Winter ex rel. United States v. Gardens Reg'l Hosp. & Med. Ctr., Inc.

953 F.3d 1108

Jane WINTER, EX REL. UNITED STATES of America, Plaintiff-Appellant,

v.GARDENS REGIONAL HOSPITAL AND MEDICAL CENTER, INC., dba Tri-City Regional Medical Center, a California corporation; RollinsNelson LTC Corp., a California corporation; Vicki Rollins; Bill Nelson; S&W Health Management Services, Inc., a California corporation; Beryl Weiner; Prode Pascual, M.D.; Rafaelito Victoria, M.D.; Arnold Ling, M.D.; Cynthia Miller-Dobalian, M.D.; Edgardo Binoya, M.D.; Namiko Nerio, M.D.; Manuel Sacapano, M.D., Defendants-Appellees.

No. 18-55020

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 13, 2019, Pasadena, California

Filed March 23, 2020

Michael J. Khouri (argued), Andrew G. Goodman, and Jennifer W. Gatewood, Khouri Law Firm APC, Irvine, California, for Plaintiff-Appellant.

Thad A. Davis (argued), Gibson Dunn & Crutcher LLP, San Francisco, California; James L. Zelenay Jr., Gibson Dunn & Crutcher LLP, Los Angeles, California; for Defendants-Appellees Beryl Weiner and S&W Health Management Services, Inc.

Matthew Umhofer (argued) and Elizabeth J. Lee, Spertus Landes & Umhofer LLP, Los Angeles, California, for Defendants-Appellees RollinsNelson LTC Corp., Vicki Rollins, and Bill Nelson.

Raymond J. McMahon, Doyle Schafer McMahon, Irvine, California, for Defendants-Appellees Arnold Ling, M.D.; Cynthia Miller-Dobalian, M.D.; and Edgardo Binoya, M.D.

Michael D. Gonzalez and Andrea D. Vazquez, Law Offices of Michael D. Gonzalez, Glendale, California; Kenneth R. Pedroza and Matthew S. Levinson, Cole Pedroza LLP, for Defendant-Appellee Prode Pascual, M.D.

Craig B. Garner, Garner Health Law Corporation, Marina Del Rey, California, for Defendant-Appellee Rafaelito Victoria, M.D.

No appearance by Defendants-Appellees Gardens Regional Hospital and Medical Center, Inc.; Namiko Nerio, M.D.; and Manuel Sacapano, M.D.

Benjamin M. Shultz (argued), Michael S. Raab, and Charles W. Scarborough, Appellate Staff; Nicola T. Hanna, United States Attorney; Civil Division, United States Department of Justice, Washington, D.C.; for Amicus Curiae United States of America.

James F. Segroves, Kelly H. Hibbert, and Nancy B. Halstead, Reed Smith LLP, Washington, D.C.; Mark E. Reagan, Hooper Lundy & Bookman PC, San Francisco, California; for Amici Curiae American Health Care Association, National Center for Assisted Living, and California Association of Health Facilities.

Before: Johnnie B. Rawlinson, John B. Owens, and Mark J. Bennett, Circuit Judges.

BENNETT, Circuit Judge:

Appellant-Relator Jane Winter ("Winter"), the former Director of Care Management at Gardens Regional Hospital ("Gardens Regional"), brought this qui tam action under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 – 33. Winter alleges Defendants¹ submitted, or caused to be submitted, Medicare claims falsely certifying that patients’ inpatient hospitalizations were medically necessary. Winter alleges that the admissions were not medically necessary and were contraindicated by the patients’ medical records and the hospital’s own admissions criteria. The district court dismissed Winter’s second amended complaint ("the complaint") for failure to state a claim. The district court held that "to prevail on an FCA claim, a plaintiff must show that a defendant knowingly made an objectively false representation," so a statement that implicates a doctor’s clinical judgment can never state a claim under the FCA because "subjective medical opinions ... cannot be proven to be objectively false."

We have jurisdiction under 28 U.S.C. § 1291. 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. A doctor’s clinical opinion must be judged under the same standard as any other representation. A doctor, like anyone else, can express an opinion that he knows to be false, or that he makes in reckless disregard of its truth or falsity. See 31 U.S.C. § 3729(b)(1). We therefore hold that a false certification of medical necessity can give rise to FCA liability.² We also hold that a false certification of medical necessity can be material because medical necessity is a statutory prerequisite to Medicare reimbursement. Accordingly, we reverse and remand.

