United States ex rel. Druding v. Care Alternatives
| Docket Number | 22-1035 |
| Decision Date | 25 August 2023 |
| Parties | UNITED STATES OF AMERICA and STATE OF NEW JERSEY ex rel VICTORIA DRUDING; BARBARA BAIN; LINDA COLEMAN; RONNI O'BRIEN v. CARE ALTERNATIVES Victoria Druding, Barbara Bain, Linda Coleman, and Ronni O'Brien, Appellants |
| Court | U.S. Court of Appeals — Third Circuit |
Argued on April 25, 2023
On Appeal from the United States District Court for the District of New Jersey (District Court No. 1-08-cv-02126) Honorable Juan R. Sanchez, Chief District Judge
Ross Begelman [ARGUED] Marc M. Orlow Begelman Orlow & Melletz Counsel for Appellants
Amanda Mundell [ARGUED] United States Department of Justice Civil Division, Charles W. Scarborough United States Department of Justice Appellate Section Counsel for Amicus Curiae United States of America, in Support of Appellants
Jacklyn DeMar Taxpayers Against Fraud Counsel for Amicus Curiae Taxpayers Against Fraud Education Fund, in Support of Appellants
Jeffrey S. Bucholtz [ARGUED] King & Spalding, Craig Carpenito King & Spalding, William H. Jordan Jason Popp Alston & Bird
Steven L. Penaro Alston & Bird Counsel for Appellee
John P. Elwood Arnold & Porter Kaye Scholer Counsel for Amici Curiae Chamber of Commerce of the United States of America and Pharmaceutical Research and Manufacturers of America, in Support of Appellee
Before: KRAUSE, BIBAS, and RENDELL, Circuit Judges
The False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq., is a flexible, far-reaching tool that empowers the federal government and private individuals acting in the government's name, known as relators, to bring claims for fraud against the United States. At the same time, it is not "an all-purpose antifraud statute or a vehicle for punishing garden-variety breaches of contract or regulatory violations." Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 194 (2016). So when a government contractor submits a claim for payment but fails to disclose a statutory, regulatory, or contractual violation, that claim does not automatically trigger FCA liability. Instead, the Act requires that the contractor's alleged violation be, among other things, "material" to the government's decision to pay. Id. at 192-93.
And in Escobar, the Supreme Court identified various factors to assist courts in evaluating materiality.
In this case, the District Court granted summary judgment to the Defendant, Care Alternatives, Inc. ("Care Alternatives"), a New Jersey hospice provider, for lack of materiality based principally on the government's continued reimbursement of Care Alternatives even after being made aware of its deficient documentation required by regulation. Because the District Court assigned dispositive weight to a single Escobar factor, government action, while overlooking the factors that could have weighed in favor of materiality- and despite an open dispute over the government's "actual knowledge," 579 U.S. at 195-we will vacate the District Court's grant of summary judgment and remand for further proceedings consistent with this opinion.
Defendant Care Alternatives is a for-profit hospice provider that operates in New Jersey. It employs teams of clinicians known as "Interdisciplinary Teams" ("IDTs"), consisting of registered nurses, chaplains, social workers, home health aides, and therapists. JA 6. These groups work alongside independent physicians who serve as hospice medical directors. The IDTs meet regularly to review patient care plans and discuss patients who are up for recertification of their need for hospice care.
The Relator-Appellants ("Relators") are former employees of Care Alternatives, some of whom were clinicians who participated in IDTs. They brought this action under the False Claims Act alleging that Care Alternatives submitted claims for Medicare reimbursement despite inadequate documentation in the patients' medical records supporting hospice eligibility, as required by 42 C.F.R. § 418.22(b)(2) (2011).
Before reviewing the specifics of Relators' claims and the circumstances leading to this appeal, we will review the requirements that hospice providers must meet to qualify for Medicare reimbursement and the False Claims Act.
