Court decision upholds provider sovereignty over determinations of medical necessity

Ruling focused on key hospice admission.

Last week, the 11th Circuit (the federal appeals court for the Southeastern United States) issued a decision in the AsceraCare case.    

We have been waiting for this decision since the case was argued two and a half years ago. The key question in the case is: if a hospice provides care to a patient based on a physician’s reasonable conclusion that the patient is terminally ill, can the hospice face False Claim Act liability if another physician working for the contractor disagrees? 

The trial court had originally concluded that such claims could still be false, but over the course of the trial, the judge changed his mind. Upon the conclusion of the trial, the judge reversed himself and ruled that as a matter of law, if two reasonable physicians could differ about the issue, the claim could not be false.

That ruling really bothered the government, because it makes it very difficult to make a False Claims Act case that is based on physician judgment. On appeal, the 11th Circuit rejected the government’s arguments and agreed with the trial court, ruling that when coverage hinges on a physician’s medical judgment, as long as a physician holds a sincere belief, a fact that another physician might disagree is irrelevant.

Procedurally, the 11^th Circuit did vacate part of the trial court’s order and remanded the case back to the trial court, but that portion of the decision relates to whether AsceraCare had a good-faith basis for relying on the judgment of its physicians. The government asserts that there was evidence that the physicians were not given all of the relevant information and that other information was withheld from the physicians. The court is to consider that question on the remand.

Most of the decision focuses on the False Claims Act, so it is not clear how much of the decision is applicable to a standard Medicare overpayment. The government also brought claims for unjust enrichment, arguing that the hospice received money for unnecessary services. The appeals court decision does not address that claim. But I want to stress that the analysis here is similar to analysis made under the Medicare treating physician rule.

In Medicare overpayment cases, courts have said that the judgment of the treating physician is entitled to deference. This decision reinforces the idea that in a medical necessity case if you are capable of finding an expert to support your physician, you should be able to prevail unless the government can show that someone was intentionally withholding information from the physicians, or your physician was lying about his or her opinion.

The bottom line is that if reasonable people can differ about the medical necessity of service, there should not be any liability under the False Claims Act. In fact, while the AscereCare case doesn’t address the question, rulings on other cases applying the “treating physician rule” have indicated that there should not be any overpayment liability or a duty to refund.

There are a few other interesting statements associated with this case, and they will be the subject of a future article. 

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