952 F.3d 89
3rd Cir.2020Background
- Four former Care Alternatives employees (Druding, Coleman, Bain, O’Brien) sued under the False Claims Act (qui tam), alleging Care Alternatives admitted ineligible hospice patients and pressured staff to alter Medicare hospice certifications.
- Appellants’ medical expert (Dr. Jayes) reviewed 47 patient records and opined ~35% of certification periods lacked documentation supporting terminal-prognosis certifications; Care Alternatives’ expert (Dr. Hughes) disagreed, finding the certifications defensible.
- The District Court granted summary judgment for Care Alternatives, adopting an "objective falsehood" rule: a mere difference of medical opinion does not establish FCA falsity and plaintiffs must prove an objectively false prognosis (effectively folding scienter into falsity).
- The Government filed a statement of interest opposing the objective-falsehood requirement; the Third Circuit heard the appeal.
- The Third Circuit reversed and remanded, holding (1) the District Court erred in imposing an objective-falsehood requirement, (2) clinical judgments can be legally false under the FCA, and (3) expert testimony challenging certifications can create a triable issue of falsity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether clinical/medical judgments can be "false" under the FCA | Medical expert testimony shows certifications lacked supporting clinical documentation and thus were false/legal noncompliance | Medical opinions are subjective; a mere difference of opinion cannot make a claim false | Clinical judgments can be scrutinized and may be "false" for FCA purposes |
| Whether FCA falsity requires an "objective falsehood" (i.e., proof physician knowingly made incorrect prognosis) | No: falsity and scienter are distinct; legal falsity (noncompliance with statutory/regulatory conditions) suffices | Yes: District Court said plaintiffs must show an objectively incorrect prognosis or intentional misstatement | Rejected the objective-falsehood test; falsity and scienter must be analyzed separately |
| Whether expert disagreement alone can create a triable issue of falsity | Dr. Jayes’ report creates a genuine dispute that certifications lacked supporting documentation | Dueling experts amount only to difference of opinion and do not defeat summary judgment | Expert testimony challenging certifications can create a triable issue of legal falsity; Dr. Jayes’ report sufficed to survive summary judgment on falsity |
| Proper framing of FCA falsity: factual only or includes legal falsity (noncompliance with payment conditions) | Falsity includes legal falsity where claims fail to meet Medicare/regulatory conditions (e.g., required supporting clinical documentation) | Falsity should be limited to objectively verifiable factual inaccuracies | Adopted legal-falsity framing: falsity can be based on noncompliance with statutory/regulatory payment requirements |
Key Cases Cited
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (Supreme Court) (incorporates common-law meanings; stresses separate falsity, materiality, scienter analyses)
- Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175 (opinion may be a false statement under law)
- United States v. Paulus, 894 F.3d 267 (6th Cir.) (medical opinions not insulated from fraud scrutiny; jury decides credibility)
- United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir.) (adopted objective-falsity approach; contrasting treatment cited by Third Circuit)
- United States ex rel. Polukoff v. St. Mark's Hosp., 895 F.3d 730 (10th Cir.) (medical judgment can be false under FCA; legal-falsity approach)
- United States ex rel. Petratos v. Genentech Inc., 855 F.3d 481 (3d Cir.) (sets out FCA prima facie elements, including falsity)
- United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir.) (recognizes legal falsity via false certification theory)
- United States v. Neifert-White Co., 390 U.S. 228 (FCA intended to reach all types of fraud against government)