July 4, 2020

Volume X, Number 186

July 03, 2020

Subscribe to Latest Legal News and Analysis

July 02, 2020

Subscribe to Latest Legal News and Analysis

July 01, 2020

Subscribe to Latest Legal News and Analysis

Ninth Circuit Holds an “Objective Falsehood” Is Not Required for Violation of False Claims Act

Following the Eleventh Circuit’s and Third Circuit’s recent rulings in United States v. AseraCare and United States v. Care Alternatives, respectively, the Ninth Circuit Court of Appeals has now also addressed the question of whether the False Claims Act (FCA) requires relators to show an “objective falsehood” to prove their claims. (See Third Circuit Creates Budding Circuit Split in United States v. Care Alternatives, Ruling That “Objective Falsity” Is Not Required Under FCAAseraCare 11th Circuit Case Holds Differences in Hospice Clinical Opinions Are Insufficient to Demonstrate Falsity Under the FCA) In Winter ex rel. United States v. Gardens Regional Hospital and Medical Center, the Ninth Circuit ruled that an “objective falsehood” is not required under the FCA, and that the relator had satisfactorily pled an FCA violation where she had alleged “more than just a reasonable difference of opinion” between physicians as to whether inpatient hospital admissions were medically necessary.

The Facts and District Court Opinion

In Gardens Regional Hospital, the relator was a former Gardens Regional employee whose job duties included reviewing hospital patients’ medical records and evaluating the medical necessity of hospital admissions. After the co-defendant nursing home owner/operator acquired an interest in the management company that oversaw the hospital’s operations, the relator began noticing what she thought was an unusually high inpatient admission rate for patients from that nursing home owner’s facilities. 

The relator eventually filed a qui tam complaint alleging that the defendants had submitted claims to CMS falsely certifying that patients’ inpatient hospitalizations were medically necessary. She presented statistical evidence showing an overall increase in hospitalizations during the relevant period, and identified 65 specific examples of admissions that allegedly did not satisfy the hospital’s own admissions criteria. As summarized in the 9th Circuit opinion, the district court granted defendants’ motion to dismiss, in part on the grounds that a determination of medical necessity was a “subjective medical opinion[] that cannot be proven to be objectively false[.]” (Winter ex rel. United States v. Gardens Regional Hospital and Medical Center, Inc., No. 18-55020, 2020 WL 1329661, at *1 (9th Cir. Mar. 23, 2020))

Ninth Circuit Reversal

On appeal, the Ninth Circuit disagreed, holding that “Congress imposed no requirement of proving ‘objective falsity’” within the statutory language of the FCA, and that “[a] doctor’s clinical opinion must be judged under the same standard as any other representation.” (Id. at *2) In short, a physician’s certification that inpatient hospitalization was medically necessary could be false or fraudulent under the FCA for the same reasons any other opinion could be false or fraudulent.

Because Congress did not define “false or fraudulent” in the FCA, the Court presumed that these terms incorporated common-law definitions—including the rule that a statement need not contain an “express falsehood” in order to be actionable, and that subjective opinions are fraudulent if they are not honestly held or if they imply the existence of facts that do not exist. Though the defendants argued that such a reading would expose physicians to open-ended liability, the Ninth Circuit held that such policy concerns could not supersede the “clear statutory text” of the FCA, and could instead be effectively addressed by way of the FCA’s scienter and materiality requirements.

Despite rejecting AseraCare to the extent AseraCare could be read to require “objective falsity,” the Court explained its view that its opinion was in harmony with AseraCare, on the grounds that in that case, the Eleventh Circuit held that a clinical judgment of terminal illness could not be deemed false under the FCA “when there is only a reasonable disagreement between medical experts as to the accuracy of that conclusion, with no other evidence to prove the falsity of the assessment.” (United States v. AseraCare, Inc., 938 F.3d 1278, 1281 (11th Cir. 2019), emphasis in original.) This finding was different, the Ninth Circuit reasoned, because the Eleventh Circuit was not asked whether a medical opinion could ever be false or fraudulent—instead, it only ruled as to whether a reasonable disagreement between physicians, without more, was sufficient to prove falsity at summary judgment. The Ninth Circuit also emphasized the importance to the Eleventh Circuit that the clinical judgment at issue in AseraCare related to a hospice benefit provision that purposely deferred to the physician. Further, the Ninth Circuit noted the Third Circuit’s recent rejection of the “bright-line rule that a doctor’s clinical judgment cannot be ‘false’” in Care Alternatives. (Id. at *6, quoting United States ex rel. Druding v. Care Alternatives, 952 F.3d 89, 98 (3d Cir. 2020))

Not only can an opinion establish falsity, the Ninth Circuit concluded, but the relator had satisfactorily alleged “more than just a reasonable difference of opinion” among physicians—she alleged that some of the hospital admissions were for disproven diagnoses, and that others were for psychiatric treatment, even though the hospital was not a psychiatric hospital, and one of the patients never even saw a psychiatrist. (Gardens Regional Hospital, 2020 WL 1329661 at *9) The district court’s dismissal of the case was reversed.

