Due to COVID-19, there have been a significant amount of economic incentive programs and government contract opportunities to assist in stimulus and responding to the crisis. This is in addition to the typical government procurement and healthcare costs reimbursements by the government. When individuals or entities interact with the government, there is False Claims Act (FCA) liability associated with monies that were not properly earned or claimed. At times, whether a claim was actually false is in dispute and reasonable minds may disagree. On February 22, 2021, the U.S. Supreme Court declined certiorari to hear two petitions, which would have resolved a circuit court split regarding whether the FCA requires “objective falsity” of information or a claim to establish liability.
The FCA (31 U.S.C. §§ 3729-3733) is a federal statute whose enactment dates back to the Civil War and has since been amended by Congress three times. In general terms, the FCA sets forth liability for any person who knowingly submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government. Violations of this statute are costly, often resulting in steep fines, treble damages, and in some circumstances, debarment from government contracting.
Liability under the FCA requires proof that the individual had (1) actual knowledge that the claim or information was false; (2) deliberate ignorance of the truth or falsity of the information, or (3) a reckless disregard of the truth or falsity of the claim or information.
The FCA’s construction and application has been the subject of thousands of court decisions. At issue most recently, however, is the proof required to establish that information or a claim is actually false. The circuit courts are split on this threshold requirement.
On one side, the Eleventh Circuit Court held in United States v. AseraCare: “[A] reasonable difference of opinion among physicians reviewing medical documentation ex post is not sufficient on its own to suggest that those judgments—or any claims based on them—are false under the FCA.” In reaching its decision, the Court stated that proof of “objective falsity” is required. That is, statements or information of claims must be more than “objectively untrue, they must betray or suggest intentional deceit.” In a seeming win for healthcare providers and government contractors, the Eleventh Circuit showed deference to the expert opinions of the defendants, noting that AseraCare had accurate and comprehensive documentation of patients’ medical conditions and there was appropriate oversight by medical personnel.
In contrast with the Eleventh Circuit, the Third Circuit, in United States v. Care Alternatives, ruled that evidence of “objective falsity” for FCA claims is not required and that difference in physician opinions, particularly where another medical expert calls another’s opinion into question after the fact, can constitute legal falsity.
In Winter ex rel. United States v. Gardens Regional Hospital and Medical Center, the Ninth Circuit similarly held that proof of “objective falsity” is not a requirement under the FCA where a pleading sufficiently alleges “more than just a reasonable difference of opinion” among physicians regarding medical necessity of inpatient hospital admissions. While the Third Circuit decision directly conflicted with AseraCare, the Ninth Circuit opinion agreed with the Third Circuit, but also maintained harmony with the Eleventh Circuit’s decision. The Ninth Circuit viewed the Eleventh Circuit as only addressing the question of whether "objective falsity" under the FCA stems from “only a reasonable disagreement . . . with no other evidence to prove falsity.” Other circuits, such as the Second and Eighth Circuits, have not clearly adopted or rejected the “objective falsity” standard.
Regardless, the decisions in the Third and Ninth Circuits created uncertainty following AseraCare, and in both cases petitions were filed with the Supreme Court, believing that it may provide clarity on this issue. But the Supreme Court declined to hear the case, thereby prolonging the uncertainty. Following the Supreme Court’s denial of the petitions, all circuit courts will have to pick a side, which will inevitably create a larger schism among courts. The varied applications of the “objective falsity” standard for FCA claims will also subject healthcare providers and government contractors across the country to different levels of litigation risk.
For instance, while providers and contractors within the Third Circuit—New Jersey, Pennsylvania and Delaware—are now liable under the FCA for damages and penalties based on expert judgments, others, including those located in the Eleventh Circuit—Alabama, Florida, and Georgia—can still rely on a showing of objective falsity before being held liable.
In comparison, courts in the Ninth Circuit—Arizona and California—may take a more even-handed approach, such as holding that FCA claims cannot be based on a reasonable disagreement among experts without additional evidence, thereby recognizing instances where a more stringent standard of “objective falsity” may be appropriate and others where it may not be necessary. For example, FCA liability against a healthcare provider may require more than a showing that the physician’s initial certification for medical necessity was not honestly held or that the physician’s opinion implies nonexistent facts.
With this varying legal standard still unresolved, healthcare providers, government contractors, and their counsel should be cognizant that an internal expert’s reasonable opinion, by itself, no longer insulates them from FCA liability. Importantly, providers, contractors, and their counsel should consider reviewing internal decision-making policies, as well as ensuring proper due diligence measures are in place, for decisions tied to an expert’s opinion. Furthermore, companies should consider outside program reviews and audits. Such measures may help reduce risk of increased litigation and avoid financial liability where expert opinions may lead to alternative decision outcomes.