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Court Grants New Trial in AseraCare Hospice Case, Holding It Erred by Failing to Instruct Jury Regarding Standard for Proof of “Objective Falsity” in FCA False Certification Cases

Raymond Kolls

November 13, 2015

Judicial opinions do not typically begin with observations such as: “False Claims Act cases have been particularly hot in 2015 – and not only in this court.” So begins, however, the latest opinion in USA v. AseraCare, Inc., No 2:12-CV-245 (N.D. Ala.), issued November 3. This closely watched False Claims Act (FCA) trial pits the US Department of Justice against AseraCare, an operator of 60 hospices in 19 states. Notable previous developments in the case include the first-ever-known bifurcation of an FCA trial into separate liability phases and consideration of the use of statistically valid random samples (SVRS) to determine the claims to be subject to proof at trial. The most recent opinion addressed significant issues regarding the standard for proof of “objective falsity” in FCA false certification claims, i.e., whether proof of improper practices or procedures, standing alone, is sufficient to show falsity and whether mere differences of opinion as between medical experts, without more, are sufficient to show falsity.

The government alleged that AseraCare submitted false hospice claims to Medicare by certifying patients as eligible for hospice when in fact the patients did not have a prognosis of a life expectancy of less than six months if the terminal illness ran its normal course. Under Medicare regulations, the certifications are to be based on a medical director’s or physician’s clinical judgment regarding the normal course of a patient’s illness. After a ten-week trial, a jury found that claims submitted for 104 of 123 patients contained in the government’s SVRS were false. The only evidence for falsity was the testimony of the government’s expert and the medical records themselves.

After trial, AseraCare orally moved for a new trial, which the court granted in a 25-page opinion. The court concluded that it had erroneously instructed the jury regarding the proof required to render a claim “false.”

The court noted that the case falls into the “more amorphous” category of “false certification” claims in which a claimant knowingly falsely certifies compliance with a statute or regulation that is a condition for government payment, as distinct from “factually false” or “direct fraud” FCA claims. The court described the latter category as involving acts such as forging required signatures, billing for services not performed, or submitting claims for fictitious patients. The court described its original instructions as containing two elements: (1) that a claim is false if it is an assertion that is untrue when made or when used; and (2) that practices engaged in by the defendant that may be improper are, standing alone, insufficient to show falsity without proof that specific claims were in fact false when submitted to Medicare. The court determined that while those instructions were correct, they were incomplete and that it should have further advised the jury that: (1) the FCA requires proof of an objective falsehood; and (2) that a mere difference of opinion among physicians, without more, is not enough to show falsity. Accordingly, the court granted AseraCare’s motion for a new trial.

In addition, the court went on to determine, sua sponte, that it would entertain entering summary judgment for AseraCare. The court questioned whether the government had sufficient admissible evidence to show that the claims at issue were objectively false, or whether the government’s evidence merely consisted of a difference of opinion among physicians. The court noted that the government’s evidence on falsity was limited to the testimony of its medical expert and medical records relating to individual patients within the SVRS. While the government had earlier indicated an intention to submit evidence relating to alleged improprieties in AseraCare’s patient admission and certification procedures, the court noted that the government had abandoned its plan in this regard. In any event, the court reiterated that improper AseraCare practices, if any, standing alone would not be sufficient to show falsity without proof that specific claims were in fact false when presented to Medicare, stating “[t]he sine qua non of a FCA case is not the defendant’s bad conduct, procedures, or policies, but the actual false claim.” Finally, the court noted that AseraCare had presented several expert witnesses whose opinions contradicted those of the government’s expert and that, without more, expressions of opinion, scientific judgments, or statements as to conclusions about which reasonable minds might differ cannot be false.

Originally published in American Health Lawyers Association’s Fraud and Abuse Practice Group email alert on November 13, 2015. The information obtained by the use of this service is for reference use only and does not constitute the rendering of legal, financial, or other professional advice by the American Health Lawyers Association.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.

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Raymond Kolls

Managing Director

Washington, DC