Untimely Physician Certifications for Medicare Home Care Claims—Arguably a Technicality—Vulnerable to False Claims Act Allegations: Sixth Circuit

by Cadwalader, Wickersham & Taft LLP

Cadwalader, Wickersham & Taft LLP

[co-author: Andrew Ravits]*


On June 11, 2018, the United States Court of Appeals for the Sixth Circuit sustained a complaint against a home health care agency alleging that the agency had violated the False Claims Act (the “FCA”) by submitting numerous claims to the Medicare program, even though the agency had not timely received the requisite physician certifications of the need for the services billed‑for. United States ex rel. Prather v. Brookdale Senior Communities, Inc., 892 F.3d 822 (6th Cir. 2018). The Sixth Circuit concluded that the agency’s former employee, who filed the FCA action, had sufficiently alleged that (i) the timely submission of physician certifications was “material to the Government’s decision to make the payment,” and (ii) the defendants had knowledge—or at least acted with “reckless disregard”—that the Medicare claims may not comply with the applicable Medicare regulations governing payment. The FCA action was allowed to go forward on that basis alone, even though there was no allegation that the home care services were not medically necessary or were not provided, or that the home health agency had backdated certifications, submitted claims with unsigned certifications, or withheld any information from Medicare.

As discussed below, this case highlights the need for providers to implement robust compliance policies and procedures to ensure that mere technical violations of the regulations do not mature into full-blown FCA violations.

Regulatory Background

FCA: The FCA imposes liability—including per claim penalties and treble damages—on health care providers who submit false claims for reimbursement to any federal health care program. 31 U.S.C. § 3729 et seq. To plead a claim under the FCA, the plaintiff must allege with particularity that: (i) the defendant made a false statement or record; (ii) with scienter (intent or knowledge) of the wrongdoing; (iii) the false statement or record was material to the government’s decision to pay the claim; and (iv) the defendant submitted the false statement or record to the government causing it to pay the claim. Prather, 892 F.3d at 830-31.

Physician Certification: Medicare Part A or Part B pays for home health services only “if a physician certifies and recertifies” the patient’s eligibility for an entitlement to those services. 42 C.F.R. § 424.22. These certifications are essentially projections about the patient’s medical need and plan of care. Medicare currently pays home health agencies on a prospective payment system based on a 60-day period of services, known as an “episode of care.” The physician’s certification of need for home health services must be obtained “at the time the plan of care is established or as soon thereafter and must be signed and dated by the physician who establishes the plan.” Id. Any delay in obtaining the physician certification once the plan of care is established is acceptable only if the length of the delay is properly justified by the home health agency. Prather, 892 F.3d at 827.

Factual Background

Alleged False Claims: Brookdale Senior Communities, Inc. and related entities (“Brookdale”) operate senior communities, assisted living facilities, and home health care providers. In 2011, Brookdale had a backlog of about 7,000 unbilled Medicare home health claims worth approximately $35 million. Brookdale hired Marjorie Prather (“Prather”) as a Utilization Review Nurse to help facilitate the processing of these claims and to determine if Brookdale needed any other documentation prior to submitting a bill to Medicare. Prather determined that one of the documents that was frequently missing in the record was the physician certification for the home health services. To remedy this, Brookdale initially sent attestation forms to the treating doctors to correct the problem of missing signatures, but only received a few signed forms back from the doctors. Accordingly, to obtain the remaining required certifications, Brookdale hired outside physicians to review outstanding home health claims and to sign the orders for care previously provided.

Prather alleged that she had raised concerns about this practice with her supervisors but that Brookdale: (i) instructed her to “ignore problems they found,” review the claims “only cursorily,” and “release claims more quickly;” (ii) informed her that there was a “push to get the claims through;” and (iii) acknowledged that not all physicians would be comfortable with signing untimely certifications and that they would not be forced to sign them.

FCA Complaint: Prather filed a “whistleblower” complaint in the United States District Court, Middle District of Tennessee (which was subsequently amended three times), alleging that Brookdale violated the FCA by presenting false claims to the United States government and wrongfully retaining overpayments. Specifically, the complaint alleged that Brookdale submitted hundreds of claims to Medicare in which the physician certification was received many months after the episode of care. The complaint asserted a theory of liability under the FCA known as “implied false certification.” Under this theory, a health care provider submitting Medicare claims makes specific representations about the services provided, but knowingly fails to disclose the provider’s “non-compliance with a statutory, regulatory, or contractual requirement.” Such a misrepresentation through omission would render the claim false or fraudulent under the FCA.

The United States government declined to intervene in the FCA action. Thereafter, Brookdale moved to dismiss the FCA complaint, arguing that Prather had failed to plead adequately the required elements of materiality and scienter. The district court granted Brookdale’s motion to dismiss, which Prather appealed.

The Court’s Decision

In a 2-1 decision, the court reversed the district court’s decision to dismiss the complaint, holding that Prather sufficiently pled the elements of materiality and scienter.

