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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Healthcare Enforcement Quarterly Roundup – Q2 2019

By , , , , , , , , , , , , , and on Aug 27, 2019
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In this second installment of the Healthcare Enforcement Quarterly Roundup for 2019, we cover several topics that have persisted over the past few years and identify new issues that will shape the scope of enforcement efforts for the remainder of this year and beyond. In this Quarterly Roundup, we discuss DOJ’s guidance on compliance programs and cooperation credit, new US Department of Health and Human Services (HHS) rules and enforcement activity on provider religious/conscience opt-out rights, enforcement activity against home health agencies and telemedicine providers, continued federal action to combat the opioid crisis, and resolution of ambiguity in the False Claims Act (FCA) statute of limitations.

Click here to read the full issue of the Healthcare Enforcement Quarterly Roundup.

Click here to download a PDF of the issue.  



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.



Opening Briefs Filed in Fourth Circuit Case on Use of Statistical Sampling to Prove FCA Liability – Could Have Far-Reaching Implications for FCA Defendants

By on Jan 20, 2016
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As we previously reported in October 2015, the U.S. Court of Appeals for the Fourth Circuit is considering an interlocutory appeal regarding the use of statistical sampling to prove liability under the False Claims Act (FCA).  The Fourth Circuit’s resolution of this case, U.S. ex rel. Michaels v. Agape Senior Community, et al., Record No. 15-2145 (4th Cir.), could have broad-sweeping implications for FCA defendants.  In short, while courts have regularly permitted the use of statistical sampling to determine damages in FCA cases, the use of sampling to prove FCA liability is a relative rarity and the question has never been considered by a circuit court.  The first question on appeal goes directly to this point.  The second question on appeal—which could also have a significant impact on the FCA landscape—is whether the United States has unreviewable “veto authority” under 31 U.S.C. § 3730(b)(1) to reject a settlement in FCA cases where it has elected not to intervene.

In opening briefs filed last week, the relators expound upon a cross-section of cases where statistical sampling has been permitted to prove damages.  Then, citing to the Supreme Court’s touchstone Daubert opinion, the relators seek to stretch the use of sampling beyond damages and directly to the issue of FCA liability, asserting that the question is not “whether statistical sampling and extrapolation, in and of itself, is appropriate, but whether the statistical sampling is conducted in a scientifically proven and accepted manner . . . .”  The relators’ position throughout the case has been that the sheer volume of claims at issue—approximately 50,000–60,000 claims across 10,000–19,000-plus patients—could not be individually reviewed by an expert to determine medical necessity without incurring exorbitant costs that exceed the estimated damages in the case.  The relators pinned that cost at upwards of $35 million based on each of their experts spending “four to nine hours reviewing each patient’s chart.”

With top-end estimated damages of $25 million, the relators argued that they should be permitted to review a sample of claims, extrapolate across the universe, and draw inferences about FCA liability from the results.  Agape firmly rejected the relators’ position, contending that “determining eligibility for hospice care requires an exercise of subjective clinical judgment that takes into account a myriad of facts and circumstances unique to each patient.”  The district court agreed, leading the relators to proceed forward based on the ruling that sampling could not be used to prove liability, including preparations for an “informational bellwether” trial (over Agape’s objections) to present evidence regarding a small sample of claims.  At the same time, the parties engaged in a series of mediation sessions.  In the first two sessions, the United States participated and a resolution was not reached.  At the mediator’s request, the third session excluded the United States and resulted in Agape obtaining a settlement agreement to resolve all of the relators’ claims for $2.5 million.

With the district court set to approve Agape’s settlement, the United States objected on the basis of [...]

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Re-Trial Order in AseraCare Confirms that Differences in Clinical Judgment Alone Insufficient to Establish Falsity

By on Nov 6, 2015
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As we previously reported, in the FCA case against hospice-provider AseraCare, U.S. ex rel. Paradies v. AseraCare, Inc., the U.S. District Court for the Northern District of Alabama granted AseraCare’s motion for a new trial based on error in instructing the jury during the falsity phase of the trial (The trial was bifurcated into falsity and scienter phases.)  The court released its written order on the motion this week.

This order is an instructive read for any defense of a false certification case. As the court explains, a false certification case does not rest on allegations that, for example, a defendant forged doctor signatures, billed for unperformed services, or submitted claims for fictitious patients. Rather, such a claim, as in this case, rests on a theory that the underlying medical records do not support the physician’s certifications (here, of hospice eligibility), rendering those certifications false. But, as the court ultimately recognized in reviewing its jury instructions, a mere difference of clinical judgment is not enough to show falsity.  The court stated that it should have advised the jury that the FCA requires proof of an “objective” falsehood. It also added that a proper instruction should have stated that a difference of opinion between doctors, without more, is insufficient to show that a Medicare hospice claim is false.

But that was not all, in a case that has proved itself a procedural primer. The court also reopened summary judgment.  The court noted at the outset of its order that the law on many key issues under the FCA is still developing, particularly in the hospice realm. Based on its findings regarding the correct legal standard of falsity and the government’s evidence on falsity, the court notified the parties that it will consider summary judgment under Federal Rule of Civil Procedure 56(f)(3), which provides that a court may “consider summary judgment on its own after identifying for the parties the material facts that may not be genuinely in dispute.”  Thus, before setting a new trial date, the court will reconsider summary judgment, giving the government an opportunity to point to objective evidence of falsity offered during the trial.

The government faces a challenging case on summary judgment under the clarified legal standard.  In replying to contention interrogatories, the government represented that it would use only its expert’s testimony and the underlying medical records to try to prove falsity. Because the government’s evidence showed a difference in only clinical judgment about patients’ terminal prognoses, “the court now questions whether the Government, under the correct legal standard, has sufficient admissible evidence of more than just a difference of opinion to show that the claims at issue are objectively false as a matter of law.”  Government witness testimony at trial further undermines the government’s case. As the court noted, the government expert acknowledged that he had changed his opinion regarding the eligibility of patients between his review in 2010 and 2013: “I was not the same physician in 2013 as I was in 2010.” Likewise, [...]

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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.



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