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False Claims Act Trial in Alabama Sets Precedent for Future Cases

The DOJ’s theory of falsity based on clinical disagreement alone fails as a matter of law.

In a closely watched False Claims Act (FCA) proceeding by the healthcare industry and FCA practitioners, the US District Court for the Northern District of Alabama ruled in favor of a national hospice provider and dismissed the action, rejecting the US Department of Justice’s (DOJ’s) legal position that falsity can be established solely by retrospective clinical disagreement.[1] Chief Judge Karon Bowdre’s seven-page opinion explains and resolves this important FCA legal issue with elegant and devastating simplicity, ensuring that the decision will be a strong and influential precedent for pending and future cases focused on asserting FCA liability for mere clinical disagreements or subjective interpretations of medical record documentation.

The DOJ alleged that AseraCare provided hospice services to Medicare beneficiaries who did not satisfy hospice eligibility criteria based on a retrospective review of the medical record. To show that AseraCare’s claims were objectively false, the DOJ relied solely on its medical expert’s review of patient medical records. AseraCare offered its own experts to testify that the records did support hospice eligibility. The case then boiled down to clinical disagreements between medical professionals. Following an initial favorable jury verdict for the DOJ, the court realized that it had incorrectly instructed the jury on the element of falsity and granted a new trial. The court concluded that the DOJ was required to show objective falsehood by something more than mere clinical disagreement and provided the DOJ with an opportunity to support its fraud theory against the hospice provider with evidence beyond mere clinical disagreement. The DOJ could not make this crucial evidentiary showing. Accordingly, on March 31, the court granted summary judgment in favor of AseraCare, concluding that “contradiction based on clinical judgment or opinion alone cannot constitute falsity under the [FCA] as a matter of law.”[2]

The decision is consistent with longstanding FCA precedent that requires an objective falsehood to give rise to liability under the FCA.[3]

The court reasoned that “[w]hen hospice certifying physicians and medical experts look at the very same medical records and disagree about whether the medical records support hospice eligibility, the opinion of one medical expert alone cannot prove falsity without further evidence of an objective falsehood.”[4] The court noted that the government’s own clinical expert changed his mind on the asserted clinical ineligibility findings several times over a three-year period of the review.

AseraCare is a notable defeat for the government’s assertion of FCA liability against healthcare providers under alleged failure to document sufficiently in the medical record enough information to show “medical necessity”—a legal theory that the DOJ has been pursuing against a growing number of healthcare providers. In all of these cases, the DOJ has alleged that providers violated the FCA because a medical expert disagreed with the clinical judgment of a patient’s healthcare provider after a retrospective review of medical records, a function that is more within the expertise of the Medicare contractor and administrative law process. Healthcare providers are understandably frustrated to have legitimate clinical disagreements labeled as fraudulent practices with no nexus to actual false claims or any evidence of objective falsehood related to a claim.

The AseraCare decision explicitly rejects the DOJ’s approach to FCA liability, noting, “[i]f the court were to find that all the Government needed to prove falsity in a hospice provider case was one medical expert who reviewed the medical records and disagreed with the certifying physician, 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. The court refuses to go down that road.”[5] In a gesture of poetic license, the court illustrated the common-sense logic of this position by quoting famed 17th century French mathematician Blaise Pascal: “Contradiction is not a sign of falsity, nor the lack of contradiction the sign of truth.”


[1] United States ex rel. Paradies v. AseraCare, 2:12–CV–245–KOB, Dkt. #497 (N.D. Ala. March 31, 2016) available at https://ecf.alnd.uscourts.gov/doc1/01914124528.

[2] AseraCare at 7.

[3] See e.g., United States v. Aegis Therapies, No. CV-210-072, 2015 WL 1541491, at *12 (S.D. Ga. Mar. 31, 2015); United States ex rel. Phalp v. Lincare Holdings, Inc., 116 F. Supp. 3d 1326, 1360 (S.D. Fla. 2015); United States ex rel. Geschrey v. Generations HealthCare, LLC, 922 F.Supp. 2d 695 (N.D. Ill. 2012); United States ex rel. Parato v. Unadilla Health Care Ctr. Inc., 787 F. Supp. 2d 1329, 1339 (M.D. Ga. 2011); United States v. Prabhu, 442 F. Supp. 2d 1008 (D. Nev. 2006).

[4] AseraCare at 1-2.

[5] AseraCare, at 5-6.

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume VI, Number 92
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About this Author

Kathleen McDermott, Healthcare attorney, Morgan Lewis
Partner

Katie McDermott defends healthcare and life sciences clients throughout the United States in government investigations and litigation matters relating to criminal, civil, and administrative allegations, including violations of the False Claims Act related to off-label promotion, anti-kickback, reimbursement, privacy, and quality of care violations. Katie also advises on compliance matters relating to voluntary government disclosures, consent decrees, and corporate integrity agreements with the Office of Inspector General (OIG) and US Department of Justice (DOJ), as well...

202-739-5458
Howard Young, Morgan Lewis, Healthcare lawyer
Partner

A nationally recognized leader in healthcare fraud and abuse and regulatory issues, Howard J. Young leads the Morgan Lewis healthcare practice and co-leads the healthcare industry initiative where he advises a range of healthcare clients on government investigations, regulatory, and transactional matters. Healthcare organizations turn to Howard to address their most critical legal, compliance and strategic business issues and to assist with internal and government investigations and self-disclosures. Howard regularly advises investors, including private equity firms, on...

202-739-5461
Holly Barker, Healthcare Attorney, Morgan Lewis
Associate

Holly C. Barker counsels clients on US federal and state healthcare fraud and abuse enforcement and regulatory matters, primarily defending companies in False Claims Act (FCA) actions. Holly represents pharmaceutical and medical device manufacturers, hospital systems, long–term care facilities, clinical laboratories, physicians, and senior healthcare executives in complex criminal, civil and administrative fraud and abuse matters before US Attorneys’ Offices, the HHS Office of Inspector General, and state MFCUs.

202-739-5787
John Cosgriff, Healthcare attorney, Morgan Lewis
Associate

John Cosgriff represents health care and life science clients in government investigations and litigation matters, and provides regulatory and compliance guidance to providers, including many large and small hospices, home health agencies, hospitals, physician groups, and pharmacies. John primarily defends clients in complex criminal, civil and administrative fraud and abuse matters before US Attorneys’ Offices, the HHS Office of Inspector General, and state MFCUs. These cases typically involve alleged violations of the False Claims Act, the Anti-Kickback Statute, the...

202-739-5691
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