In its conference on Feb. 19, the U.S. Supreme Court is scheduled to consider two pending petitions for certiorari that could resolve a critical but deeply disputed issue that impacts both the False Claims Act and health care law.

The cert petitions in those cases — U.S. v. Care Alternatives,[1] and Winter v. Gardens Regional Hospital & Medical Center[2] — ask the court to determine when an expert opinion can be sufficient for a plaintiff to prove that a government contractor's claim for payment is false or fraudulent.

This article suggests that the Supreme Court should grant certiorari in the Care Alternatives case, and reverse the U.S. Court of Appeals for the Third Circuit. Practically speaking, the court should adopt the rule from the U.S. Court of Appeals for the Eleventh Circuit's ground-breaking decision in U.S. v. AseraCare Inc., which predated Care Alternatives.

Importantly, it was the U.S. Court of Appeals for the Ninth Circuit in Winter that recognized what this article refers to as the "objective falsehood fallacy."

Contrary to the Third Circuit's apparent misunderstanding of AseraCare, a rule requiring an objective falsehood does not mean that a subjective judgment or opinion never can be false under the False Claims Act.

Context Matters

In AseraCare, the Eleventh Circuit held that — in the context of the Medicare hospice benefit — a mere subjective disagreement between physicians is insufficient to show falsity under the FCA.

The government alleged that the defendant hospice provider had submitted claims for payment to Medicare for patients who were not eligible for the hospice benefit.[3]

By statute, a patient is eligible for the Medicare hospice benefit where a physician certifies in their subjective clinical judgment that the patient is terminally ill — i.e., where the patient's medical prognosis is a life expectancy of six months or less.[4]

Neither Congress nor the Centers for Medicare and Medicaid Services has imposed defined criteria that would govern the certifying physician's subjective clinical judgment.[5]

Against this backdrop, the Eleventh Circuit held that the government had not created a triable issue of fact for the jury on the False Claims Act's element of falsity.[6]

That was because there was "only a reasonable disagreement between medical experts" regarding each patient's terminal illness — i.e., a disagreement between the government's physician expert and the patients' certifying physicians years before — with "no other evidence to prove the falsity" of the certifying physician's subjective clinical judgment.[7]

The Eleventh Circuit held that a "claim cannot be 'false' ... if the underlying clinical judgment does not reflect an objective falsehood."[8] And, according to the Eleventh Circuit, a "mere difference of reasonable opinion between physicians, without more, ... does not constitute an objective falsehood."[9] 

But the Eleventh Circuit clearly did not announce a rule that a subjective clinical judgment or opinion never could be false or wrong, or that a plaintiff's expert testimony was irrelevant where the falsity or accuracy of a subjective opinion was at issue.

Instead, the Eleventh Circuit required evidence of "facts and circumstances surrounding the patient's certification" that would be "inconsistent with the proper exercise of a physician's clinical judgment"[10 ] — for example, if the certifying physician "d[id] not actually hold th[e] opinion" that the patient was terminally ill, if the physician simply "rubber-stamped whatever file was put in front of him," or "if no reasonable physician would think that a patient had a terminal illness based on the evidence before that physician."[11]

The Circuit Split and the "Objective Falsehood Fallacy"

In Care Alternatives, the Third Circuit departed from the Eleventh Circuit, and all but ignored the context of the Medicare hospice benefit.[12]

The court addressed the exact same issue as the Eleventh Circuit in AseraCare — that is, whether a defendant hospice provider's claim for Medicare reimbursement can be false under the FCA based on a plaintiff's medical expert testimony that the patient was not terminally ill.[13]

The Third Circuit departed from the Eleventh Circuit's AseraCare decision,[14] and held that the "answer [wa]s a straightforward yes."[15]

Stunningly, the Third Circuit relegated to only a footnote its consideration of the controlling statute for patient eligibility for the Medicare hospice benefit — i.e., the statute that defers the determination to the certifying physician's subjective clinical judgment, and includes no mandatory objective criteria.[16]

This is illustrative of the Third Circuit's reasoning, which largely ignored the context of the Medicare hospice benefit.

