On August 25, 2023, the Third Circuit continued its trend of rulings unfavorable to FCA healthcare defendants in the latest appeal of U.S. ex rel. Druding et al. v. Care Alternatives et al., No. 22-1035, 2023 WL 5494333 (3d Cir. 2023), holding that medical record-keeping issues and documentation errors may be material under the False Claims Act (FCA). Reversing the lower court’s grant of summary judgment, the court found that a hospice provider’s violations of the Medicare requirement that medical records “support” a physician’s diagnosis were not “isolated incidents,” and that poor record-keeping patterns and practices are enough to withstand summary judgment.
The Third Circuit’s prior opinion in Druding is a well-known case to healthcare providers and the defense bar. In 2008, the defendant’s former employees filed a qui tam alleging that the defendant submitted claims to Medicare with inadequate documentation supporting patient eligibility for hospice care. The relators’ medical expert reviewed 47 patient records and found that hospice records did not support a terminal prognosis, and thus did not support hospice eligibility, 35% of the time. The defendant filed a motion for summary judgment, which the district court granted in line with the Eleventh Circuit’s opinion in United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019), finding that a mere difference in medical opinion between the relators’ expert and the defendant’s physicians without more was not sufficient to show that the claims submitted to Medicare were false. On appeal, the Third Circuit disagreed, holding that a difference in medical opinion could raise questions of “legal falsity” and remanded the case back to the district court.
On remand, defendant again moved for summary judgment, arguing that the missing documentation was not “material” under the FCA. Again, granting the defendant’s motion, the district court ruled that there was no evidence demonstrating that documentation deficiencies were material to the government’s decision to grant reimbursement. The district court noted that the government could plainly see that the defendant’s records were missing information yet decided to pay the claims anyway.
On appeal, however, the Third Circuit again vacated the grant of summary judgment and remanded for further proceedings. The court found that the district court erred by giving dispositive weight to Medicare’s decision to pay the claims while overlooking other factors that could have shown materiality, including the number and significance of the defendant’s alleged violations of Medicare regulations related to documentation.
Medicare regulations at 42 C.F.R. § 418.22(b)(2) require documentation that “supports” hospice care. The Third Circuit appears to interpret this requirement of support differently from the Eleventh Circuit, stating that “the patients’ terminal prognosis cannot be verified without adequate documentation.” In contrast, the Eleventh Circuit in Aseracare rejected the argument that patient eligibility turns on the documentation accompanying the physician’s certification, stating “To conclude that the supporting documentation must, standing alone, prove the validity of the physician’s initial clinical judgment would read more into the legal framework than its language allows.”
Regardless, the required documentation must only be included in a patient’s medical records, and submissions for payment may not contain that information. Thus, the Third Circuit found that there was a genuine issue of material fact as to whether the government had “actual knowledge” that the defendant’s certifications regarding eligibility were supported by the medical record. Importantly, the Third Circuit noted that that the flaws in the defendant’s certifications appeared to be pervasive, making it plausible that some of the defendant’s patients may have been medically ineligible for hospice care.
Courts have long held that there is no FCA liability for mere clerical errors (see Tyger Const. Co. Inc. v. United States, 28 Fed. Cl. 35, 55 (1993); see also U.S. ex rel. Butler v. Hughes Helicopters, Inc., 71 F.3d 321, 328 (9th Cir. 1995)). Nonetheless, although the Eleventh Circuit and the Third Circuit diverge when it comes to how physician judgment can be false and what documentation is required to “support” a physician certification, both courts have now found that whether or not deficient medical records are mere clerical errors may be a question for the jury to decide (see Ruckh v. Salus Rehab., LLC, 963 F.3d 1089, 1105 (11th Cir. 2020)).
While defense counsel may still have arguments in litigation, depending on the facts of the specific case, the importance of providers having appropriate documentation in the first place – before a lawsuit comes knocking – cannot be overstated. The Third Circuit’s latest Druding opinion reinforces how critical proper documentation and retention practices are, even for claims from years past. Providers often find themselves overwhelmed by paperwork, but what a busy doctor may consider “administrative” work today might make the difference regarding whether a patient is deemed ineligible for services tomorrow.
