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United States v. Aseracare, Inc.

United States Court of Appeals, Eleventh Circuit

September 9, 2019

UNITED STATES OF AMERICA, Plaintiff - Appellant,
v.
ASERACARE, INC., GGNSC ADMINISTRATIVE SERVICES, d.b.a. Golden Living, f.k.a. Beverly Enterprises, Inc., HOSPICE PREFERRED CHOICE, INC., HOSPICE OF EASTERN CAROLINA, INC., Defendants - Appellees.

          Appeal from the United States District Court for the Northern District of Alabama D.C. Docket No. 2:12-cv-00245-KOB

          Before ROSENBAUM and JULIE CARNES, Circuit Judges, and SCHLESINGER, [*] District Judge.

          JULIE CARNES, CIRCUIT JUDGE.

         This case requires us to consider the circumstances under which a claim for hospice treatment under Medicare may be deemed "false" for purposes of the federal False Claims Act. Defendants comprise a network of hospice facilities that routinely bill Medicare for end-of-life care provided to elderly patients. In the underlying civil suit, the Government alleged that Defendants had certified patients as eligible for Medicare's hospice benefit, and billed Medicare accordingly, on the basis of erroneous clinical judgments that those patients were terminally ill. Based on the opinion of its expert witness, the Government contends that the patients at issue were not, in fact, terminally ill at the time of certification, meaning that AseraCare's claims to the contrary were false under the False Claims Act.

         As the case proceeded through discovery and a partial trial on the merits, the district court confronted the following question: Can a medical provider's clinical judgment that a patient is terminally ill be deemed false based merely on the existence of a reasonable difference of opinion between experts as to the accuracy of that prognosis? The district court ultimately answered this question in the negative and therefore granted summary judgment to AseraCare on the issue of falsity.

         Upon careful review of the record and the relevant law, and with the benefit of oral argument, we concur with the district court's ultimate determination that a clinical judgment of terminal illness warranting hospice benefits under Medicare cannot be deemed false, for purposes of the False Claims Act, when there is only a reasonable disagreement between medical experts as to the accuracy of that conclusion, with no other evidence to prove the falsity of the assessment. We do, however, think that the Government should have been allowed to rely on the entire record, not just the trial record, in making its case that disputed issues of fact, beyond just the difference of opinion between experts, existed sufficient to warrant denial of the district court's post-verdict sua sponte reconsideration of summary judgment on the falsity question. We therefore affirm in part and remand in part.

         I. BACKGROUND[1]

         Each year, more than a million Americans make the difficult decision to forgo curative care and turn instead to end-of-life hospice care, which is designed to relieve the pain and symptoms associated with terminal illness. See 79 Fed. Reg. 50452, 50454-55 (Aug. 22, 2014). The federal government's Medicare program makes such care affordable for a significant number of terminally ill individuals. Defendants, collectively referred to as AseraCare, operate approximately sixty hospice facilities across nineteen states and admit around 10, 000 patients each year. Most of AseraCare's patients are enrolled in Medicare. In fact, from 2007 to 2012, Medicare payments composed approximately ninety-five percent of AseraCare's revenues. As such, AseraCare routinely prepares and submits claims for reimbursement under Medicare.

         This case began when three former AseraCare employees alleged that AseraCare had a practice of knowingly submitting unsubstantiated Medicare claims in violation of the federal False Claims Act. We begin by setting out the requirements hospice providers like AseraCare must meet in order to be entitled to hospice reimbursement and identifying the tools the Government uses to police compliance with these requirements.

