FCA UPDATE
FCA UPDATE
Exploring Recent Developments in False Claims Act Litigation, Enforcement and Compliance
FCA UPDATE
Exploring Recent Developments in False Claims Act Litigation, Enforcement and Compliance
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DOJ Appealing AseraCare Loss

By on Jun 10, 2016
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On May 27, 2016, the US Department of Justice said it will appeal to the Eleventh Circuit its loss in the False Claims Act (FCA) case against hospice chain AseraCare Inc. The government’s decision to appeal comes as no surprise, and it means that the substantial attention this case has received will continue.

As a reminder, this case, U.S. ex rel. Paradies v. AseraCare, Inc., focused on whether AseraCare fraudulently billed Medicare for hospice services for patients who were not terminally ill. AseraCare argued (and the district court ultimately agreed) that physicians could disagree about a patient’s eligibility for end-of-life care and such differences in clinical judgment are not enough to establish FCA falsity.

The government appealed three orders issued by the US District Court for the Northern District of Alabama. We previously posted about each of these three orders.

The first order on appeal is the district court’s May 20, 2015 decision bifurcating the trial, with the element of falsity to be tried first and the element of scienter (and the other FCA elements) to be tried second. The government had unsuccessfully sought reconsideration of this decision.  This is the first instance in which a court ordered an FCA suit to be tried in two parts.

The second order on appeal is the district court’s October 26, 2015 decision ordering a new trial, explaining that the jury instructions contained the wrong legal standard on falsity. This order came after two months of trial on the element of falsity and after a jury verdict largely in favor of the government.

The third order on appeal is the district court’s March 31, 2016 decision, after sua sponte reopening summary judgment, granting summary judgment in favor of AseraCare. In dismissing the case, the court explained that mere differences in clinical judgment are not enough to establish FCA falsity, and the government had not produced evidence other than conflicting medical expert opinions.

The government must file its opening brief 40 days after the record is filed with the Eleventh Circuit. We will be watching this case throughout the appellate process.



Court Orders Re-Trial of AseraCare Falsity Phase Based on Jury Instruction Errors

By on Oct 29, 2015
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We said we would provide updates based on any developments in U.S. ex rel. Paradies v. AseraCare, Inc., and we are reporting earlier than anticipated. Instead of moving the case along to the second phase of the bifurcated trial to address scienter, the court granted AseraCare’s motion for a new trial on the issue of falsity after expressing concern that it had “committed major reversible error in the jury instructions.” Thus, the parties are now faced with re-trying the question of whether 121 hospice claims were false–an issue that took almost two months to try the first time.

At issue are the judge’s instructions relating to the issue of falsity. In earlier stages of the case, the parties disputed the proper standard of falsity, with AseraCare arguing that to establish falsity, the government must show that that a certifying physician did not or could not have believed, based on his clinical judgment, that a patient was eligible for hospice. AseraCare argued that the government’s medical expert was second-guessing the certifying physician’s judgment, evidence not sufficient to prove that the claims were objectively false. The government, in contrast, argued that the falsity inquiry turned on medical record information, and not the physician’s certification: it suggested that a hospice claim is false when clinical information and other documentation in the medical record does not support a terminal prognosis.

After trial, the judge cited a concern that the jury instructions had two errors. First, the judge expressed concern that she hadn’t instructed the jury about objective falsity or objective evidence of falsity; second, the judge said the “bigger error I think I made was in overruling the defendant’s request for an instruction that said… opinion is not enough or difference of opinion is not enough.”  AseraCare moved orally for a new trial, and the judge granted the motion.

While a trial of False Claims Act (FCA) claims is unusual, even more unusual is for a judge to order a new trial after a jury verdict. However, the judge was correct to recognize the errors in the jury instructions, as differences in medical judgment or opinions certainly should not be sufficient to establish fraud under the FCA.

The court also denied the government’s request to stay the trial proceedings. We will watch to see whether the re-trial based on revised instructions addressing objective falsity and physician differences of opinion alter the outcome of the first phase on the falsity of the claims.



AseraCare Trial Set To Move To Phase Two

By on Oct 19, 2015
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The first round is over in U.S. ex rel. Paradies v. AseraCare, Inc., the False Claims Act (FCA) case pending in the U.S. District Court for the Northern District of Alabama that, as we previously reported, was the first in which a court bifurcated an FCA trial between the elements of falsity and scienter. The jury considered the element of falsity as to 121 hospice claims, and on October 15, 2015, concluded that 104 of those claims were not eligible for reimbursement by Medicare under applicable regulations for end-of-life care. The case will now continue to the second phase, concerning scienter, in which the jury will be asked to determine whether AseraCare knowingly submitted false claims.

