The battle between “objective falsity” and “medical judgment” in deciding whether a claim was medically necessary under the False Claims Act seemed to gain clarity thanks to a recent decision by the 10th Circuit Court of Appeals, see U.S. ex rel Polukoff, v. St. Mark’s Hospital 895 F.3d 730 (10th Cir.) (July 9, 2018).

In Polukoff, the relator alleged that the defendant physician, Dr. Sorensen, performed and billed the government for unnecessary medical procedures (patent formen ovale (PFO) closures). The relator also alleged that two defendant hospitals had billed the government for associated costs.  Specifically, the relator alleged that PFO closures were reasonable and medically necessary only in highly limited circumstances, such as where there was a history of stroke.  Medicare had not issued a National Coverage Determination (NCD) for PFO closures or otherwise indicated circumstances under which it would pay for such procedures.  However, the relator held up medical guidelines issued by the American Heart Association/American Stroke Association (AHA).

The District Court dismissed relator’s claims,12(b)(6), failure to satisfy 9(b) heightened pleading standard ruling that that medical judgement cannot be false under the FCA. The 10th Circuit reversed by holding,

“It is possible for a medical judgment to be “false or fraudulent” as proscribed by the FCA for at least three reasons. First, we read the FCA broadly. See United States v. Neifert-White Co., 390 U.S. 228, 232, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968) (observing that the FCA “was intended to reach all types of fraud, without qualification, that might result in financial loss to the Government,” and “refus[ing] to accept a rigid, restrictive reading”).

Second, “the fact that an allegedly false statement constitutes the speaker’s opinion does not disqualify it from forming the basis of FCA liability.” United States ex rel. Loughren v. Unum Grp., 613 F.3d 300, 310 (1st Cir. 2010) (holding, in the Social Security benefits context, that “an applicant’s opinion regarding the date on which he became unable to work” can give rise to FCA liability); cf. Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, ––– U.S. ––––, 135 S.Ct. 1318, 1326, 191 L.Ed.2d 253 (2015) (suggesting, in the securities context, that a “false-statement provision … appl[ies] to expressions of opinion”).

Third, “claims for medically unnecessary treatment are actionable under the FCA.” United States ex rel. Riley v. St. Luke’s Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004) (holding relator’s complaint “sufficiently allege[d] that statements were known to be false, rather than just erroneous, because she assert[ed] that Defendants ordered the services knowing they were unnecessary”); cf. Frazier ex rel. United States v. Iasis Healthcare Corp., 392 F. App’x 535, 537 (9th Cir. 2010) (affirming FCA claim was inadequately pled, but suggesting an FCA claim could survive if the relator “provide[s] ‘reliable indicia’ that [the defendant] submitted claims for medically unnecessary procedures”).

“A Medicare claim is false if it is not reimbursable, and a Medicare claim is not reimbursable if the services provided were not medically necessary.” Amicus Br. at 14. For a claim to be reimbursable, it must meet the government’s definition of “reasonable and necessary,” as found in the Medicare Program Integrity Manual.

A doctor’s certification to the government that a procedure is “reasonable and necessary” is “false” under the FCA if the procedure was not reasonable and necessary under the government’s definition of the phrase.

“ Instead of adopting a circumscribed view of what it means for a claim to be false or fraudulent, concerns about fair notice and open-ended liability can be effectively addressed through strict enforcement of the [FCA]’s materiality and scienter requirements. Those requirements are rigorous.” Escobar, 136 S.Ct. at 2002.

Discussion Defining Reasonable and Necessary: (From Polukoff)

The Secretary of Health and Human Services decides “whether a particular medical service is ‘reasonable and necessary’ … by promulgating a generally applicable rule or by allowing individual adjudication.” Heckler v. Ringer, 466 U.S. 602, 617, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984)

The former course involves a “national coverage determination” that announces “whether or not a particular item or service is covered nationally.” 42 U.S.C. § 1395ff(f)(1)(B). In the absence of a national coverage determination, local Medicare contractors may issue a “local coverage determination” that announces “whether or not a particular item or service is covered” by that contractor. Id. § 1395ff(f)(2)(B).

The latter course allows “contractors [to] make individual claim determinations, even in the absence of [a national or local coverage determination], … based on the individual’s particular factual situation.” 68 Fed. Reg. 63,692, 63,693 (Nov. 7, 2003). In making an individual claim determination about whether to reimburse a medical provider, “[c]ontractors shall consider a service to be reasonable and necessary if the contractor determines that the service is: [ (1) ] Safe and effective;     [(2) ] Not experimental or investigational …; and [ (3) ] Appropriate.” Centers for Medicare & Medicaid Services (“CMS”),2 Medicare Program Integrity Manual § 13.5.1 (2015) (describing local coverage determinations); see also id. § 13.3 (incorporating § 13.5.1’s standards for individual claim determinations).

Medicare Program Integrity Manual.

The manual instructs contractors to “consider a service to be reasonable and necessary” if the procedure is:

  • Safe and effective;
  • Not experimental or investigational …; and
  • Appropriate, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it is:
  • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the  patient’s condition or to improve the function of a malformed body member;
  • Furnished in a setting appropriate to the patient’s medical needs and condition;
  • Ordered and furnished by qualified personnel;
  • One that meets, but does not exceed, the patient’s medical need; and
  • At least as beneficial as an existing and available medically appropriate alternative.

CMS, Medicare Program Integrity Manual § 13.5.1; see also § 13.3 (incorporating § 13.5.1’s definition of reasonable and necessary for individual claim determinations). Polukoff at 742-43.

Whistleblower lawyer W. Stacy Miller, II, of Miller Law Group in Raleigh, NC represents realtors in qui tam actions in Medicare and Medicaid fraud and governmental contract fraud, among others.   Contact or call 919-348-3461.