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By Michael L. Waldman and Eric A. White
Michael Waldman is a partner at Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, in Washington. He has extensive experience in civil, criminal, and debarment cases arising from federal fraud investigations, and has lectured and written widely on the False Claims Act. Eric White is an associate at Robbins Russell and has represented defendants in several False Claims Act and qui tam lawsuits.
If the False Claims Act is any part of your practice, chances are you have heard of United States v. AseraCare—if not by name then by reputation.
Much ink has been spilled and many gigabytes consumed discussing the surprising turn of events in that $200 million false-certification qui tam in the Northern District of Alabama in which the federal district judge reversed course after trial, granting summary judgment for the defendants because, in retrospect, the government medical expert's differing opinion as to patient prognosis was not sufficient to render the defendant's claims false.
But the logic of AseraCare is not limited to that holding.
Rather, it can be seen as at the intersection of two developing bodies of law: First, it reinforces the recent push back from some courts to relators employing statistical sampling to establish False Claims Act liability, counseling that courts should tread warily with statistical sampling.
And, second, it lends further support for the holdings in recent cases that dueling expert opinions as to ambiguous statutory or contract terms or, here, medical judgments do not properly form the basis of a False Claims Act case.
AseraCare involved allegations that a hospice provider falsely certified patients as eligible for Medicare-funded hospice care in violation of the False Claims Act United States v. AseraCare, Inc., 2014 BL 341007 at *3–*5 (N.D. Ala. 2014).
To be eligible for Medicare-funded hospice care, a physician must certify that a patient is terminally ill. Id. at *4. The Centers for Medicare & Medicaid Services (“CMS”) considers a patient terminally ill if the “prognosis is for a life expectancy of 6 months or less if the terminal illness runs its normal course,” which determination must be backed up by documentation in the patient's medical record. Id. at *4 (discussing 42 C.F.R. § 418.22(b)).
The central issue in AseraCare came down to whether physician certifications that patients were terminally ill were supported by the patients' medical records United States v. AseraCare Inc., 2015 BL 410381, at *1–*2(N.D. Ala. 2015).
Over the defendant's objection, Judge Bowdre approved the government's approach to have its expert review records relating to 233 of the 2,181 patients. 2014 BL 341007, at *10.
After bifurcating to focus first on the falsity of the claims (a later trial would focus on knowledge), the case proceeded to trial, at which the government made its case on an even more limited subset of claims concerning 121 sample patients. 2015 BL 410381, at *3, *5.
Following deliberations, the jury agreed with the government's expert as to most of the sample patients and found that the claims as to these patients were objectively false. Id. at *5.
However, after this two-month trial and verdict, the court ( sua sponte) held a hearing to revisit the jury instructions—namely, the denial of AseraCare's request for an instruction that a mere difference in opinion regarding whether a patient was terminally ill cannot rise to the level of an objective falsehood.
The district judge then granted AseraCare's motion for a new trial, and issued an order (again, sua sponte) saying that it would revisit AseraCare's summary judgment motion, id. at *5–*12, which the court later granted, seeUnited States v. AseraCare Inc., 2016 BL 100986, at *1–*3 (N.D. Ala. 2016).
The reason for the court's about-face was its realization that the government's attempt to prove that AseraCare's claims contained false certifications rested on nothing more than its expert's disagreement about the patient prognoses underlying the claims.
The court was “concerned that allowing a mere difference of opinion among physicians alone to prove falsity would totally eradicate the clinical judgment required of the certifying physicians.” Id. at *3.
After all, if it “were to find that all the Government needed to prove falsity ... was one medical expert who reviewed the medical records and disagreed with the certifying physician, hospice providers would be subject to potential FCA liability any time the Government could find a medical expert who disagreed with the certifying physician's clinical judgment.” Id. at *4.
In the end, the analysis of patient charts underlying the claims elicited only “a difference of opinion between physicians and medical experts about which reasonable minds could differ,” and, the court held, that is not enough to “prove the falsity element as a matter of law.” Id. .
