Last week, the United States Court of Appeals for the Third Circuit held that prognoses of terminal illness submitted in support of hospice claims for reimbursement could be actionable false statements under the False Claims Act (FCA). United States ex rel. Druding v. Care Alternatives, No. 18-3298 (3d Cir. 2020). In so holding, the court rejected the reasoning embraced by the Care Alternatives district court, and recently by the Eleventh Circuit, that clinical judgments are subjective and cannot implicate the FCA.

To claim reimbursement from Medicare, a hospice provider must certify that a patient is terminally ill. The certification must be accompanied by documentation that supports the prognosis of terminal illness based on the medical record.

The plaintiffs in Care Alternatives alleged that the defendant, a hospice provider and their former employer, submitted false certifications to Medicare. In discovery, an expert for the plaintiffs found that the documentation the defendant submitted in support of its certifications did not support a prognosis of terminal illness in thirty-five percent of the cases sampled.

In granting summary judgment for the defendant, the district court held that an FCA claim cannot survive a motion for summary judgment absent evidence of an objective falsehood. The court ruled that the plaintiffs’ expert opinion, without more, was insufficient to show falsity because medical opinions are inherently subjective and cannot be objectively false.

On appeal, the Third Circuit declined to adopt the “objective falsehood” test, holding instead that the FCA adheres to the common-law definition of fraud, which allows subjective opinions to be considered false when made in bad faith. In the court’s view, whether a clinical judgment was made in bad faith is an appropriate question of fact for the jury.

The Third Circuit also ruled that the objective falsehood standard is inconsistent with the FCA’s legal falsity precedent, which asks whether the claim was reimbursable under the conditions for payment set by the government. Applying this standard, the Third Circuit found that the opinion of the plaintiffs’ expert could be evidence that the documentation the defendant submitted in support of its claim for reimbursement did not support its prognosis of terminal illness.

The Third Circuit’s decision in Care Alternatives stands in stark contrast to the Eleventh Circuit’s decision in United States v. Aseracare, Inc., decided last year. 938 F.3d 1278 (11th Cir. 2019). Aseracare was another FCA case alleging that a hospice provider had submitted false certifications to Medicare. Like the district court in Care Alternatives, the Eleventh Circuit in Aseracare ruled that clinical judgments cannot be false under the objective falsehood standard. The Third Circuit acknowledged but declined to follow Aseracare.

A copy of the Third Circuit’s Care Alternatives decision is available here. A copy of the Eleventh Circuit’s Aseracare decision is available here.