A recent court decision regarding physician judgment could put hospitals at greater risk of liability. The decision involved the False Claims Act.

  • A physician’s assessment of medical necessity could be deemed false.
  • Expert physician testimony may contradict the defendant’s judgment.
  • An “objective falsity” standard could reduce the risk.

Clinicians make judgment calls every day that do not always turn out to be correct, even when they are made in good faith. A recent court decision regarding the medical necessity of hospice care could put clinicians and hospitals at risk of False Claims Act (FCA) allegations when judgment calls turn out wrong.

A recent federal court of appeals decision, Care Alternatives v. United States (Care Alternatives), 952 F.3d 89 (3d Cir. 2020), opens new avenues of liability related to these judgment calls, says Olivia R. King, JD, associate with Foley & Lardner in Boston. (The case text is available online at: https://casetext.com/case/united-states-v-care-alts.)

Plaintiffs alleged that hospice care physicians had improperly certified patients as terminal, and the patients then lived longer than expected. Four staff members at the New Jersey hospice center initiated a qui tam action claiming the center had submitted false claims to Medicare.

To support their claims, plaintiffs supplied the expert testimony of a physician who reviewed the patients’ medical records. They claimed the certifying physicians’ medical opinions were wrong in their assessment of the patients’ conditions and qualifications for hospice care, thereby leading to false claims when the hospice facility sought reimbursement.

When the case went before the 3rd U.S. Circuit Court of Appeals, the defendant argued the claims should require proof of objective falsity and that a physician’s judgment cannot lead to FCA liability. The court rejected those arguments, ruling a physician’s judgment call can be the basis for liability under the FCA. The defendant is appealing to the U.S. Supreme Court, which is expected to decide in the next few months whether to hear the case.

Objective Falsity Debated

The issue of objective falsity is at the heart of this case. “There’s a theory in the False Claims Act, and it’s not written in the False Claims Act itself, that in order for a claim to be false, it must be objectively false,” King explains. “That means that there are objective, verifiable claims to prove falsity. What’s happening here is that there are cases brought claiming that a physician’s judgment is false for the purpose of the False Claims Act. There is a circuit split on this question of objective falsity, which is what makes it particularly interesting.”

Some circuits require that a claim be objectively false, some do not, and others have not ruled on the issue, King says.

Treatment settings such as hospice and rehabilitation are particularly vulnerable to this kind of claim, says Michael J. Tuteur, JD, partner with Foley & Lardner in Boston. He notes that while the FCA applies only to federal programs such as Medicare, commercial insurers could follow the lead of the courts in interpreting the need for objective falsity.

“You have to be able to qualify for hospice, with a finding by a physician that certain clinical requirements are met, including the likelihood of death within six months,” he says. “Another clinician can come along, look at the records, and say there was no way this person could have thought that this person was going to be terminal. Sometimes, just going into hospice makes people live longer because it’s calmer and they’ve decided to accept their condition.”

A Supreme Court ruling favoring a requirement for objective falsity would greatly reduce the risk for healthcare organizations, Tuteur says. It could make the difference between shutting down a claim early in the process or a case dragging out for a long time.

“It could mean getting out of a case from the very beginning with a motion to dismiss, or — not quite as good — a motion for summary judgment,” Tuteur says. “There is a whole lot less upheaval if you can do it at that stage rather than at the trial stage. By then, the provider probably has given up and tries to settle.”

With objective falsity, the plaintiff would have to prove the clinical judgment was knowingly and deliberately false, Tuteur says. That is a high bar and would require proof, such as showing the physician never read the patient record on which the decision was made — an extremely unlikely circumstance.

“Here, there’s no reason to think that the practitioner is doing anything other than making a clinical judgment,” he says. “That should be the beginning and end of the matter.”

Affects Many Treatments

King notes the issue involves more than just hospice and could affect any healthcare service that requires certification of medical necessity for reimbursement. Any providers and organizations participating in Medicare should be aware of the risks with these clinician assessments.

Tuteur says the dispute can involve not just whether a patient should be in the facility, but the details of prescribed services. “Think of all those patients in skilled nursing facilities who are getting physical therapy or occupational therapy, and whether they should get 60 minutes or 120 minutes. The government has brought claims in these cases because they all required a physician to certify this was the amount of rehab a patient needed,” he explains. “If the answer is always going to be that you have an expert who says otherwise, those cases are going to be more difficult to resolve. If, on the other hand, absent showing bad faith on the part of the certifier, and the question must be answered objectively whether it is true or false, many more cases will be resolvable at the front end.”

Depending on the federal circuit in which a healthcare organization is located, the risk of a false claim of this nature might already be included in the risk management system, King says. They have already been operating in a world in which medical necessity can be deemed false.

“But if the Supreme Court accepts the case, then the decision, whichever way it goes, can have implications for the entire country,” King says. “If the Supreme Court decides that objective falsity is not necessary, then there will be increased costs associated with trying to avoid liability.”

Those increased costs would come from more rigorous documentation and the associated paperwork. “Will you have one person doing the certifying, or two?” Tuteur asks. “You’re making it more difficult for the qui tam relator to establish that there is anything there to dispute in the clinical determination. That might be good for healthcare because the unscrupulous will be driven out by the higher costs, but it’s often the scrupulous who get driven out because they have to do more work, the cases go on longer, and they have to rely on physicians to certify.”


  • Olivia R. King, JD, Foley & Lardner, Boston. Phone: (617) 226-3165. Email: oking@foley.com.
  • Michael J. Tuteur, JD, Partner, Foley & Lardner, Boston. Phone: (617) 342-4016. Email: mtuteur@foley.com.