The holding in AseraCare is significant in its own right. But, taken to its logical conclusion, AseraCare stands for much more than just the insufficiency of a lone government expert's contrary opinion to render a claim false.
For one, it implicitly recognizes that it is the unique factual circumstances in the individual claims themselves that hold the key to falsity or lack of falsity—particularly in cases necessitating reviews of complicated, highly judgment-based underlying records, like patient charts.
And that requires individualized assessments. It also lends further support for the argument that, beyond issues of medical necessity, mere differences in opinion are not sufficient to establish liability under the Act.
These lessons are best highlighted by a few recent cases—one questioning the use of statistical sampling for proving liability (of which, recall, the AseraCare court had approved) and others rejecting the notion that a reasonable interpretation of an ambiguous provision based on a relator's or the government's contrary interpretation rises to the level of a False Claims Act violation.
In recent years, some courts have seemed all too willing to elide over the basic requirement that the individual claims at issue be proven false, permitting statistical sampling for purposes of establishing False Claims Act liability. See, e.g., United States ex rel. Ruckh v. Genoa Healthcare, LLC, 2015 BL 122821 (M.D. Fla. 2015) (rejecting, in the context of an upcoding/upcharging qui tam, defendants' argument to dismiss the case on the grounds that the relator's proposal to have her expert review just 1% of the claim population cannot form the basis for False Claims Act liability); United States v. Robinson, 2015 BL 89887 (E.D. Ky. 2015); United States ex rel. Martin v. Life Care Centers of America, Inc., 114 F. Supp. 3d 549, 2014 BL 276533 (E.D. Tenn. 2014) (allowing, in the context of an intervened medical-necessity qui tam, the government to extrapolate based on an individual assessment of the patient's clinical condition in only a random sample of 7% of the patient admissions underlying the allegedly false claims).
But there could be a reaction in the works. Standing athwart the recent trend is the District of South Carolina opinion in United States ex rel. Michaels v. Agape Senior Community, Inc.
There, the relator alleged that a nursing-home network submitted tens of thousands of false claims for services that were not medically necessary. United States ex rel. Michaels v. Agape Senior Community, Inc., 2015 BL 203093 (D.S.C. 2015), appeal docketed, No. 15-2145(L) (4th Cir. Sept. 29, 2015).
Given the large number of claims and patients at issue, the relator intended to use statistical sampling to establish liability based on review of only select patient records. Id. at *6. Judge Anderson, Jr., considered that such an approach might be acceptable in a case where evidence has dissipated or been destroyed, but determined that that was not the case there, and thus that “statistical sampling should not be allowed.” Id.
In keeping with the logic in AseraCare, the Michaels court correctly recognized that falsity turns on the circumstances of individual claims: that “[d]istilled to its essence, each claim asserted ... presents the question of whether certain services furnished to nursing home patients were medically necessary.” Id. at *8.
And it honed in on the fact that “[a]nswering that question for each of the patients involved ... is [a] highly fact-intensive inquiry involving medical testimony after a thorough review of the detailed medical chart of each individual patient.” Id.
The Court rejected the argument that this individualized inquiry should be excused because of the effort involved in a review of each patient (the relator maintained that an individualized review of the records for each of 10,166 patients, at a few hours per chart, would cost somewhere between $16.2 million and $36.5 million).
Ultimately, the Michaels court certified the statistical-sampling question (along with a separate question about the government's right to reject a settlement in a qui tam case in which it has not intervened) to the Fourth Circuit. Id. at *8–*9. So we may soon have helpful court of appeals guidance on this important matter.
But whatever the end result in Michaels, the logic of AseraCare— i.e., that determining the falsity of any one claim rests on a thorough review of the factual predicates of that claim—counsels courts to be skeptical of relators who are all too eager to jettison establishing falsity at the individual-claim level and to replace it with statistical sampling by experts.