Materiality: The court noted that the FCA defines “material” as having a natural tendency to influence reimbursement. 31 U.S.C. § 3729(b)(4). Though not dispositive, relevant factors in a materiality analysis, as articulated by the United States Supreme Court in Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S.Ct. 1989 (2016) (“Escobar”), include: (i) whether a regulatory provision allegedly violated is an express condition of payment; (ii) whether the government consistently declines to pay claims on the basis of noncompliance with the same statutory, regulatory, or contractual provisions, or whether it consistently reimburses claims despite knowledge of such noncompliance; and (iii) whether the noncompliance is “minor or insubstantial” or goes to the “very essence of the bargain.”

First, the court determined that obtaining a timely physician certification is an express condition of payment, as the regulations provide that in order for home health services to qualify for payment, the physician certification requirements must be met. 42 CFR §§ 409.41, 424.22(a)(2). Second, the court acknowledged that the complaint contained no allegations regarding past government action denying Medicare claims associated with untimely certifications. Nevertheless, the court found that this factor neither weighed in favor nor against a finding of materiality, because Prather asserted that the government had not been made aware of the untimeliness of the certifications when it paid the claims. Instead, Prather alleged that had the government been made aware, it would have denied the claims. Third, the court pointed to guidance documents issued by the Department of Health and Human Services and the Centers for Medicare and Medicaid Services in which the government had emphasized the importance of timely certifications as a fraud prevention measure and its longstanding policy to mandate that home health care providers complete the physician certification prior to the end of the episode of care. In light of the foregoing, the court concluded that the complaint adequately pled the materiality element.

Scienter: FCA liability will not attach for failing to disclose violations of billing requirements, unless the “defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.” Prather, 892 F.3d at 837. The FCA defines “knowingly” to mean either [A] to have “actual knowledge,” [B] to act with “deliberate ignorance of the truth,” or [C] to act with “reckless disregard” of the truth. U.S.C. § 3729(b)(1)(A). The court held that Prather sufficiently alleged that Brookdale acted with at least “reckless disregard” with respect to compliance with the certification requirements. In particular, the court concluded that the factual allegations in the complaint supported the inference that Brookdale was on notice that its claim-submission process was potentially non-complaint. According to the court, when Prather raised possible compliance issues with her supervisors, Brookdale had an obligation to inquire into whether it was actually in compliance with regulations. Instead of conducting such an inquiry, Brookdale advised its employees to essentially ignore the problem in order to get the backlogged claims submitted. In the court’s view, those allegations were enough to meet the “reckless disregard” standard of scienter.

The Dissenting Opinion: In an unusually long dissenting opinion, the dissenting judge concluded that Prather failed to sufficiently plead both the materiality and scienter requirements under the FCA. Applying Escobar, the dissent reasoned that timely certification could not be considered “material” to the government’s determination to pay a claim when the applicable Medicare claim form, otherwise detailed, does not even require the provider to identify the date of certification. Additionally, the dissent noted, Prather could not identify any instance when the government had actually denied a claim based on an untimely physician certification.

The dissent also took issue with the majority’s conclusion that a technical violation of the regulations governing the timing of the certifications could deprive the government of the benefit of the bargain. The dissent contrasted the timing of the certifications with more substantive regulatory requirements—that the services be actually provided, by a licensed professional, and be medically necessary—that do go to the essence of the bargain in reimbursing Medicare claims. In the dissent’s view, untimely certifications in violation of the regulations can be effectively remedied on audit, and should not be addressed through FCA actions premised on “fraud.”

Finally, the dissent concluded that the “rigorous” FCA scienter requirement (citing Escobar) was also not satisfied, as Prather’s allegations at best “suggest[] that Brookdale knew some of its billing practices might draw the ire of Medicare auditors.”


Subject to further review, this decision points to the ominous risk that mere, arguably technical noncompliance with the regulations—in this case, untimely physician certifications—may be fodder for FCA liability and sufficient to meet the “materiality” component, at least where the regulations make such compliance an express condition of payment. This is so, in this case, even in the absence of any evidence or history of the government’s denying Medicare claims on such a technicality, and when a home care agency often cannot control or compel third‑party physicians to timely complete the certifications. Accordingly, home care agencies and other providers need to be vigilant about compliance with the full gamut of regulations affecting the right of payment.

Additionally, this decision puts providers on notice that the “knowledge” component of an FCA claim may be satisfied, under the lower “reckless disregard” threshold, when employees have expressed concerns about possible compliance issues and the provider fails to investigate such concerns prior to billing. Thus, providers must ensure that they have a compliance program in place in which compliance concerns are promptly investigated and, if necessary, remediated.

*Andrew Ravits, a summer associate law clerk, assisted with the preparation of this memorandum.


1 On June 26, 2018, Brookdale petitioned the Sixth Circuit for an “en banc” review of the decision, requesting a review by all the active judges in the Sixth Circuit Court of Appeals. A decision on the petition has not yet been rendered. Also, we note that the Sixth Circuit Court of Appeals has jurisdiction over appeals from federal district courts located in Kentucky, Michigan, Ohio, and Tennessee.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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