A recent district court decision delivered a decisive blow to False Claims Act (FCA) relators seeking to survive summary judgment in cases based on ambiguous regulations. In United States ex rel. Donegan v. Anesthesia Associates of Kansas City, PC, the United States District Court for the Western District of Missouri granted summary judgment to the defendant on June 9, 2015, holding that because the regulation at issue was ambiguous and the defendant’s construction of it was reasonable, the defendant was entitled to summary judgment on the issue of scienter.

The case involved meaning of the term “emergence” as used in anesthesiology. The applicable regulation required that, in order to bill at a particular rate, an anesthesiologist must be present during a patient’s “emergence” from anesthesia, without defining that term. The parties differed on whether the term included a patient’s recovery in the recovery room as well as in the operating room. The defendant argued that it included both; as such, even if an anesthesiologist was not present in the operating room when the patient came out of anesthesia, if he/she was present in the recovery room, the emergence requirement was satisfied. The relator offered evidence supporting a contrary definition, limiting “emergence” to the operating room.

The court held that the relator could not prove knowing submission of false claims, finding that the definition of “emergence” was ambiguous and undefined, and that “[a]lthough there is a consensus within the anesthesiology community that emergence begins in the operating room with the cessation of the delivery of anesthetic agents, there is no agreement on where it ends.” The court found the defendant’s interpretation reasonable, even if not “the most widely held or most reasonable definition” and even if an opportunistic interpretation, inasmuch as the defendant had “a financial motive to interpret the regulation this way.” In reaching its holding, the court rejected not only the relator’s arguments, but those advanced by the United States in a statement of interest, in which it suggested that the scienter analysis should include examining the “steps the defendant took to ascertain the government’s construction of an ambiguous regulation.”

The court’s decision makes sense, and is an outgrowth of the often-cited notion that matters of scientific disagreement cannot give rise to FCA liability. Where an FCA claim is premised on a regulation that uses an undefined medical term that is subject to different interpretations, a provider should not rationally be held to have engaged in fraud if the provider reasonably interpreted the ambiguity, even in a “less reasonable” way than the relator and even if in a manner that inured to the provider’s financial benefit.

  • Paul Kamenar

    Excellent decision by the district court that ambiguous terms of a health care regulation should not be the subject of civil fraud where the defendant’s interpretation of the regulation was a reasonable one and hence, no scienter. All the more so in a criminal health care fraud case is it improper to prosecute where the statute in question is unclear, agency regulations clarifying the statute are nonexistent, and the defendants’ interpretation of the law is objectively reasonable.

    That situation is squarely presented in a case pending before the 11th Circuit in United States v. Clay involving criminal charges of Medicaid fraud. The case will be argued the last week of September 2015, the outcome of which will have a major impact on the criminal enforcement of health care laws.

    See http://www.wlf.org/upload/legalstudies/legalbackgrounder/031315LB_Kaiser.pdf