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False Claims Act Medical Necessity Cases Get Another Boost in the Tenth Circuit

July 19, 2018

False Claims Act cases based on false statements of medical necessity received another big boost last week – this time from the Tenth Circuit.  As previously discussed, a worrisome trend had emerged at the district court level in at least three cases in which judges accepted defense arguments that doctors’ medical judgments are subjective opinions and cannot be false or fraudulent. All three cases were appealed. Two recently were reversed, and a decision is pending in the third.

Sixth Circuit Leads the Way, Reinstating Conviction of Cardiologist Based on False Statements of Medical Necessity

In United States v. Paulus, a jury convicted a cardiologist of false statements and health care fraud. Prosecutors presented evidence that Dr. Paulus performed an unusually large number of angiograms. An angiogram is a test for arterial blockages. He also exaggerated the degree of blockages so that he could perform and bill for unnecessary cardiac stents. The district judge threw out the jury’s verdict, finding that Dr. Paulus’s interpretation of angiograms could not be false because determining the extent of blockages was a subjective medical judgment.

On appeal, the Sixth Circuit rejected the district court’s conclusion. The court held that the degree of arterial blockage “is a fact capable of proof or disproof”. It remains a jury question even though it may be subject to good-faith disagreement. The court also noted, “A doctor who deliberately inflates the blockage he sees on an angiogram has told a lie; if he does so to bill a more expensive procedure, he has also committed fraud.” United States v. Paulus at *9.

Within days of the Sixth Circuit’s ruling, the Department of Justice filed letters notifying the Tenth and Eleventh Circuits of the court’s decision. Each of those courts was considering an appeal of an FCA medical necessity case during the pendency of Paulus – the Polukoff case in the Tenth Circuit, and the AseraCare case in the Eleventh (see discussion below).

Tenth Circuit Agrees in FCA Case that Falsity is a Jury Determination

Subsequently, the Tenth Circuit agreed with the Sixth Circuit’s and DOJ’s position. In US ex rel Polukoff v. St. Mark’s Hospital, common sense again prevailed when the court concluded that in a False Claims Act case a jury must decided whether statements of medical necessity are false. In the case, a cardiac surgeon was alleged to have performed thousands of unnecessary heart surgeries. The district court dismissed the complaint, because it found that the doctor’s statements that surgery was reasonable and medically necessary was a subjective medical judgment and, as a matter of law, could not be false. Polukoff at *14.

On appeal, the Tenth Circuit reversed, and rejected the proposition that “a medical judgment can never serve as the basis for an FCA claim.” Polukoff at *16. The court held that a doctor’s certification on claims forms that a procedure is reasonable and necessary is false under the FCA if the procedure fails to meet the government’s definition of “reasonable and necessary.” Polukoff at *20. Notably, the court adopted an “expansive” view of what constitutes a false or fraudulent claim under the FCA. Polukoff at *16-17. In doing so, it dismissed arguments that a broad definition might expose doctors to increased liability for their medical judgments, holding that the False Claims Act materiality and knowledge requirements effectively address such concerns. Polukoff at *20-21, citing Universal Health Services v. US ex rel Escobar, 137 S. Ct. 1989, 2002 (2016).

All Eyes Now Turn to the Eleventh Circuit in Aseracare

In United States v. AseraCare, Inc., 176 F.Supp. 3d 1281 (N.D. Ala. 2016), the United States intervened in whistleblower lawsuits against a hospice provider accused of falsely certifying patients as terminally ill. A jury found in favor of the Government on the issue of falsity. Afterward, the district judge vacated the verdict and granted summary judgment to the defendant. The court concluded that testimony by the Government’s expert that patients’ medical records did not support hospice admission was insufficient to prove falsity and merely reflected a difference of opinion with the hospice physicians. 176 F.Supp. 3d at 1285-86.

The AseraCare appeal was argued in March 2017, and the court’s decision is anticipated any day. We will soon know whether the Eleventh Circuit will join the Sixth and Tenth Circuits in reaffirming that the falsity of medical judgment statements is a fact to be decided by a jury. In any case, it will remain important for whistleblowers and their attorneys to evaluate medical necessity cases very carefully and only bring cases in which there is evidence of false statements or fraudulent conduct.