         A. The Medicare Hospice Benefit

         In order for a hospice claim to be eligible for Medicare reimbursement, the patient's attending physician, if there is one, and the medical director of the hospice provider must "each certify in writing at the beginning of [each] period, that the individual is terminally ill . . . based on the physician's or medical director's clinical judgment regarding the normal course of the individual's illness." 42 U.S.C. § 1395f(7)(A). "Terminally ill" means that the individual "has a medical prognosis that the individual's life expectancy is 6 months or less." 42 U.S.C. § 1395x(dd)(3)(A). Under the statute's implementing regulations, a claim for hospice reimbursement must conform to several requirements in order to be payable. Most notably for purposes of this appeal, the certification must be accompanied by "[c]linical information and other documentation that support the medical prognosis," and such support "must be filed in the medical record with the written certification." 42 C.F.R. § 418.22(b)(2).

         An initial certification conforming to these requirements is valid for a period of ninety days. 42 U.S.C. § 1395f(7)(A). The patient must be recertified in a similar manner for each additional sixty- or ninety-day period during which he or she remains in hospice. Id. While a life-expectancy prognosis of six months or less is a necessary condition for reimbursement, regulators recognize that "[p]redicting life expectancy is not an exact science." 75 Fed. Reg. 70372, 70488 (Nov. 17, 2010). Accordingly, the Medicare framework does not preclude reimbursement for periods of hospice care that extend beyond six months, as long as the patient's eligibility is continually recertified. This framework also recognizes that, in some cases, patients with an initial prognosis of terminality can improve over time, and it allows such patients to exit hospice without losing their right to Medicare coverage to treat illness. Id. Thus, there is no statutory limit to the number of periods for which a patient may be properly certified. 42 U.S.C. § 1395d(d)(1) (establishing that hospice providers may collect reimbursement for an unlimited number of recertification periods).

         The Medicare program is overseen by the Centers for Medicare and Medicaid Services ("CMS"), a division of the Department of Health and Human Services. CMS operates locally through so-called Medicare Administrative Contractors ("MACs"), which process claims from healthcare providers and make payment for eligible services. A majority of AseraCare's Medicare claims are processed by a MAC called Palmetto GBA ("Palmetto"), which operates in the southeast United States.

         In preparing its claims for hospice reimbursement, AseraCare employs interdisciplinary teams of skilled staff-including physicians, nurses, psychologists, social workers, and chaplains-that render services directly to patients and collectively make eligibility determinations. To guide this review, AseraCare professionals rely in part on documents called Local Coverage Determinations ("LCDs"), which are issued by Palmetto's medical directors. LCDs provide detailed lists of diagnostic guidance and clinical information that, if documented in a patient's medical record, suggest that the patient has a life expectancy of six months or less. LCDs are not clinical benchmarks or mandatory requirements for hospice eligibility, however. Rather, they are designed to help clinical staff understand the type of information that should be considered prior to concluding that a patient is terminally ill. The LCDs themselves explicitly state that they are non-binding.

         Once AseraCare physicians reach a clinical judgment that a patient is eligible for hospice care, AseraCare may begin providing treatment. It submits claims to Palmetto for reimbursement only after care has been rendered. The trial testimony of Mary Jane Schultz, a registered nurse and former director of Palmetto's medical review team, clarified at trial the process by which Palmetto reviewed and paid claims for hospice coverage during the relevant time period of 2007 to 2012. As Ms. Schultz described, the first round of claim review was conducted by an automated claim-processing system designed to ensure that no critical information, such as a patient's Medicare identification number, was missing or invalid. If no critical information was missing, the system would then check for any "red flags" that might require further review of the claim-such as the involvement of a particular provider, patient, or type of care that Palmetto staff believed may pose heightened eligibility risks. For instance, if Palmetto wished to conduct a targeted audit of claims submitted by a particular provider, it could program the automated system to pull all or a portion of those claims for additional review before payment.

         If automated review uncovered no missing information or red flags, the system would process the claim directly for payment. As a result, Palmetto paid many claims without directly reviewing the medical documentation underpinning them. Where, on the other hand, a claim was flagged for heightened medical review, Palmetto would immediately issue a request to the provider for medical documentation substantiating the patient's terminal prognosis, such as notes from physicians, nurses, and social workers and records of medications and treatments prescribed. A trained medical review team would then review the supporting documentation before determining whether the claim should be paid in full, paid in part, or denied. Like AseraCare's medical staff, the medical review team commonly uses the LCDs as guidelines in its assessment, but it is not required to rigidly apply their criteria. Instead, the review team also looks at the "whole picture" of information submitted with the claim.

