10th Circuit Allows FCA Claim for Alleged “Lack of Medical Necessity”

On July 9, 2018, the Tenth Circuit revived a qui tam False Claims Act (FCA) case, finding that a physician’s judgments or representations about the medical necessity of medical procedures may be found “false or fraudulent” if the procedure is “not reasonable and necessary under the government’s definition of the phrase.”

The relator brought this action against a doctor and the hospitals he worked for, alleging that the doctor-defendant received Medicare reimbursement for performing thousands of unnecessary heart surgeries after “fraudulently certif[ying] that the surgeries were medically necessary.”  The relator claimed that the doctor-defendant performed procedures to close holes found in patients’ hearts in order to cure “migraines” and “prevent strokes” despite the fact that guidance provided by the American Heart and American Stroke Associations (AHA/ASA) suggested that such closures are not medically necessary, except in limited circumstances where a patient experiences recurrent strokes.  Further, the relator claimed that the hospital-defendants were complicit in and profited from the defendant’s fraudulent scheme because they requested cost reimbursements and executed provider agreements which “allowed and encouraged” the doctor-defendant to submit Medicare claims and accept payment for services.  The relator claims that the hospitals submitted these claims despite “clear compliance red flags” with the doctor’s practices, including the fact that the doctor-defendant “was performing these procedures at a rate that far exceeded that of any other institution or physician.”

The relator claimed that the defendants misrepresented the medical necessity of these procedures to the government: (1) the doctor allegedly submitted express false certifications on government forms that the procedures were “medically indicated and necessary for the health of the patient,” and that he performed the procedures “according to AHA/ASA guidelines;” and (2) the hospitals allegedly requested reimbursements for the procedures by including them in annual cost reports which certified that all services were provided “in compliance with relevant laws and regulations.”

The district court dismissed the relator’s claims, claiming that the defendants’ alleged misrepresentations about the medical procedures could not be objectively false.  It reasoned that in FCA cases, the relator must show that a defendant “knowingly made an objectively false representation to the government that caused the government to remit payment,” but that “opinions, medical judgments, and conclusions about which reasonable minds may differ cannot be false for the purposes of an FCA claim.”  However, the relator appealed, and the Department of Justice (DOJ) submitted an amicus brief in support of the relator’s position, which cited case law from the Sixth Circuit directly rejecting the district court’s opinion.  In its brief, the DOJ stated that “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.”

The Tenth Circuit agreed with the DOJ’s brief, finding that “it is possible for a medical judgment to be ‘false or fraudulent’ under the FCA because: (1) the Tenth Circuit reads the FCA broadly to reach “all types of fraud . . . that might result in financial loss to the government;” (2) “the fact that an allegedly false statement constitutes the speaker’s opinion does not disqualify it from forming the basis of FCA liability;” and (3) claims for medically unnecessary treatment are actionable under the FCA.  The court reasoned that “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,” which requires, among other things, that the procedure meet but not exceed “the patient’s medical need.”  Thus, the court reasoned that a doctors’ 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.”

The court found that the relator’s amended complaint adequately alleged that the defendants “knowingly” made false certifications to the government in their claims for reimbursement for the procedures because it showed that the defendants acted at least with “reckless disregard” as to whether the procedures were medically necessary.  The Tenth Circuit reversed and remanded the case for further proceedings.

The case is United States ex rel. Polukoff v. St. Mark’s Hosp., et al., No. 17-4014 (10th Cir. Jul. 9, 2018).