False Certifications of Medical Necessity Can Trigger False Claims Act Liability

Winter ex rel. United States v. Gardens Regional Hosp. & Me. Ctr., Inc., __ F.3d __, 2020 WL 1329661 (9th Cir. Mar. 23, 2020)

As reported by the California Society of Health Care Attorneys, Jane Winter was responsible for reviewing patient medical records at Gardens Regional Hospital and Medical Center to determine whether admission orders met the Hospital’s medical necessity admission criteria. Shortly after a nursing home acquired ownership in the management company that oversaw operations at the Hospital, Winter alleges she noticed a spike in the number of emergency room patients transported from the nursing home—an overwhelming majority of whom were admitted for inpatient treatment. Believing this to be improper, Winter repeatedly tried to raise her concerns with hospital management, without success. Instead, she was instructed not to question the admissions, and then she was fired.

Winter brought a qui tam action under the False Claims Act alleging that the Hospital and affiliated persons submitted Medicare claims falsely certifying that patients’ inpatient hospitalizations were medically necessary. The district court dismissed Winter’s complaint for failure to plead a plausible claim, ruling that “to prevail on an FCA claim, a plaintiff must show that a defendant knowingly made an objectively false representation” and claims involving a doctor’s clinical judgment can never state a claim under the FCA because “subjective medical opinions . . . cannot be proven to be objectively false.” Winter appealed.

The Ninth Circuit reversed, explaining that “a plaintiff need not allege falsity beyond the requirements adopted by Congress” in the FCA, and Congress did not impose a requirement of proving “objective falsity.” The FCA imposes liability for all “false or fraudulent claims” and does not distinguish between “objective” and “subjective” falsity, nor does it carve out an exception for clinical judgments and opinions. The Ninth Circuit further held that “a false certification of medical necessity can give rise to FCA liability” and can be “material because medical necessity is a statutory prerequisite to Medicare reimbursement.” A doctor’s certification that inpatient hospitalization was “medically necessary” can be false or fraudulent for the same reasons any opinion can be false or fraudulent. Thus, a medical necessity certification is actionable under the FCA if the opinion is not honestly held, or if it implies the existence of facts—namely, that inpatient hospitalization is needed to diagnose or treat a medical condition, in accordance with accepted standards of medical practice—that do not exist.