From there, the Third Circuit's reasoning fell into the objective falsehood fallacy noted above. The Third Circuit rejected the objective falsehood standard.[17]

The Third Circuit attributed the objective falsehood standard to the Eleventh Circuit's AseraCare decision, and repeatedly criticized AseraCare for its adoption of that
standard.[18]

To be clear, the Eleventh Circuit did rule that the FCA requires an objective falsehood. But, contrary to the suggestions in Care Alternatives — and as explained above — the Eleventh Circuit never "determined that clinical judgments cannot be untrue."[19]

Nor did the Eleventh Circuit rule that a plaintiff expert's medical opinion disagreeing with a certifying physician's opinion is not relevant evidence.[20]

Tellingly, the Third Circuit appeared to agree with the Eleventh Circuit on the facts and circumstances under which a certifying physician's subjective clinical judgment as to a patient's terminal illness could be false or wrong.[21]

For instance, an FCA plaintiff could prove falsity where the opinion issued without reasonable genuine belief, had no basis, or were contrary to the opinion the certifying physician actually held.[22]

Winter Is Coming

Even in agreeing with the Third Circuit, in Winter, the Ninth Circuit explained away the objective falsehood fallacy. The Ninth Circuit held that the FCA does not require an objective falsehood, and recognized that a subjective judgment or opinion can be false.[23]

Again, context matters, and Winter involved Medicare claims for payment for inpatient care, not hospice.

More importantly, for purposes of the Supreme Court's Feb. 19 conference, the Ninth Circuit explained away the Third Circuit's objective falsehood fallacy in a single paragraph. Discussing AseraCare, the Ninth Circuit stated as follows:

Notwithstanding the Eleventh Circuit's language about "objective falsehoods," the court clearly did not consider all subjective statements — including medical opinions — to be incapable of falsity.[24]

Moreover, the Ninth Circuit acknowledged that the Eleventh Circuit had "identified circumstances in which a medical opinion would be false."[25]

As explained above, the Eleventh Circuit had offered example facts and circumstances for falsity, which the Third Circuit implicitly adopted, and which the Ninth Circuit collected in a footnote.[26]

Resolve the Circuit Split

So, where does this trilogy leave the FCA — and the Supreme Court in its Feb. 19 conference? The Supreme Court should resolve the split between the Eleventh and Third Circuits, but not necessarily decide whether the FCA requires an objective falsehood.

At the risk of being reductive, the Eleventh, Third and Ninth Circuits all agree that a subjective judgment or opinion can be false — notwithstanding what Care Alternatives said about AseraCare.

The Eleventh Circuit disagrees with the Third and Ninth Circuits about whether the FCA requires an objective falsehood. And, in the context of the Medicare hospice benefit, the Eleventh and Third Circuits disagree about whether a plaintiff's expert testimony — without more — is sufficient to show falsity under the FCA.

Again, it is the Ninth Circuit in Winter that provides the way forward.

Whatever an objective falsehood may be under the FCA, a rule requiring such an objective falsehood does not mean that a subjective judgment or opinion never can be false. The Eleventh Circuit in AseraCare was crystal clear about that. And, in this respect, some of the Third Circuit's statements in Care Alternatives about AseraCare are just wrong.

As Winter explains, the federal circuit courts even appear to agree about the facts and circumstances under which a subjective judgment or opinion can be false. But the courts do not agree on nomenclature — that is, whether those same facts and circumstances should be called an objective falsehood in terms of FCA falsity.

What is an objective falsehood under the FCA, and is that term of art still helpful to FCA jurisprudence? Those are questions that the Supreme Court should grant cert to answer.

However, those questions also may be beside the point. Both AseraCare and Care Alternatives reason that the determinative issue is whether the defendant hospice provider's claims were reimbursable under the controlling Medicare statutes and regulations.[27]

The Eleventh and Third Circuits have split on this point: whether a patient is eligible for the Medicare hospice benefit where the only evidence contradicting the certifying physician's subjective clinical judgment is the subjective, hindsight opinion of a medical expert.