In 1982, Congress created the Medicare Hospice Benefit, an amendment to the Social Security Act that authorized Medicare beneficiaries to receive coverage for hospice care. See Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, § 122, 96 Stat. 324, 356-63. Hospice care is considered palliative care, meaning it is "patient and family-centered care that optimizes quality of life by anticipating, preventing, and treating suffering." 42 C.F.R. § 418.3 (2021). It aims to "mak[e] [a terminally ill] individual as physically and emotionally comfortable as possible." 48 Fed.Reg. 56,008, 56,008 (Dec. 16, 1983). A patient who has been certified as eligible for hospice care and elects to receive the Hospice Benefit waives the right to Medicare payment for "curative" care that is designed to treat the individual's condition. See 42 U.S.C. § 1395d(d)(2)(A)(ii).
For a patient to be eligible for Medicare hospice benefits, and for a hospice provider to be entitled to bill for such benefits, a patient must be certified as "terminally ill," see 42 C.F.R. §§ 418.20, meaning "that the individual has a medical prognosis that his or her life expectancy is 6 months or less if the illness runs its normal course," id. § 418.3. There are two principal components of that certification: it must (1) be signed by at least one physician, and (2) be accompanied by "[c]linical information and other documentation that support the medical prognosis" of terminal illness in the medical record. Id. § 418.22(b).
To satisfy the first component, physician certification, an individual's "attending physician" and the hospice's "medical director" must "certify in writing . . . 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(a)(7)(A)(i). This certification must be obtained at the time a patient is admitted to hospice, id., and renewed at ninety days and every sixty days thereafter, id. at § 1395f(a)(7)(A)(ii).
To satisfy the second component, medical documentation, "[c]linical information and other documentation that support the medical prognosis must accompany the certification and must be filed in the [patient's] medical record with the written certification." 42 C.F.R. § 418.22(b)(2); see also id. § 418.22(b)(3) (). As the Center for Medicare and Medicaid Services ("CMS"), the agency that administers the Hospice Benefit, has explained: 70 Fed.Reg. 70,532, 70,534-35 (Nov. 22, 2005).
The False Claims Act "imposes significant penalties on those who defraud the Government." Escobar, 579 U.S. at 180. The Act makes liable "any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the government. 31 U.S.C. § 3729(a)(1)(A).
The government may bring FCA actions directly. Id. § 3730(a). Alternatively, as happened in this case, "a private person, known as a relator, may bring a qui tam civil action" in the government's name. Cochise Consultancy, Inc. v. United States ex rel. Hunt, 139 S.Ct. 1507, 1510 (2019); see also 31 U.S.C. § 3730(b). In such cases, the government may "intervene in the action" after investigating the relator's allegations. Cochise Consultancy, Inc., 139 S.Ct. at 1510 (citations omitted). If, as here, the government declines to intervene, the relator may still "pursue the action." Id. (citation omitted). The relator is entitled to "a share," generally between 15 and 30 percent, "of any proceeds from the action." Id. (citations omitted).
To prevail on an FCA claim, the relator 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. Escobar, 579 U.S. at 181-82; United States ex rel Petratos v. Genetech Inc., 855 F.3d 481, 487 (3d Cir. 2017) (citations omitted). "Materiality," the Court explained in Escobar, turns on a variety of factors such as: (1) whether the government has expressly designated the legal requirement at issue as a "condition of payment"; (2) whether the alleged violation is "minor or insubstantial" or instead goes to the "essence of the bargain" between the contractor and the government; and (3) whether the government made continued payments, or does so in the "mine run of cases," despite "actual knowledge" of the violation. See 579 U.S. at 193 n.5, 194-95 (quotation and citations omitted). As this Court and our sister circuits have repeatedly recognized, this is a "holistic," totality-of-the-circumstances inquiry.[1]
Relators brought this suit under the qui tam provision of the FCA. Pursuant to that provision, they filed their Complaint under seal in 2008 and provided the government with the information upon which they intended to rely so that the government could make an informed decision as to whether it would intervene and take over the case. 31...
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