The central logic of AseraCare also runs through another recent victory for a False Claims Act defendant, United States ex rel. Purcell v. MWI Corp., 807 F.3d 281, 2015 BL 386398 (D.C. Cir. 2015). This case involved MWI Corporation's application for $74.3 million in loans from the Export-Import Bank.
As a condition of approval, MWI had to certify that it had not paid “any discount, allowance rebate, commission, fee or other payment in connection with the sale” except “ [r]egular commissions or fees paid or to be paid in the ordinary course of business to [its] regular sales agents.” Id. at 284. MWI made dozens of certifications that it had only paid “regular commissions.” Id.
The relator filed a complaint alleging that MWI had paid $28 million in commissions to its Nigerian sales agent that MWI should have disclosed, and the government intervened. Id. The applicable regulations did not define “regular commissions.” Id. at 284–85.
For its part, MWI maintained that those commissions were “regular,” in that it had been paying commissions to its sales agents based on that same formula for several years. Id. at 288–89. The government, however, insisted that the definition of “regular commission” should be set by industry-wide benchmarks. Id. at 285.
The district court agreed with the government, and the jury determined that each of MWI's certifications concerning commissions were false as judged against industry-wide benchmarks. Id.; seeUnited States ex rel. Purcell v. MWI Corp., 520 F. Supp. 2d 158 (D.D.C. 2007).
The D.C. Circuit reversed with instructions to enter judgment for MWI. Purcell, 807 F.3d at 291. The court based its opinion on the False Claims Act's knowledge element, holding that the government failed in its burden to prove that MWI knowingly submitted false claims. Id. at 287–91. It “agree[d] with MWI that the meaning of the term ‘regular commissions' is ambiguous and that MWI's interpretation is reasonable.” Id. at 288.
And it recognized that even though “MWI's interpretation may not be the best interpretation [that] does not demonstrate that MWI's interpretation was necessarily unreasonable. Absent evidence that the negative consequences of an interpretation render it unreasonable, such consequences can play no role in evaluating whether an FCA defendant acted knowingly.” Id. at 290–91.
Purcell is not the only recent opinion to emphasize that a relator or government-intervenor cannot hinge False Claims Act liability on a differing interpretation of an ambiguous requirement.
Another is United States ex rel. Danielides v. Northrop Grumman Systems Corp., 2015 BL 333435 (N.D. Ill. 2015). (Full disclosure: The authors' firm represents the defendant-appellee in Danielides.)
In that qui tam involving an Other Transaction Agreement (“OTA”) with the Department of Homeland Security, Judge Shah granted the defendant's motion for summary judgment on all claims because the relator failed to show that the defendant and the Department of Homeland Security shared his interpretation of “best efforts” in the OTA, and thus there was no objective falsehood to serve as the basis of a False Claims Act action. Id. at *6–*11.
While Purcell is about knowledge and Danielides is about falsity, they both get at the same overarching point.
These opinions recognize that, just as a “contradiction based on clinical judgment or opinion alone cannot constitute falsity under the FCA,” AseraCare, 2016 BL 100986, at *4, so, too, a disagreement based on differing interpretations of an ambiguous requirement cannot rise to the level of a False Claims Act violation.
Whether the disagreement among experts relates to medical assessments of patients, interpreting unclear statutes, or defining obligations arising from a vague contract term, that a relator can find an expert with a contrary opinion should not be enough to make out a claim under the Act.
In this time of aggressive False Claims Act enforcement, and with the new higher penalties, courts should be increasingly attuned to the need that false claims be just that—false.
Statistical sampling arguably may have a place for calculating damages, but in the liability context it stands in tension with the False Claims Act's central requirement that the claims at issue be proven false.
Likewise, a difference of opinion as to the interpretation of an ambiguous contract term or regulation does not morph a claim into a false claim.
And the common nucleus of logic for this possible common-sense reawakening? It can be found in a surprise post-trial rethink in northern Alabama.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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