The U.S. Supreme Court recently declined to address a circuit split regarding the standard for establishing that a statement material to a claim for payment is false under the False Claims Act (FCA); specifically, whether the FCA requires pleading and proof of an “objectively false statement,” or whether liability can be based on allegedly false opinions. While the Courts of Appeals have taken conflicting positions on these issues, the circuit split is not as deep as would appear and the variation in standards are likely to have a minimal impact on ultimate outcomes. Nevertheless, with these varying standards for establishing falsity, healthcare providers and government contractors should take proactive steps to ensure signed certifications pertinent to a claim reflect appropriate diligence and decision-making and convey reasonably and honestly held opinions.
A plaintiff must allege and prove the following to prevail on an FCA claim: (1) a false statement, (2) made with the requisite scienter (or knowledge that it was false), (3) that was material, causing (4) the government to pay out money. The threshold issue here relates to the proof required to establish the first prong, that information in or material to a claim is actually false. Assessing whether an opinion conveyed in a relevant certification is reasonably held or is false, however, is inextricably tied to the assessment of the second element, whether the statement was made with the requisite knowledge of the fraudulent nature of the statement (and either deliberate ignorance or reckless indifference is sufficient to establish scienter in the FCA context).
On February 22, 2021, the U.S. Supreme Court denied petitions for certiorari in two cases seeking review of opinions of the Third and Ninth Circuits in United States ex rel. Druding v. Care Alternatives, 952 F.3d 89, 97 (3d Cir. 2020), and United States ex rel. Winter v. Gardens Regional Hospital and Medical Center, 953 F.3d 1108, 1114 (9th Cir. 2020), respectively, regarding whether the FCA required proof of an “objective falsity” in a material statement to establish liability. Both cases involve allegations of healthcare fraud arising from false physician certifications, and the circuit opinions in those cases both address the “objective false statement” standard articulated by the Eleventh Circuit in United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019).
In the AseraCare case, which involved allegations centering on purportedly false certifications that federal healthcare program beneficiaries were terminally ill and therefore eligible for hospice services, the Eleventh Circuit held that to properly state a claim under the FCA, the plaintiff must demonstrate an objective falsity in the statement at issue, which is “something more than the mere difference of reasonable opinion.”
In contrast, the Third Circuit in ex rel. Druding (another case centering on allegedly false terminal illness certifications) flatly rejected the AseraCare Court’s objective falsity standard for FCA claims. The Third Circuit reasoned that “clinical judgments” like other opinions, can “be ‘false’ for purposes of FCA liability.” The Care Alternatives Court further held that the objective falsity standard “improperly conflates the elements of scienter and falsity,” effectively reading the scienter requirement out of the statute: “objectivity speaks to the element of scienter, not falsity … the text and application of the FCA require that the elements of falsity and scienter be analyzed separately.”
Similarly, the Ninth Circuit in ex rel. Winter (involving allegedly false certifications that hospitalization was medically necessary for federal healthcare program beneficiaries) rejected the argument “that only ‘objectively false’ statements can give rise to FCA liability.” The court noted that, “under the common law, a subjective opinion is fraudulent if it implies the existence of facts that do not exist or if it is not honestly held.” Despite concluding that a physician’s opinion with “no basis in fact can be fraudulent if expressed with scienter,” the Ninth Circuit claimed that their decision did not conflict with AseraCare. The Winter Court reasoned that the AseraCare objective falsity standard was limited to the fact specific and inherently speculative context of the “hospice-benefit provision at issue” (i.e., the forward-looking assessment that a patient was terminally ill and so likely had six months or less to live).
With the Supreme Court declining to provide clarity, government contractors, healthcare entities, and other heavily regulated industries should take note of the ongoing legal uncertainty and potentially disparate levels of risk in different parts of the country. It is unclear to what extent, if any, that entities can rely on AseraCare and the objective falsity standard outside of the Eleventh Circuit (Alabama, Florida, and Georgia) and the hospice context.
That said, the careful reading of the three circuit opinions shows that there is less to the circuit split than meets the eye: While the Eleventh Circuit did adopt an “objective falsity” standard that the Third and Ninth Circuits rejected, the AseraCare Court took pains to broadly define “objective falsity” to include not only patently false certifications containing forged or “rubber stamped” signatures, but also opinions that are not honestly held or reasonable. As such, even the Eleventh Circuit conceded that statements of opinion and clinical judgment can be false if they “disregard the patient’s underlying medical condition” and so are not necessarily immune from liability. Moreover, while the AseraCare Court held that a certifying physician’s state of mind must be considered when assessing falsity, and the Ninth and Third Circuits held that such an analysis should be conducted when evaluating scienter, the elements of falsity and knowledge are tightly intertwined: Whether an opinion was dishonestly or unreasonably held (and therefore false), and whether that opinion was conveyed with the knowledge that is was false, are closely related questions. That being the case, whether state of mind is assessed in determining both falsity and scienter, or just scienter, is not likely to affect the outcome of most cases.
Companies should be conscious that a certifying official’s opinion may trigger FCA liability if it is not supported by evidence or if it is not reasonably or honestly held. The fact that a statement at issue may be an opinion or an expression of professional judgment will not automatically immunize the statement from liability, no matter which circuit the case is in. Healthcare providers and government contractors should therefore consider reviewing internal policies related to certifications that are material to a claim for payment. Companies are encouraged to be proactive in mitigating the risk of enforcement actions, including through the maintenance of a robust Governance, Risk, and Compliance (GRC) program and periodic audits of business processes to ensure certifications are supported by documentation in the clinical records or contract files, and made in an environment conducive to considered judgment and free from inappropriate pressure. These proactive mitigating steps are especially important where noncompliance includes the potential for treble damages and per invoice penalties under the FCA.
Please contact the authors if you have any questions about FCA compliance and the potential impact on your business.
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