         B. The False Claims Act

         The False Claims Act ("FCA") serves as a mechanism by which the Government may police noncompliance with Medicare reimbursement standards after payment has been made. The Act imposes civil liability-including treble damages-on "any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for payment" to the federal government or who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(A)-(B). To prevail on an FCA claim, the plaintiff must prove that the defendant (1) made a false statement, (2) with scienter, (3) that was material, (4) causing the Government to make a payment. Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1045 (11th Cir. 2015).

         Private citizens, called qui tam relators, are authorized to bring FCA suits on behalf of the United States. 31 U.S.C. § 3730(b). The United States can, and frequently does, intervene in qui tam suits to develop the civil case itself. Thus, to the extent the Government concludes that it has reimbursed a hospice provider that knowingly submitted deficient claims, the Government can use the FCA cause of action to recoup payments and to penalize the provider.

         II. PROCEDURAL HISTORY

         A. Suit Against AseraCare Under the FCA

         The underlying case began in 2008, when three former AseraCare employees, acting as qui tam relators, filed a complaint against AseraCare alleging submission of unsubstantiated hospice claims. Following a transfer of venue from the Eastern District of Wisconsin to the Northern District of Alabama, the Government intervened and filed the operative complaint. In its complaint, the Government alleged that AseraCare knowingly employed reckless business practices that enabled it to admit, and receive reimbursement for, patients who were not eligible for the Medicare hospice benefit "because it was financially lucrative," thus "misspending" millions of Medicare dollars. The Government's complaint described a corporate climate that pressured sales and clinical staff to meet aggressive monthly quotas for patient intake and, in so doing, discouraged meaningful physician involvement in eligibility determinations. More specifically, the Government alleged that AseraCare "submitted documentation that falsely represented that certain Medicare recipients were 'terminally ill'" when, in the Government's view, they were not.

         In light of these allegations, the Government's case falls under the "false certification" theory of FCA liability. Under this theory, FCA liability may arise where a defendant falsely asserts or implies that it has complied with a statutory or regulatory requirement when, in actuality, it has not so complied. See Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989, 1999 (2016).

         In developing its case, the Government began by identifying a universe of approximately 2, 180 patients for whom AseraCare had billed Medicare for at least 365 continuous days of hospice care. The Government then focused its attention on a sample of 223 patients from within that universe. Through direct review of these patients' medical records and clinical histories, the Government's primary expert witness, Dr. Solomon Liao, identified 123 patients from the sample pool who were, in Dr. Liao's view, ineligible for the hospice benefit at the time AseraCare received reimbursement for their care. Should it prevail as to this group, the Government intended to extrapolate from the sample to impose further liability on AseraCare for a statistically valid set of additional claims within the broader universe of hospice patients for whom AseraCare received Medicare payments.

         To supplement the testimony of Dr. Liao, the Government also sought to develop evidence that AseraCare's broader business practices fostered and promoted improper certification procedures while deemphasizing clinical training on terminal-illness prognostication. Several former AseraCare employees, including the qui tam relators, supported the Government's narrative by describing a process in which physicians merely rubber-stamped terminal-illness certifications without thoroughly examining the relevant medical records underlying them.

         Importantly, though, the Government's false-claims allegations in this case were narrowly circumscribed. There were no allegations that AseraCare billed for phantom patients, that certifications or medical documentation were forged, or that AseraCare employees lied to certifying physicians or withheld critical information regarding patient conditions. Indeed, there was no doubt in the proceeding below that AseraCare possessed accurate and comprehensive documentation of each patient's medical condition and that its certifications of terminal illness were signed by the appropriate medical personnel. Rather, the Government asserted that its expert testimony-contextualized by broad evidence of AseraCare's improper business practices-would demonstrate that the patients in the sample pool were not, as a medical fact, terminally ill at the time AseraCare collected reimbursement for their hospice care. The sole question related to the sufficiency of the clinical judgments on which the claims were based.