Key Takeaways

The Ninth Circuit has now joined the Third Circuit in concluding that “objective falsehood” is not required under the FCA. But, in part, this is just semantics. Unlike the Third Circuit, which explicitly disagreed with the Eleventh Circuit’s ruling in AseraCare, the Ninth Circuit seems in accord with the Eleventh Circuit that an FCA case cannot be based in a reasonable disagreement between physicians, without more. Rather, something more is required, such as evidence suggesting that the physician’s purported clinical judgment was not honestly held or the physician’s opinion implies the existence of facts that did not exist. At any rate, as we have previously advised, these somewhat incongruous standards will no doubt be the subject of FCA cases moving forward, where defendants seek to avoid FCA liability for their reasonable subjective medical judgments.

© 2020 Foley & Lardner LLPNational Law Review, Volume X, Number 111

TRENDING LEGAL ANALYSIS


About this Author

Lori A. Rubin, litigation lawyer, false claims act, attorney, Foley law firm
Senior Counsel

Lori Rubin is an associate and litigation lawyer with Foley & Lardner LLP. Ms. Rubin’s practice focuses on False Claims Act investigations and litigation. She also has particular experience in website compliance with the Americans with Disabilities Act and the Rehabilitation Act. She is a member of the Business Litigation & Dispute Resolution Practice, the Government Enforcement Compliance & White Collar Defense Practice, and the Health Care Industry Team.

202-295-4760
Jessica Joseph, Foley Lardner Law Firm, Boston, Healthcare and Litigation Law Attorney
Associate

Jessica Joseph is an associate and litigation attorney with Foley & Lardner LLP. Ms. Joseph is a member of the firm’s Business Litigation & Dispute Resolution, Health Care, and eDiscovery & Data Management Practices.

Previously, Ms. Joseph served as a summer associate in Foley’s Orlando office. Ms. Joseph has also interned with the Office of Audit and Investigation of the United Nations Development Programme, where she provided legal support for investigations into various types of internal misconduct by UNDP employees and officials.

Education

Ms. Joseph earned her degree from Columbia Law School (J.D., 2012), where she was named a Harlan Fiske Stone Scholar and served as a staff editor of the Columbia Journal of Law & the Arts. She also volunteered with the STEPS Family Law Domestic Violence Project and the Uncontested Divorce Project. She graduated, cum laude, from the University of Florida (B.A., 2009).

617-226-3196
Lisa Noller, Trial Lawyer, Foley Lardner Law Firm
Partner

Lisa Noller is a trial lawyer and investigator with Foley & Lardner LLP, where she is chair of the Government Enforcement, Compliance & White Collar Defense Practice. She has spent almost 20 years investigating, litigating and trying complex criminal and civil cases, including responding to government investigations, conducting corporate internal investigations, and persuading the government not to pursue clients. When cases proceed to trial, Ms. Noller also has significant experience successfully trying a wide variety of over 30 civil and criminal matters in...

312-832-4363
Pam Johnston, Trial Attorney, Foley Lardner Law Firm
Partner

Pamela L. Johnston is a partner and trial lawyer with Foley & Lardner LLP, where she is chair of the firm’s Government Enforcement, Compliance & White Collar Defense Practice, a member of the Securities Enforcement & Litigation Practice, and a member of the Health Care Industry Team. Ms. Johnston focuses in the areas of white collar criminal defense, False Claims Act and whistleblower actions, securities enforcement and other governmental enforcement actions. She represents companies and individuals in parallel civil and criminal proceedings involving a...

213-972-4632
Thomas F. Carlucci, Foley Lardner, Health Care Fraud Lawyer, Off Label Marketing Attorney,
Partner

Thomas F. Carlucci is a partner and litigation attorney at Foley & Lardner LLP where he is managing partner of the San Francisco office. Mr. Carlucci represents corporations, organizations and individuals in white-collar matters and internal investigations with an emphasis on potential health care fraud, tax fraud, off-label marketing, and false claims. He also focuses on civil state and federal tax litigation.

415-984-9824