That would be the question on the merits for the Supreme Court in the Care Alternatives case, and it is an important one — as the pending cert petition and supporting amicus briefs have explained.

For the reasons explained above, it was the Eleventh Circuit that correctly interpreted the applicable Medicare statutes and regulations, which defer to the certifying physician's subjective clinical judgment and include no mandatory objective criteria.

And it was the Third Circuit that downplayed the importance of those statutes and regulations, and mischaracterized the AseraCare rule — a mischaracterization that the Ninth Circuit then corrected.

At a minimum, the Supreme Court should grant cert to resolve the circuit split over this core issue under the Medicare statues and regulations.

What then should the Supreme Court do with the pending cert petition in Winter, which squarely presents the question of whether the FCA requires an objective falsehood?

Because context matters, and Winter was not a hospice case, the court should do one of two things. As suggested above, the court could grant the petition to address the confusion and uncertainty about what is an objective falsehood under the FCA, and why that concept matters (or does not matter).

Alternatively, the court could grant the Care Alternatives petition to address the core issue under the Medicare statutes and regulations, hold in conference the Winter petition, and then grant, vacate and remand the case back to the Ninth Circuit when the court later decides the merits of Care Alternatives.[28]

The key on remand would be a more comprehensive analysis of the controlling Medicare statutes and regulations for the relevant inpatient services, perhaps irrespective of whether the FCA requires an objective falsehood.

Republished with permission. This article, "Justices Should Weigh In On FCA Objective Falsity Standard," was originally published by Law360 on February 18, 2021 and can be accessed here. (login required)

[1] See Care Alternatives v. U.S., No. 20-371 (U.S.).
[2] See RollinsNelson LTC Corp. v. U.S. ex rel. Winters, No. 20-805 (U.S.).
[3] U.S. v. AseraCare Inc., 938 F.3d 1278, 1281 (11th Cir. 2019).
[4] 938 F.3d at 1282 (citing 42 U.S.C. §§ 1395f(a)(7)(A), 1395x(dd)(3)(A)).
[5] Id.
[6] Id. at 1281.
[7] Id.
[8] Id. at 1296-97.
[9] Id. at 1301.
[10] Id. at 1297.
[11] Id. at 1302.
[12] Care Alternatives, 952 F.3d 89 (3d Cir. 2020).
[13] Id. at 95.
[14] Id. at 99.
[15] Id. at 95.
[16] See id. at 92 n.1 (citing 42 U.S.C. § 1395f(a)(7)(A)).
[17] Id. at 100.
[18] Id. at 99-100.
[19] Id. at 100.
[20] Id.
[21] See supra.
[22] Care Alternatives, 952 F.3d at 95.
[23] See Winter, 953 F.3d 1108, 1119 (9th Cir. 2020). While this author disagrees with the rulings that the FCA does not require an objective falsity — for the reasons discussed in AseraCare — that disagreement is not the subject of this article.
[24] Id.
[25] Id. at 1118-19.
[26] Id. at 1119 n.7.
[27] Compare AseraCare, 938 F.3d at 1291 ("[T]he sole question is whether the claims [the defendant provider] submitted were reimbursable under the Medicare framework for hospice care."), with Care Alternatives, 952 F.3d at 100 ("FCA falsity ... encompass[es] circumstances where a claim for reimbursement is non-compliant with requirements under the statute and regulations.").
[28] For example, that is what the court did with the cert petition that followed from
the U.S. Court of Appeals for the Fourth Circuit's significant decision in Triple Canopy, when the court decided the landmark Escobar case regarding FCA materiality. See Triple Canopy, Inc. v. U.S. ex rel. Badr, No. 14-1440 (U.S.); Universal Health Servs. Inc. v. U.S., 136 S. Ct. 1989 (2016).