“Objective Falsity” in Healthcare Fraud and Abuse

Blog Post | 110 KY. L. J. ONLINE | April 20, 2022

“Objective Falsity” in Healthcare Fraud and Abuse

By: Adriel Wilson, Staff Editor, Vol. 110

Introduction

Healthcare fraud and abuse poses problems for both patients and payers.[1] Circuit Courts are split as to whether a difference in expert medical opinion that certain health services are medically necessary—and therefore payable by the government—is sufficient to establish that the claim for services provided is false or fraudulent under the False Claims Act (FCA).[2] This split stems from the interpretation of “falsity” under the Act.[3] The Supreme Court should adopt the Eleventh Circuit’s “objective falsity” standard in which a clinical judgment cannot be deemed “false” when there is merely a reasonable disagreement between medical experts as to the accuracy of that conclusion.[4] In contrast, the leading case for the opposing view is the Third Circuit’s decision in United States ex rel. Druding v. Druding (2020).[5] It found that the difference in opinion did create a “genuine dispute of material fact as to falsity.”[6]

Reconciling the Third and Eleventh Circuits

There are three notable points for reconciling the Third and Eleventh Circuits, respectively, and in the determination that the Eleventh Circuit has the superior analysis, as laid out in United States v. AseraCare (2019): (1) the courts actually seem to agree on whether a medical opinion can be deemed untrue, (2) they mainly disagree on the purpose of the documentation requirements and its effect on a falsity determination, and (3) the Eleventh Circuit’s analysis is superior because the Supreme Court has explicitly held the FCA is not there to punish garden-variety regulatory infractions.[7]

First, regarding what the Third Circuit refers to as “factual falsity,” the two circuits actually seem to agree. Both courts determined that medical opinions are not shielded from scrutiny, although the Third Circuit seemed to suggest the Eleventh Circuit thought otherwise.[8] Specifically, both circuits determined that an opinion is “false” if it is not genuinely held by the speaker.[9]

Second, the courts seem to mainly disagree on the role the documentation requirements play in the Medicare Hospice Benefit. The Third Circuit found that it is evidence of a violation of legal falsity, while the Eleventh Circuit believes that it is merely there to provide documentation of the doctor’s rationale[10] and address the mandate that there be a medical basis for certification.[11]

Finally, the Eleventh Circuit’s analysis is superior to the Third Circuit’s because it promotes the considerations addressed in the Supreme Court’s decision in United States ex rel. Escobar (2016). Akin Gump wrote: “In Escobar, the Court made clear that the FCA is not ‘an all-purpose antifraud statute’… [or] a ‘vehicle for punishing garden-variety breaches of contract or regulatory violations’… Instead, as one recent court summarized… ‘Escobar rejects a system of government traps, zaps, and zingers that permits the government to retain the benefit of a substantially conforming good or service but to recover the price entirely–multiplied by three–because of some immaterial contractual or regulatory non-compliance.’”[12]

Two Schools of Thought Doctrine

Another reason the Eleventh Circuit’s objective standard of falsity is preferable is the uncertainty of medical sciences.[13] In an ancillary legal field, medical negligence liability, some states have adopted the “two schools of thought” doctrine.[14] The two schools of thought doctrine was articulated in Jones v. Chidester.[15] The main proposition of the doctrine is that if there are two bona fide schools of thought among physicians, then a physician cannot be held liable in negligence for choosing one school of thought over another.[16] The rationale is if there are two legitimate schools of thought, then a jury of laypersons should not have to decide the better alternative.[17] The jury simply determines whether it believes there are two legitimate schools of thought sufficient to insulate the defendant from liability.[18] Although this is in the medical negligence field, its rationale is applicable to the objective falsity issue for the FCA as well: laypersons are not qualified to determine liability when there are differing opinions between trained medical experts.[19] However, because this is a claim based on a federal statute as opposed to state tort law, the issue should be decided in the preliminary stages by the judge instead as a matter of law, as the Eleventh Circuit explained in AseraCare.

Conclusion

In conclusion, the Supreme Court should adopt the Eleventh Circuit’s objective falsity standard. This will resolve the confusion among lower courts, and it is the superior theory for at least two reasons: (1) it is aligned with the court’s Escobar decision and (2) it would simplify courtroom controversies in light of the “two schools of thought” doctrine.

[1] Katherine Drabiak, JD & Jay Wolfson, DrPH, JD, What Should Health Care Organizations Do to Reduce Billing Fraud and Abuse?, AMA Journal of Ethics (Mar. 2020), https://journalofethics.ama-assn.org/article/what-should-health-care-organizations-do-reduce-billing-fraud-and-abuse/2020-03.

[2] Foley Hoag LLP, ‘Objective Falsity’ and the FCA: An Ongoing Circuit Split, JD Supra (Mar. 15, 2021), https://www.jdsupra.com/legalnews/objective-falsity-and-the-fca-an-2164689/.

[3] Id.

[4] Id.; United States v. AseraCare, Inc., 938 F.3d 1278, 1281 (11th Cir. 2019); United States v. AseraCare Inc., 176 F. Supp. 3d 1282, 1286 (N.D. Ala. 2016).

[5] Foley Hoag LLP, supra note 2; Care Alts. v. United States, et al. ex rel. Druding, et al., No. 20-371 (Sep. 16, 2020).

[6] Id.

[7] Universal Health Servs. v. United States, 579 U.S. 176, 194 (2016).

[8] United States ex rel. Druding v. Druding, 952 F.3d 89, 100 (3d Cir. 2020).

[9] Id. at 95.; AseraCare, 938 F.3d at 1300.

[10] AseraCare, 938 F.3d at 1296.

[11] Druding, 952 F.3d at 99.

[12] Strauss Hauer & Feld LLP, 9th Circuit Makes Mandatory Escobar’s Implied False Certification Test, but Fails to Faithfully Follow Escobar’s Directives, Akin Gump (Sept. 4, 2018), https://www.akingump.com/en/news-insights/9th-circuit-makes-mandatory-escobar-s-implied-false.html.

[13] Mark A. Hall, David Orentlicher, Mary Anne Bobinski, Nicholas Bagley, & I. Glenn Cohen, Medical Liability and Treatment Relationships 363–64 (4th ed. 2018).

[14] Id.

[15] Jones v. Chidester, 531 Pa. 31, 610 A.2d 964, 965 (1992); Hall, supra note 12, at 338.

[16] Id.

[17] Id.

[18] Id. at 340.

[19] Id.