BACKGROUND

A. The "Medical Necessity" Requirement

The Medicare program provides basic health insurance for individuals who are 65 or older, disabled, or have end-stage renal disease. 42 U.S.C. § 1395c. "[N]o payment may be made ... for any expenses incurred for items or services ... [that] are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member[.]" 42 U.S.C. § 1395y(a)(1)(A). Medicare reimburses providers for inpatient hospitalization only if "a physician certifies that such services are required to be given on an inpatient basis for such individual’s medical treatment, or that inpatient diagnostic study is medically required and such services are necessary for such purpose[.]" 42 U.S.C. § 1395f(a)(3).

The Department of Health and Human Services, Centers for Medicare & Medicaid Services ("CMS"), administers the Medicare program and issues guidance governing reimbursement. CMS defines a "reasonable and necessary" service as one that "meets, but does not exceed, the patient’s medical need," and is furnished "in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition ... in a setting appropriate to the patient’s medical needs and condition[.]" CMS, Medicare Program Integrity Manual § 13.5.4 (2019). The Medicare program tells patients that "medically necessary" means health care services that are "needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine. " CMS, Medicare & You 2020: The Official U.S. Government Medicare Handbook 114 (2019).

Admitting a patient to the hospital for inpatient—as opposed to outpatient—treatment requires a formal admission order from a doctor "who is knowledgeable about the patient’s hospital course, medical plan of care, and current condition." 42 C.F.R. § 412.3(b). Inpatient admission "is generally appropriate for payment under Medicare Part A when the admitting physician expects the patient to require hospital care that crosses two midnights," but inpatient admission can also be appropriate under other circumstances if "supported by the medical record." Id. § 412.3(d)(1), (3).

The Medicare program trusts doctors to use their clinical judgment based on "complex medical factors," but does not give them unfettered discretion to decide whether inpatient admission is medically necessary: "The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration." Id. § 412.3(d)(1)(i) (emphasis added). And the regulations consider medical necessity a question of fact: "No presumptive weight shall be assigned to the physician’s order under § 412.3 or the physician’s certification ... in determining the medical necessity of inpatient hospital services .... A physician’s order or certification will be evaluated in the context of the evidence in the medical record." Id. § 412.46(b).

B. The False Claims Act

The FCA imposes significant civil liability on any person who, inter alia , (A) "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval," (B) "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim," or (C) "conspires to commit a violation of subparagraph (A), [or] (B)[.]" 31 U.S.C. § 3729(a)(1). The Act allows private plaintiffs to enforce its provisions by bringing a qui tam suit on behalf of the United States. Id. § 3730(b).

A plaintiff must allege: "(1) a false statement or fraudulent course of conduct, (2) made with the scienter, (3) that was material, causing, (4) the government to pay out money or forfeit moneys due." United States ex rel. Campie v. Gilead Scis., Inc. , 862 F.3d 890, 899 (9th Cir. 2017). Winter’s allegations fall under a "false certification" theory of FCA liability.³ See Universal Health Servs., Inc. v. United States ex rel. Escobar , ––– U.S. ––––, 136 S. Ct. 1989, 2001, 195 L.Ed.2d 348 (2016). Because medical necessity is a condition of payment, every Medicare claim includes an express or implied certification that treatment was medically necessary. Claims for unnecessary treatment are false claims. Defendants act with the required scienter if they know the treatment was not medically necessary, or act in deliberate ignorance or reckless disregard of whether the treatment was medically necessary. See 31 U.S.C. § 3729(b)(1).

C. The Allegations in Winter’s Complaint⁴

Winter, a registered nurse, became the Director of Care Management and Emergency Room at Gardens Regional in August 2014, and came to the job with thirteen years of experience as a director of case management at hospitals in Southern California and Utah.

Winter reviewed hospital admissions using the admissions criteria adopted by Gardens Regional—the InterQual Level of Care Criteria 2014 ("the InterQual criteria"). The InterQual criteria, promulgated by McKesson Health Solutions LLC and updated annually, "are reviewed and validated by a national panel of clinicians and medical experts," and represent "a synthesis of evidence-based standards of care, current practices, and consensus from licensed specialists and/or primary care physicians." Medicare uses the criteria to evaluate claims for payment. And, as the criteria require a secondary review of all care decisions, Winter’s job included reviewing Garden Regional patients’ medical...