The now-concluded falsity phase was notable because, as we previously discussed, the court denied the defendant’s motion for summary judgment on the element of falsity where the government solely relied upon a sampling of claims reviewed by an expert.

According to the jury instructions in the falsity phase, one requirement of the claims AseraCare submitted to Medicare was that the patients were properly certified as terminally ill (which is when the patient’s medical prognosis is a life expectancy of six months or less if the illness runs its normal course.) The certification for the initial benefit period required that both the patient’s attending physician, if the patient had one, and the hospice program’s medical director state that they considered the patient to be terminally ill based on the doctor’s clinical judgment. This certification required clinical information and documentation to support the prognosis. For each of the claims in the sample, the parties did not dispute the existence of the certifications, but instead whether they were proper.

On October 16, 2015, AseraCare renewed its motion for judgment as a matter of law as to the jury’s findings in phase one. We will watch and report on the outcome and the scienter phase of the case.



Court Refuses To Reconsider Bifurcation Order

By on Jun 29, 2015
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We previously posted on the U.S. Department of Justice’s motion for reconsideration of the United States District Court for the Northern District of Alabama’s order bifurcating the element of falsity from scienter (and the other False Claims Act (FCA) elements) at trial in U.S. ex rel. Paradies v. Aseracare, Inc. Last Thursday, the court denied the motion for reconsideration. The court was unpersuaded by DOJ’s contention that bifurcation had never been done before in an FCA case. “Just because a trial technique has never been done does not preclude the court from using its discretion to do so.”  The court also noted—perhaps turning DOJ’s “never been done before” argument against it—that “[t]he parties have not directed the court to any other False Claims Act trial involving a [M]edicare hospice benefit.”

With respect to DOJ’s arguments about juror confusion and duplicative evidence in the different phases of a bifurcated trial, the court rejected them, and reiterated its position that evidence of “general corporate practices” unrelated to actual, allegedly false claims would be inadmissible in the first trial phase.

While the court’s denial of the motion for reconsideration was not unexpected, it was undoubtedly the correct result, evidencing the court’s desire to ensure that DOJ properly establishes the element of falsity without unduly prejudicing the defendant with evidence irrelevant to the falsity question.  After all and in the words of the court, “no FCA liability exists without a false claim.”



Bifurcation Squarely Within Court’s Discretion, Notwithstanding DOJ’s Motion for Reconsideration

By on Jun 12, 2015
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On June 10, 2015, the Department of Justice moved for reconsideration of the U.S. District Court for the Northern District of Alabama’s May 20 decision in U.S. ex rel. Paradies v. AseraCare, Inc., a False Claims Act (FCA) case in which the court ordered bifurcation of the element of falsity from the element of scienter at trial, with the issue of falsity to be tried first.  Despite the government’s arguments, the bifurcation order was both within the court’s discretion and well-reasoned.

A primary feature of the government’s motion for reconsideration is its contention that bifurcation of this type has never before been done in an FCA case.  However, bifurcation lies squarely within a district court’s discretion: the applicable rule (F.R.C.P. 42) expressly provides for bifurcation of “one or more separate issues,” and there is no exception to this rule under the FCA.

The government’s position nonetheless suggests that there is something that categorically distinguishes bifurcation considerations in an FCA case from bifurcation considerations in other types of cases.  But this categorical argument is not particularly compelling; indeed, the government’s contention that bifurcation requires it “to jump over an arbitrary hurdle that is without precedent” does not resonate, given that falsity is a distinct element of an FCA claim and has always been a hurdle the government must surmount.  It is hardly arbitrary—a false claim is the central feature of an FCA case, without which there is no case.  In any event, whether or not bifurcation has ever before been ordered in an FCA case, the court found that the specific circumstances in this case warranted bifurcation.

An important consideration underlying the bifurcation order was the court’s prior decision authorizing the use of sampling and extrapolation to prove falsity, a ruling on which we previously reported.  Given that decision, it is entirely proper for the court to take the precaution of bifurcation to prevent evidence that is not relevant to falsity from improperly infecting the jury’s determination of whether the claims within the sample were false.  This is particularly true given that the government indicated it would seek to present evidence of general corporate practices at trial.  The court properly held that “[a]llowing such general ‘pattern or practice’ evidence before the jury decides whether any claim is false would be unduly prejudicial to Aseracare.  Further, this type of evidence would be confusing to the falsity analysis as the jury must view each claim separately to determine whether it is objectively false.”  The court went on:

Essentially, the Government argues that the existence of the scheme proves the falsity of the claims.  The court disagrees.  The Government must show that each separate claim within the 233 patient sample is objectively false.  Falsity cannot be inferred by reference to AseraCare’s general corporate practices unrelated to specific patients.  A claim is either false or not without evidence of corporate practices unrelated to that claim.

The government presented several other arguments in its motion for reconsideration, including that some [...]

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