The Effect Differing Medical Opinions Have On Falsity and Scienter in False Claims Act Lawsuits

By: Jim Hoover with Burr Forman, LLP

There is currently a circuit split among the Federal Circuit Courts of Appeals regarding the effect differing medical opinions have on the elements of falsity and scienter in False Claims Act lawsuits.  

Earlier this year the Third Circuit Court of Appeals ruled that conflicting medical opinions can create a genuine dispute of material fact on “falsity” in a False Claims Act action. The case is United States v. Care Alternatives. This holding directly conflicts with the Eleventh Circuit’s September 2019 decision in United States v. AseraCare, which held that a mere difference in medical opinion between physicians regarding a patient’s prognosis was not enough to establish falsity under the FCA. In Care Alternatives, the Third Circuit rejected AseraCare and found that conflicting physician testimony about the validity of physician’s certifications was sufficient to raise a dispute of material fact regarding the element of “falsity.” The Third Circuit sought to make clear that in its Circuit, findings of falsity and scienter must be independent from one another for purposes of FCA liability. According to the Third Circuit, the scienter element helps limit the possibility that providers will be exposed to liability under the FCA any time the Government or relator can find an expert who disagreed with the certifying physician’s medical prognosis.

Former employees of Care Alternatives filed a qui tam action against the hospice provider, alleging the hospice had improperly admitted patients who were not eligible for Medicare’s hospice benefit and directed employees to falsify Medicare certifications in order to meet the eligibility requirements. The relators’ physician opined that in 35% of the sample cases he reviewed a reasonable physician would not have certified the patient as terminally ill with a prognosis of six months or less based on the accompanying documentation. Reviewing the same sample set, Care Alternatives’ physician disagreed, finding that a reasonable physician could reasonably certify each case. Thus, there was a disagreement among the parties’ experts. The United States District Court for the District of New Jersey agreed with AseraCare by adopting and applying AseraCare’s holding that an “objective falsehood,” something more than a retrospective difference of opinion, was required to create a genuine dispute of fact.

On appeal, the Third Circuit Court of Appeals disagreed and reversed and remand the case for consideration of the other elements of FCA liability, particularly the element of scienter. The Third Circuit noted it is well-established that subjective opinions can be false, and applied this reasoning to the FCA’s falsity element. The Third Circuit opined that AseraCare’s “objective falsity” standard improperly conflated falsity with scienter, i.e., that the whistleblower prove a certifying physician was making a knowingly false certification. The Third Circuit held that these elements must be considered separately, and the purpose of the scienter requirement is to limit the possibility that a provider could be found to violate the FCA any time the Government or a relator could find an expert who may establish falsity simply by disagreeing with a physician’s prognosis.

Thus, in the Third Circuit a determination that a claim was false does not immediately trigger FCA liability. Relators must still establish that the provider knew the claim was false when the claims was submitted. Unfortunately, however, one of the big problems for False Claims Act defendants is credibility determinations are typically reserved for the jury thus almost forcing the False Claims Act case to trial.  

Because of the circuit court split, a United States Supreme Court opinion is needed to resolve the differing circuits’ approaches. In the meantime, the key takeaway for health care providers across the country is these differing standards will be fought in FCA cases where defendants have made reasonable subjective judgments.  The arguments should focus on both the falsity element and the scienter element.  

Jim Hoover is a partner at Burr & Forman LLP and works exclusively within the firm’s Health Care Practice Group and predominantly handles healthcare litigation.