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' ...