[co-author: Richard Sena]

The Supreme Court of the United States declined to take up two circuit court decisions on whether “objective falsity” is a requirement for False Claims Act (FCA) liability. The two cases, United States v. Care Alternatives from the Third Circuit and United States v. RollinsNelson from the Ninth Circuit, declined to extend the objective falsity standard to cases involving the alleged falsity of doctors’ certifications for Medicare-covered services. The Supreme Court did not offer reasoning for its denial of review.

Objective falsity requires the government to allege that a claim for FCA reimbursement was objectively false. It was most recently established in the Eleventh Circuit case United States v. AseraCare, which disallowed the government from merely offering an expert witness to establish falsity of a hospice-benefit certification under the FCA.

In Care Alternatives, a hospice facility allegedly admitted patients ineligible for Medicare’s hospice benefit by falsifying patients’ certifications. In order for a patient to be eligible for the hospice benefit, healthcare providers need to determine that a patient is terminally ill. Hospice services are much more expensive than typical outpatient or inpatient services, and thus it costs Medicare comparatively much more to cover hospice care.

Care Alternatives and the government both presented experts which disagreed whether a reasonable physician would find that the patients were hospice benefit eligible (i.e. terminally ill). The Third Circuit reversed the district court’s application that FCA liability required “objective falsehood,” holding that whether a Hospice Benefit certification is false is a relevant inquiry that can be proven with an expert opinion that differs from the certifying physician’s. Further, the court expressly divorced falsity from scienter — whether a certifying physician knowingly made a false certification — under the FCA and found that scienter protected healthcare providers from expert testimony, on its own, establishing FCA liability.

In RollinsNelson, a management company, RollinsNelson, allegedly had a collusive relationship with Gardens Regional Hospital involving Medicare patients. RollinsNelson owned and operated nursing homes while also acquiring a significant ownership interest in the company that oversaw operations at Gardens Regional. Patients would be admitted to Gardens Regional from RollinsNelson nursing homes for inpatient services that were allegedly not medically necessary. The district court dismissed the claims because it found that a determination of medical necessity was subjective and cannot be proven objectively false. Like in Care Alternatives, the Ninth Circuit declined to adopt the objective falsehood standard, finding no distinction between objective and subjective falsity in the FCA.

Both cases signal a schism within the circuit courts on the doctrine of objective falsehood with respect to FCA claims — namely with the Eleventh Circuit’s United States v. AseraCare. In AseraCare, the Eleventh Circuit held that a certification of terminal illness for hospice benefits cannot be deemed false if there is only a reasonable disagreement between experts. The court in RollinsNelson expressly distinguished itself from AseraCare in two ways. First, the court in AseraCare did not address situations where multiple objective statements established falsity, as opposed to a single disagreement between medical experts. Second, RollinsNelson dealt with a determination of medical necessity for inpatient care and not a determination for terminal illness for hospice-benefit.

For now, the Supreme Court leaves the circuit courts to apply, not apply, or further develop the objective falsehood standard as it relates to FCA claims in federal court.

Takeaways

1. The decisions in these cases do not significantly change the compliance risk associated with medically unnecessary services or unsupported physician certifications of terminal illness and the medical necessity for hospice care.
2. The response to reports of medical unnecessary services requires the same due diligent efforts and investigation which have always been the standard for responsible and effective compliance programs.
3. The risk in these areas can be addressed by properly addressing reports of medically unnecessary services and effective monitoring and auditing practices called for at health care organizations.
4. The split in the case law on subjective and objective falsity and the standard for scienter in False Claims Act cases is mostly of interest to the lawyers who may have to advise clients about investigating and resolving reports of medically unnecessary services or who may have to defend against allegations in court proceedings of medically unnecessary services and false certifications for hospice care.