In a $200 million False Claims Act (FCA) litigation with certain twists and turns, the U.S. District Court for the Northern District of Alabama recently found that the federal government failed to show that claims submitted to the Medicare program by hospice defendant AseraCare were in fact false. The court held that because the only evidence of falsity was a difference of opinion between a certifying physician on the one hand and a government medical expert on the other, the government could not prevail. The apparent simplicity of the allegations in U.S. ex rel. Paradies v. AseraCare , Inc. belies the unique course the case has taken.
In 2008, several employees brought suit against AseraCare under the FCA, alleging that AseraCare knowingly provided hospice services to patients who were not properly certified as terminally ill under the Medicare program. The federal government intervened in the litigation in 2012. Concluding that statistical sampling was sufficient evidence of falsity, the court permitted the United States to show its damages using a "statistically valid random sample" of 233 claims, evaluating the falsity of that subset and extrapolating those results across the entire claim population. After reviewing the 233 claims, the government alleged that roughly half were false, amounting to an estimated $7 million in actual damages. Once extrapolated, the $7 million ballooned into $67 million, which became $200 million in damages and penalties under the FCA.
Holding that the "jury must first determine whether any claims in the 233 patient sample are false without exposure to prejudicial and confusing evidence related to AseraCare's general corporate practices that relate most appropriately to whether AseraCare knew it was submitting false claims," the court divided the trial into two phases. Phase One would determine whether the 233 claims were actually "false." Phase Two would cover whether AseraCare knew the claims were false.
As part of Phase One, a medical expert for the government who reviewed the patient records testified that 123 of the patient files in the 233 sample did not support hospice eligibility. After a 10-week trial, the jury returned a finding that 104 of the 233 claims were false or unsupported.
Shortly after the Phase One decision, the judge declared that she had "committed reversible error" because she did not fully instruct the jury on what was required to prove falsity. Deciding that the error required a new trial, the judge held that she would inform the next jury that expressions of opinion or scientific judgment about which "reasonable minds may differ" cannot be false within the meaning of the FCA. Or, in other words, "a mere difference of opinion between physicians is not enough to show falsity." With that in mind, the court then held that unless the government could point to evidence of falsity other than the clinical judgment of the government's medical expert, the court would grant summary judgment in favor of AseraCare.
On March 31, 2016, the court did exactly that:
When two or more medical experts look at the same medical records and reach different conclusions about whether those medical records support the certifying physicians' [medical opinion on hospice eligibility], all that exists is a difference of opinion. ... The government has failed to point the court to any objective evidence of falsity.
The decision was rooted in the court's concern for the integrity of the medical profession: "[A]llowing a mere difference of opinion among physicians alone to prove falsity would totally eradicate the clinical judgment required of the certifying physicians." And the litigation impact would be far-reaching, as "hospice providers would be subject to potential FCA liability any time the government could find a medical expert who disagreed with the certifying physician's clinical judgment." This would be especially true as "making medical prognostications of life expectancy is not always exact." Accordingly, the court granted summary judgment for AseraCare.
In a landscape where the government holds many advantages, the AseraCare case is a source of strength for defendants. AseraCare memorializes what practitioners already know: making healthcare decisions is difficult enough without having to worry whether a government auditor will second-guess a conclusion months or even years after it was made. If the government is to pursue damages and penalties against providers, it must do so on more than a difference in medical opinion. AseraCare also demonstrates how general, anecdotal evidence of falsity must be connected to proof that the sampled claims are indeed false.
The United States has until May 31, 2016, to decide whether it will appeal the decision.
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