Tenth Circuit Holds Medical Judgment Not Always an Ironclad Defense in FCA Cases

On July 9, 2018, the Tenth Circuit Court of Appeals, in U.S. ex rel. Polukoff v. St. Mark’s Hosp., 17-4014, — F. 3d —, 2018 WL 3340513 (10th Cir. July 9, 2018), was faced with an interesting question: whether a physician’s certification of medical necessity could be deemed “false” for purposes of the False Claims Act where no national or local governmental guidelines addressed the propriety or necessity of the physician’s specific services.

The case before the Court of Appeals involved allegations that a defendant physician, who had worked at two defendant hospitals, had systematically performed thousands of unnecessary heart surgeries for patients suffering from Patent Foramen Ovale (“PFO”), a heart condition. There was no specific guidance from Medicare addressing the physician’s practices. The District Court had granted the defendants motion to dismiss and concluded that the necessity of the doctor’s services was a matter of medical “opinion” or judgment and accordingly could not be “objectively false” under the FCA absent some regulation on point.  Id. at *5.  Relator’s appeal followed.

While there were no regulations addressing the practice at issue, the Complaint, and the Circuit Court in reviewing the sufficiency of the Complaint, looked to the American Heart Association’s and American Stroke Association’s guidelines addressing the appropriate surgical criteria for patients suffering from PFO. Both associations set forth that surgery should only be employed in certain cases of PFO. The physician was alleged to have routinely performed surgery on patient’s suffering from PFO in contravention of the AHA and ASA standards.

The Tenth Circuit recognized that “[o]ne factor that contractors consider when deciding whether a service is appropriate is whether it is [f]urnished 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.” Id. at *2 (internal quotation marks omitted). The Court determined that even absent a federal regulation or guideline addressing the specific medical decision, the claims could be deemed false.

The Court set forth three reasons for its holding: “First, we read the FCA broadly. Second, the fact that an allegedly false statement constitutes the speaker’s opinion does not disqualify it from forming the basis of FCA liability. Third, claims for medically unnecessary treatment are actionable under the FCA.” Id. at *8 (internal quotation marks and citations omitted). The Court noted that the Medicare Program Integrity Manual sets forth a definition for “reasonable and necessary,” even if it does not address any particular medical service. Id. at *9. Accordingly, “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.” Id.

As to fears that the Court’s decision would needlessly expand liability among medical professions, the Court explained that while the Program Integrity Manual’s definition is broad, the Escobar decision made clear that the materiality and scienter requirements of the FCA will prevent liability from ballooning. The Tenth Circuit recognized that the District Court’s holding would have created an FCA loophole by permitting bad actors to run up medical bills by performing unnecessary services whenever the specific medical service’s necessity is not addressed by federal regulation.

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