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Medical Judgment May be “False or Fraudulent” Under the False Claims Act: U.S. ex rel. Polukoff v. St. Mark’s Hospital

In its July 2018 decision in United States ex rel. Polukoff v. St. Mark’s Hospital (https://www.ca10.uscourts.gov/opinions/17/17-4014.pdf), the 10th Circuit Court of Appeals held that a doctor’s medical judgement can be “false or fraudulent” for the purposes of the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733 (https://www.law.cornell.edu/uscode/text/31/3729).

In doing so, the appellate court reversed the district court’s order dismissing the FCA qui tam action, which had been brought by a former colleague of defendant Dr. Sherman Sorensen, finding that the “specific factual allegations” of the relator’s complaint were sufficient “to state a claim as a matter of law and survive Rule 12(b)(6) dismissal.”

Proving an FCA Claim

Congress passed the FCA during the Civil War when the government learned of many fraudulent claims for payment from various service providers; accordingly, its goal is to recover government financial losses incurred because of fraud.

Generally, to prove a claim under the FCA, either the government or relator (whistleblower) must show the following by a preponderance of the evidence:

  1. a false statement or fraudulent course of conduct,
  2. made with scienter [knowledge],
  3. that was material, causing
  4. the government to pay out or forfeit moneys due.

The Facts of the Case

Dr. Polukoff alleged that cardiologist Dr. Sorensen performed thousands of medically unnecessary patent foramen oval (PFO) closure procedures (to close a hole in a patient’s heart), which were then reimbursed by Medicare. Dr. Polukoff claimed that Dr. Sorensen performed an extraordinary number of such procedures, offering the example that in the same time period, the Cleveland Clinic performed 37 PFO closures while Dr. Sorensen completed 861. According to the complaint, Dr. Sorensen believed that PFO closures helped cure patients’ migraines and prevent strokes in patients with an elevated risk of stroke.

The complaint also names defendants Intermountain Medical Center and St. Mark’s Hospital, two hospitals at which Dr. Sorensen worked and which, according to the complaint, “were complicit in and profited from Dr. Sorensen’s fraud.” The relator alleged that, at a minimum, the hospitals acted with reckless disregard as to whether the surgeries were medically necessary.

To support his claim that the procedures were medically unnecessary, Dr. Polukoff cited guidelines by the American Heart Association and American Stroke Association (AHA/ASA), which provide that “there has long been general agreement in the medical community that PFO closure is not medically necessary,” with some limited exceptions.

Dr. Polukoff alleged that Dr. Sorensen knew Medicare would not reimburse PFO closures for migraines, so the cardiologist made representations that the surgeries he performed were in accordance with AHA/ASA stroke guidelines. Based on these assertions, Dr. Polukoff argued that the Medicare payments Dr. Sorensen received for PFO procedures were unlawful because of his “objectively false” certifications that the surgeries were medically necessary.

The district court dismissed Dr. Polukoff’s FCA claims, ruling that the medical necessity of procedures could not be shown to “objectively false” and that “opinions, medical judgments, and ‘conclusions about which reasonable minds may differ cannot be false’” with regards to an FCA claim.

The government declined to intervene in the qui tam action, but the Department of Justice (DOJ) filed an amicus brief
(https://www.mintz.com/sites/default/files/media/documents/2018-09-25/DOJ-Amicus-Brief-Polukoff.pdf) on appeal, taking issue with the district court’s conclusion that medical judgments could not be proven “objectively false.” The DOJ argued that a statement as to whether a procedure was medically necessary “is an objective one that can be either true or false” and that a fact-finder could decide that question by referencing various sources, including “clinical information and other documentation in a medical record, relevant policies and guidance promulgated by the government or other entities, and expert and other witness testimony.”

The DOJ also submitted a letter (https://thomasdurrell.com/wp-content/uploads/2018/07/DOJ-Letter-in-Polukoff.pdf) to the court advising it of a recent 6th Circuit Court of Appeal’s decision in United States v. Paulus (http://www.opn.ca6.uscourts.gov/opinions.pdf/18a0121p-06.pdf), the holding of which supported the DOJ’s amicus brief position that a fact-finder should be given the opportunity to decide the truth or falsity of a statement of medical necessity. The Paulus decision also rejected the lower court’s finding that “a statement of opinion cannot be false.”

10th Circuit’s Decision

The 10th Circuit reversed the district court’s dismissal of the lawsuit, concluding that a medical judgement could be “false or fraudulent” for the purposes of an FCA claim “for at least three reasons”:

  1. The FCA must be construed broadly “to reach all types of fraud.”
  2. Just because an allegedly false statement is the speaker’s opinion doesn’t mean it can’t form the basis of FCA liability.
  3. “[C]laims for medically unnecessary treatment are actionable under the FCA.”

The court adopted the DOJ’s argument that a “Medicare claim is false if it is not reimbursable, and a Medicare claim is not reimbursable if the services provided were not medically necessary.” The court reasoned that the government defines what is “reasonable and necessary” in the Medicare Program Integrity Manual, and, therefore, “a doctor’s certification to the government that a procedure is
‘reasonable and necessary’ is ‘false’ under the FCA if the procedure was not reasonable and necessary under the government’s definition of the phrase.”

Acknowledging that its decision could expose doctors to increased FCA liability, the 10th Circuit asserted that the United States Supreme Court decision in Universal Health Servs. v. United States ex rel. Escobar effectively addresses this concern by requiring “strict enforcement” of the “rigorous” FCA requirements of scienter and materiality.

Overall, whether the Polukoff decision has a rippling effect throughout FCA litigation remains to be seen. While the court, as part of its consideration of the motion to dismiss, had to accept Dr. Polukoff’s assertions as true and also explicitly limited its holding to “the specific factual allegations” of the case before it, the growing consensus among courts that professional judgment may result in FCA liability if it is exercised in a manner that results in legally false claims suggests that the FCA will continue to serve as a major deterrent of fraudulent conduct in government contracting and medical care.

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