A healthcare provider’s false representation that treatment is medically necessary can be the basis for a False Claims Act case, even though it involves subjective judgment, the Ninth Circuit Court of Appeals said in a recent decision that is being heralded by whistleblowers and others who fight healthcare fraud.
A physician’s determination of medical necessity can be false if they do not believe it, know of facts that preclude it or recklessly disregard whether it is true.
The Ninth Circuit joined the Third Circuit, which also recently held in a medical necessity case that the False Claims Act does not require an “objective” falsehood.
“Medical necessity” is an important requirement for Medicare claims that protects patients from harm and prevents the wasteful expenditure of federal funds. By law, Medicare cannot pay for healthcare services that are not medically reasonable and necessary.
In False Claims Act cases, hospitals and other healthcare providers have argued that a physician’s judgment about whether treatment is medically reasonable and necessary can never be false and that only “objective” falsehoods violate the statute. That view would potentially remove from scrutiny a large portion of claims for medical treatment paid for by taxpayer funds.
In US ex rel. Winter v. Gardens Regional Hospital and Medical Center (2020 WL 1329661), the Ninth Circuit Court of Appeals rejected that argument, holding that subjective medical judgments, like other judgments, can be false.
The qui tam case was brought by a whistleblower who alleged that Gardens Regional Hospital, where she had worked, falsely certified that in-patient hospital admissions were medically necessary in circumstances where they were not. For example, the whistleblower alleged that patients were admitted for diagnoses for which there was no evidence in the patient’s medical record or for ailments that would ordinarily be treated on an outpatient basis.
The district court had dismissed the case on the grounds that a subjective medical judgment could not be objectively false and therefore the complaint did not allege a violation of the False Claims Act.
The whistleblower appealed, and the Ninth Circuit Court of Appeals reinstated the whistleblower case.
The appellate court, in a decision issued March 23, said, “A doctor’s clinical opinion must be judged under the same standard as any other representation. A doctor, like anyone else, can express an opinion that he knows to be false, or that he makes in reckless disregard of its truth or falsity.”
The Ninth Circuit Court explained that the plain language of the False Claims Act “does not distinguish between ‘objective’ and ‘subjective’ falsity or carve out an exception for clinical judgments and opinions.”
Responding to the hospital’s argument that applying the False Claims Act to subjective medical judgments would expose doctors to liability, the court pointed out that a person violates the law only if they act “knowingly.” The law does not apply to mistakes.
In Winter, the question was whether inpatient hospitalization was medically necessary, but medical necessity is a requirement for many kinds of healthcare, including the prescribing of drugs, like opioids, or ordering medical tests or equipment. The Department of Justice has pursued many such cases, which involve patient harm in addition to overbilling.
The Third Circuit recently held in a False Claims Act case alleging that representations that patients qualified for hospice care were false [US ex rel. Druding v. Care Alternatives, 2020 WL 1038083 (3d Cir. 2020)], that medical judgments about whether a patient was eligible for such care could be false.
The decisions of the Ninth Circuit and Third Circuit depart from the approach the Eleventh Circuit took in a closely watched case against hospice provider AseraCare Inc. in which the government had alleged that patients were falsely certified as eligible for hospice care.
In US v. AseraCare, Inc. [938 F.3d 1278 (11th Cir. 2019)], the Eleventh Circuit held that differences of medical opinion about medical necessity alone were not enough to establish that a representation was false. The court’s qualification is important because medical necessity cases are often based on more than differences of medical opinion.
Although the Eleventh Circuit observed that a representation that a patient is terminally ill cannot be false “if the underlying clinical judgment does not reflect an objective falsehood,” as the Ninth Circuit noted in Winter, the Eleventh Circuit did not hold that such opinions could never be knowingly false.
The Ninth Circuit observed that to the extent AseraCare could be read to hold that only objective falsehoods violated the False Claims Act, the Ninth Circuit disagreed with that view.
The argument that representations based on opinion cannot be false has received a lot of attention in False Claims Act cases involving medical necessity, in part because physicians have a degree of discretion in many situations.
However, the Ninth Circuit’s decision in Winter has important lessons beyond Medicare and the healthcare industry. When any person or entity submits a claim for payment to the government and makes representations based on opinions they do not believe or if they recklessly disregard whether those opinions are true, they may violate the False Claims Act.
For example, opinions about whether products comply with contractual specifications or about the costs of a construction project can be false if the person does not honestly hold the opinion or knows of facts that preclude it.
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