, the court concluded, the framework asks a physician responsible for the patient's care to exercise his or her judgment as to the proper interpretation of the patient's medical records.7 And while there is no question that clinical judgments must be tethered to a patient's medical records, the court noted that it is equally clear that the law is designed to furnish 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.8

To establish its case, the government retained an expert physician to review a sample of claims to determine whether patients admitted to the hospice were terminally ill. Upon direct review of patients' medical records and clinical histories, the government's expert opined that 123 patients from a sample were...