         On this theory, the Government sought to recover damages under two subsections of the FCA, 31 U.S.C. § 3729(a)(1)(A)[2] and 31 U.S.C. § 3729(a)(1)(B), [3] and on claims of common-law unjust enrichment and mistaken payment.

         B. First Motion for Summary Judgment

         Following extensive discovery and expert analysis of relevant patient records, AseraCare moved for summary judgment on the ground that the Government failed to adduce evidence of the falsity of any disputed claims and failed to show that AseraCare had any knowledge of the alleged falsity. Most notably for purposes of this appeal, AseraCare put squarely before the district court the question whether the Government's medical-opinion evidence was sufficient to establish the threshold element of falsity. To that point, AseraCare urged the district court to embrace a "reasonable doctor" standard for the assessment of falsity, which would state that, to avoid summary judgment in an action involving false claims for hospice reimbursement, the Government must show that a reasonable physician applying his or her clinical judgment could not have held the opinion that the patient at issue was terminally ill at the time of certification.[4]

         The district court found the "reasonable doctor" standard "appealing and logical," but noted that it had not been adopted by the Eleventh Circuit and declined to apply it. The court ultimately denied AseraCare's motion for summary judgment, concluding that fact questions remained regarding whether clinical information and other documentation in the relevant medical records supported the certifications of terminal illness on which AseraCare's claims were based.

         Following the denial of its motion for summary judgment, AseraCare moved to certify the following question for interlocutory appeal before this Court under 28 U.S.C. § 1292(b):

In a False Claims Act case against a hospice provider relating to the eligibility of a patient for the Medicare hospice benefit, for the Government to establish the falsity element under 31 U.S.C. § 3729(a)(1), must it show that, in light of the patient's clinical information and other documentation, no reasonable physician could have believed, based on his or her clinical judgment, that the patient was eligible for the Medicare hospice benefit?

         The district court certified the question for interlocutory appeal. We considered AseraCare's motion for review but declined to consider the question at that stage of the proceeding.

         C. Bifurcation of Trial

         Subsequent to the denial of summary judgment, AseraCare moved the district court to bifurcate trial under Federal Rule of Civil Procedure 42(b) into two phases: one phase on the falsity element of the FCA and a second phase on the FCA's remaining elements and the Government's common-law claims. The Government vehemently opposed the motion. It argued that the proposed bifurcation was "extraordinary," requiring the Government "to jump over an arbitrary hurdle that is without precedent" because "the elements of 'falsity' and 'knowledge of falsity' are not so distinct and separable that they may be tried separately without injustice." Indeed, the Government noted, the elements of FCA liability had "never before been bifurcated by a federal district court." The Government further argued that bifurcation was unworkable because documentary and testimonial evidence that was probative in the falsity phase-"because it undermines the reliability of the [certifications of terminal illness]"-was "also probative in the 'knowledge of falsity' phase because it shows AseraCare knew or should have known that it was submitting false claims for non-terminally [sic] patients."

         Nonetheless, the district court granted the motion in light of its concern that evidence pertinent to the knowledge element of the FCA would confuse the jury's analysis of the threshold question of whether the claims at issue were "false" in the first instance. The court noted that, while "pattern and practice" evidence showing deficiencies in AseraCare's admission and certification procedures could help establish AseraCare's knowledge of the alleged scheme to submit false claims-the second element of the Government's case-the falsity of the claims "cannot be inferred by reference to AseraCare's general corporate practices unrelated to specific patients." In the court's view, allowing the Government to present knowledge evidence before falsity was determined would be unduly prejudicial to AseraCare, thus warranting separation of the knowledge and falsity elements.

