Lawsuit Information Center
Earlier this year in Winter v. Gardens Regional Hospital, the 9th Circuit Court of Appeals revived a False Claims Act case filed by the Director of Care Management in a California hospital that claimed nearly $1.3 in Medicare claims that sought reimbursement for inpatient hospitalizations that were not medically necessary.
The U.S. District Court of Utah dismissed the case, without leave to amend, for failing to state a claim under the FCA. Specifically, the court believed that the qui tam plaintiff’s complaint failed to state a cause of action under the FCA because the allegations as a matter of law were “subjective medical opinions” that demonstrated a mere “difference of opinion” as to the medical necessity of inpatient hospital admissions.
Facts of Winter v. Gardens Regional Hospital
The qui tam plaintiff took a job as the Director of Care Management and Emergency Room at Gardens Regional. This is a big job supervising the entire ER. One of her jobs was to reviewing inpatient admissions to verify that the admissions were medically necessary using what it called the InterQual criteria. So she is not looking over the doctor’s shoulder and second-guessing decisions, but looking at objective criteria.
A nursing home operator, RollinsNelson, purchased a large interest in S&W Health, the hospital management company that ran Gardens Regional. She notices a big spike in inpatient admission when it took over.
Interestingly, she specifically noted a pattern of unnecessary admissions of patients with urinary tract infections. These are not patients that usually need an overnight hospital stay. You typically treat them with antibiotics for the infection and send them on their way. She also alleged saw a lot of patients being diagnosed with sepsis. No question, sepsis is extremely serious. But she says the patients being admitted for sepsis who did not have clinical findings to support sepsis. She further noticed a similar pattern of admissions for patients with pneumonia and bronchitis even though their medical records lacked the objective criteria for the diagnosis.
She alleges she took this to Gardens Regional higher-ups who ignored her and then fired her.
Whistleblower Lawsuit
Shortly after her termination, she filed a whistleblower lawsuit alleging that patients were admitted to the hospital, and then Medicare was billed under the premise that the hospitalizations were medically necessary when they were not. She pointed to at least 65 hospital admissions that “failed to satisfy the hospital’s own admissions criteria.”
She also provided data that suggested that the admission rate soared over 80% after the new management company came aboard.
I’m a little surprised that the last one did not sway the court. In a close call case, I would think that damning evidence would give a pretty clear indication of who the bad guys are. You are seeing more of this kind of evidence being used in qui tam cases and this is a good development if you are trying to stop Medicare fraud.
Motion to Dismiss
The Defendants argued that Winter’s allegations were insufficient to state a claim because it was just Monday morning quarterbacking of the decision to admit. The District Court agreed, reasoning that “the contention that the medical provider’s certifications were false is based on her own after-the-fact review of [the hospital’s] admission records. However, the fact that [the plaintiff] reached a different conclusion on the issue of medical necessity does not render the provider’s certification false.”
The District Court also found that a whistleblower plaintiff must prove that a defendant “knowingly made an objectively false representation” to recover on a qui tam claim.
Ninth Circuit Reversal
The Ninth Circuit reversed the dismissal. The court found that the plaintiff did not need to claim objective falsity. Instead, the bar is merely if it implies the “existence of facts that do not exist, or if it is not honestly held.” The court said the plaintiff’s allegation of statistical evidence and specific claims based on objective criteria that were medically unnecessary admissions. But, importantly, it also ruled that the FCA “does not differentiate between ‘objective’ and ‘subjective’ falsity or carve out an exception for clinical judgments and opinions… We hold that a plaintiff need not allege falsity beyond the requirements adopted by Congress in the FCA, which primarily punishes those who submit, conspire to submit, or aid in the submission of false or fraudulent claims. Congress imposed no requirement of proving ‘objective falsity,’ and we have no authority to rewrite the statute to add such a requirement.”
Implications of Winter v. Gardens Regional Hospital Holding
There is no question that Medicare fraud is expensive. How much? Maybe $52 billion a year. That is a huge chunk of money. We also know that overnight hospital stays may cost nearly $400 billion a year. So the federal government has a huge interest in using the FCA to rein in fraud and deter those who would consider admitting patients unnecessarily. The Act is the federal government’s most powerful weapon to prevent fraud against the federal government. If the District Court’s thinking became the law of the land, it could lead to billions of dollars lost in Medicare overbilling that could not be stopped under this statutory scheme. This opinion will make it easier to keep these hospitals in check.
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