Health Law Daily Doctor’s false certification of medical necessity supports FCA claim
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Tuesday, March 24, 2020

Doctor’s false certification of medical necessity supports FCA claim

By Robert B. Barnett Jr., J.D.

Congress never imposed the "objective falsity" requirement that the lower court imposed on the whistleblower’s FCA claim.

In an important ruling involving whistleblower claims under the False Claims Act (FCA) (31 U.S.C. §3729 et seq.), the Ninth Circuit joined other circuits in holding that a false certification of medical necessity for a hospitalization by a doctor can give rise to FCA liability. In so holding, the Ninth Circuit reversed a lower court ruling that had dismissed the whistleblower’s complaint on the grounds that a doctor’s clinical judgment can never state a claim under the FCA because subjective medical opinions cannot be proven to be objectively false. Instead, the Ninth Circuit said, a doctor’s clinical opinion must be judged under the same standard as any other representation, which can be made falsely or with reckless disregard for its truth (Winter ex rel U.S. v. Gardens Regional Hospital and Medical Center, Inc., March 23, 2020, Bennett, M.).

Background. The former director of care management at Gardens Regional Hospital filed a qui tamaction under the FCA in the Central District of California, alleging that the hospital filed Medicare claims that falsely certified that inpatient hospitalizations were medically necessary. The district court ruled that a whistleblower must show that a defendant knowingly made an objectively false representation. Subjective medical opinions, the court added, can never be proven objectively false. As a result, any whistleblower complaint that relies on a subjective medical opinion cannot support an FCA claim, and the district court dismissed the complaint. The whistleblower appealed the decision to the Ninth Circuit.

FCA claims. The FCA punishes those who submit, conspire to submit, or aid in the submission of false or fraudulent claims. According to the Ninth Circuit, Congress never imposed the "objective falsity" requirement that the lower court imposed on this whistleblower’s claim. District judges have no authority to rewrite the statue to exempt a doctor’s clinical opinion from FCA claims. The doctor’s clinical opinion must be judged under the same standard as any other representation. Like anyone else, a doctor is capable of expressing an opinion that he or she knows is false or that is made with reckless disregard for its truth or falsity. The Ninth Circuit then drew two conclusions. First, a false certification of medical necessity can support FCA liability. Second, a false certification of medical necessity can be material because medical necessity is a statutory prerequisite to Medicare reimbursement.

Allegations. In July 2014, RollinsNelson LTC Corp. (also a defendant) acquired a 50% stake in S&W Health Management Services, Inc. (another defendant), the company that oversaw operations at Gardens Regional. The whistleblower noticed, after that transaction was completed, that 83.5% of the patients transported from RollinsNelson nursing homes were being admitted to Gardens Regional for inpatient treatment, an unusually high percentage. Upon further investigation, she discovered that the number of Medicare beneficiaries being admitted also rose significantly. According to her allegations, the RollinsNelson and S&W owners were exerting pressure on physicians to admit patients to Garden Regional in order to increase Medicare reimbursements. She documented 65 separate patient admissions that were not medically necessary. Her efforts to raise the issue with the executives were angrily rebuffed. She then approached a doctor about her findings, who told her, "You know who I’m getting pressure from." She was later fired and replaced by someone who did not question the admissions process.

Falsehood. The FCA’s use of the phrase "known to be false" does not mean "scientifically untrue." It means a lie. The lower court misinterpreted the law when it concluded that the phrase meant "objectively false." It is also true, however, that a plaintiff must establish both falsity and knowledge of the falsity. In ruling that a false certification of medical necessity can give rise to FCA liability, the Ninth Circuit joined the Fifth Circuit, the Tenth Circuit, and the Eleventh Circuit in rejecting the "objective falsehood" requirement. Examining the complaint, the Ninth Circuit also concluded that it adequately stated more than just a reasonable difference of opinion, as the hospital had characterized her complaint. The facts she supplied were sufficient to render her allegations of fraud plausible. At the motion to dismiss stage, her assessment of the medical records was entitled to a presumption of truth.

The Ninth Circuit also rejected the lower court’s dismissal of her claims for lack of materiality, that is, that she failed to allege any materially false statements. Her allegations were that the hospital submitted false certifications of medical necessity. The Ninth Circuit concluded that a false certification of medical necessity can be material. Medicare pays for inpatient hospitalizations only if such hospitalizations are medically necessary. As a result, her allegations of false certifications met the materiality requirement.

Scienter. The final issue was whether the whistleblower had adequately pleaded that the admitting physician had sufficient knowledge of the falsity of the statements of medical necessity. These allegations, the Ninth Circuit said, need not be pleaded with particularity. Specific intent to commit fraud is not required. FCA claims permit liability against a person acting "knowingly" or in "reckless disregard of the truth." Her complaint sufficiently pleaded that the certifications were made knowingly or with reckless disregard. As a result, her allegations were sufficient to satisfy the scienter requirement.

The Ninth Circuit, therefore, reversed the district court’s dismissal of the whistleblower’s complaint, and remanded for further proceedings.

The case is No. 18-55020.

Attorneys: Andrew Blane Goodman (Novian & Novian, LLP) for Jane Winter. Elizabeth Jean Lee (Spertus, Landes & Umhofer, LLP) for Gardens Regional Hospital and Medical Center, Inc., Vicki Rollins and Bill Nelson.

Companies: Gardens Regional Hospital and Medical Center, Inc.

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