         In accordance with this rationale, the district court "drew the line of admissibility" in Phase One of trial "at anecdotal evidence about a specific, but unidentified, patient or event that would be impossible for the Defense to rebut." The court did, however, allow in Phase One anecdotal testimony regarding improper clinical or corporate practices that "had a time and place nexus with the 123 allegedly ineligible patients at issue." Such testimony, in the court's view, would have been "highly probative and admissible in Phase One." Indeed, in bifurcating trial, the court presumed-based on the Government's own representations-that the Government possessed and would present such evidence in Phase One. The court did allow in Phase One general testimony regarding AseraCare's business practices and claim-submission process during the relevant time period, but only to contextualize the falsity analysis and "afford[] the jury an opportunity to more fully understand the hospice process within AseraCare." Such evidence was not, however, admissible to prove the falsity of the claims at issue.[5]

         D. Phase One of Trial

         The first phase of the trial lasted approximately eight weeks and proceeded to a jury verdict largely against AseraCare on the question of falsity. During its case in chief, the Government presented several days of testimony from Dr. Liao, who explained that, in his expert opinion, the medical records of the patients at issue did not support AseraCare's "terminal illness" certifications because they did not reveal a life expectancy of six months or less. Dr. Liao made clear that his testimony was a reflection of only his own clinical judgment based on his after-the-fact review of the supporting documentation he had reviewed. He conceded that he was "not in a position to discuss whether another physician [was] wrong about a particular patient's eligibility. Nor could he say that AseraCare's medical expert, who disagreed with him concerning the accuracy of the prognoses at issue, was necessarily "wrong." Notably, Dr. Liao never testified that, in his opinion, no reasonable doctor could have concluded that the identified patients were terminally ill at the time of certification. Instead, he only testified that, in his opinion, the patients were not terminally ill. Even more notable is the fact that Dr. Liao himself changed his opinion concerning the eligibility of certain patients over the course of the proceeding-deciding that some of the patients he had earlier concluded were not terminally ill were in fact terminally ill. Nevertheless, he testified at trial that both sets of contradictory opinions remained "accurate to a reasonable degree of certainty." To explain these reversals, Dr. Liao stated that he "was not the same physician in 2013 as [he] was in 2010."

         The Government also presented testimony of the relators and other AseraCare employees regarding AseraCare's certification procedures, but, as discussed supra, this testimony was characterized as being offered solely to show context, not falsity. In rebuttal, AseraCare offered expert testimony that directly contradicted Dr. Liao's opinions.

         The parties' expert witnesses disagreed along two lines. First and foremost, they fundamentally differed as to how a doctor should analyze a patient's life expectancy for Medicare reimbursement purposes. The Government's Dr. Liao applied what might be called a "checkbox approach" to assessing terminal illness: He examined the patients' records and compared them against Palmetto's LCDs (and other, similar medical guidelines) for specific diagnoses, including Alzheimer's, heart disease, cardiopulmonary disease, and "adult failure to thrive." By contrast, AseraCare's experts considered but did not formulaically apply the LCD guidance in making their assessments. Instead, they took a "whole patient" approach, making prognoses based on the entirety of the patient's history, the confluence of ailments from which a patient may be suffering, and their own experience with end-of-life care. AseraCare's experts did not discount the LCD "criteria," but-as the latter instruct- these experts did not consider themselves compelled to conclude that a patient was ineligible merely because the patient had failed to meet one of those indicia.

         The district court correctly stated in its instructions to the jury that the LCDs are "eligibility guidelines" that are not binding and should not be considered "the exact criteria used for determining" terminal illness. As such, the jury was not permitted to conclude that Dr. Liao's testimony was more credible because he made reference to the LCD criteria, or that AseraCare's claims were false if they failed to conform to those criteria. Nonetheless, the experts' ...


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