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AseraCare Resolves Historic False Claims Act Lawsuit, Preserving Key Lack of “Falsity” Defense

By Andy Liu, Robert Rhoad, and Andrew Victor

March 3, 2020

Government contractors should take note of the last week’s announced settlement between hospice care provider AseraCare and the Department of Justice (DOJ) of their long-running False Claims Act (FCA) case, U.S. ex rel. Paradies v. AseraCare Inc., No. 2:12-cv-00245 (N.D. Ala.).  The settlement agreement involves a single $1M payment and requires no Corporate Integrity Agreement (CIA).  It stands in stark contrast to the $200M originally sought by DOJ.  The settlement also keeps intact key rulings by the Eleventh Circuit in the case, which clarified that a mere difference of reasonable opinions will not constitute falsity under the FCA – clarity, which will continue to support defenses for those in both the health care and government contracts industries.

The AseraCare case dates back to 2008, when three former employees alleged that the hospice provider overbilled Medicare for its services, particularly hospice benefits for patients who were diagnosed as terminally ill.  A primary issue in the case was whether a difference of opinion between physicians could support FCA liability; the government claimed that a majority of the patients were not terminally ill (as had been diagnosed by treating physicians) and should not have received certain hospice benefits.  The case had a complex procedural history, including an eight-week trial where the jury found Aseracare liable.  Then, in a surprising twist, the trial judge determined she erred in giving the jury instructions, ordered a new trial, and ordered a summary judgment briefing on whether evidence of difference of medical opinion could support falsity under the FCA.  In short, the District Court granted summary judgment in favor or AseraCare.

DOJ appealed and lost at the Eleventh Circuit, which held that a reasonable difference of opinion cannot support a claim of falsity under the FCA.  The Eleventh Circuit issued that decision in September 2019 and remanded the case to the District Court for trial.  Instead of re-trying the case, however, the parties settled.

As we have previously noted, the Eleventh Circuit’s decision is a helpful case for FCA defendants as it stands for the proposition that a legitimate difference of opinion can defeat the FCA’s required “falsity” element – perhaps, even at the pleading stage.  While Aseracare involved differences between clinicians’ diagnoses and government experts’ post-treatment analysis of the same, this logic should prove equally applicable to other government contracting contexts that involve a difference of opinion including, for example, whether a defendant’s interpretation of a regulation or contract provision can be false where reasonable minds can differ as to the interpretation of the regulation or provision.

Notably, on the same day AserCare announced its settlement with DOJ, the Assistant Attorney General for the Civil Division, Jody Hunt, provided remarks at the Federal Bar Association qui tam conference in Washington, DC.  He stressed that DOJ’s near term focus will include nursing homes, Medicare Advantage (MA) plans, and electronic health records.  AAG Hunt highlighted DOJ’s Elder Justice Initiative, which targets subpar nursing homes and DOJ’s increasing focus on MA insurers.  Despite the outcome of Aseracare and the defenses it clarifies, DOJ will remain aggressive in pursuing FCA cases, as well as criminal elder fraud cases.  Indeed, just this morning, DOJ announced the largest coordinated sweep of elder fraud cases in history, with more than 400 defendants charged– a substantial uptick from the 260 defendants charged in last year’s sweep.

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