In many industries, but especially health care, the amount of regulation and guidance issued by the responsible agencies is tremendous and continues to grow. The Centers for Medicare and Medicaid Services (CMS) is no exception. In a recent appeal by a home health agency, the Tenth Circuit examined the “pace [of CMS’] frenetic lawmaking,” finding that CMS applied a homebound status definition and documentation requirement that did not exist at the time the claims were submitted.

In Caring Hearts Personal Home Services., Inc. v. Burwell, No. 14-3243, 2016 BL 171256, (May 31, 2016), CMS litigated an alleged overpayment of about $800,000 for medically unnecessary home health services through the entire administrative process. The services were provided in 2008, but, according to the Tenth Circuit, CMS applied the more restrictive 2010 version instead. CMS took the position in this litigation that the 2010 changes simply clarified the prior rule and made it more consistent with the governing statute.  The Administrative Law Judge, the Department Appeals Board and even the United States District Court took the same view.  On appeal the Tenth Circuit disagreed.

The Tenth Circuit found that the 2008 version of the regulation applied to the claims, that Caring Hearts home health services and documentation content complied with that regulation, and that the statute did not clearly support CMS’ litigation position. In 2008, CMS’s homebound definition stated that, “[g]enerally speaking, a patient will be considered homebound if they [sic] have a condition due to an illness or injury that restricts their ability to leave the place of residence except with the aid of: supportive devices such as crutches, canes, wheelchairs, and walkers … .” In 2010, CMS added a second, more restrictive requirement – the patient must also “normal[ly]” be unable “to leave home” even with a wheelchair and any attempt to leave home must also “require a considerable and taxing effort.”  As for documentation requirements, no requirements existed in 2008.  The specific requirements CMS said the agency did not comply with were not created until 2010.

While Caring Hearts was dealt the lemon of defending this case, the opinion yields some potentially valuable lemonade in useful lessons and precedents for the rest of the health care community. First, due to the way the case was argued below, the Tenth Circuit was not presented with a direct Chevron challenge to CMS’ homebound definition or documentation requirements.  While the court took some pains to say that it was not opining on whether the current homebound definition or documentation requirements were consistent with the statute, 42 U.S.C. § 1395f(a)(8), the opinion lays out a roadmap to this challenge.

Second, the court had the unusual opportunity to opine on section of the Social Security Act, 42 U.S.C. § 1395pp. This section creates, according to the Tenth Circuit, “a sort of good faith affirmative defense” that permits payment for claims that are not payable for specific reasons, including for patients who do not qualify as homebound, if the provider did not know, and could not reasonably have been expected to know, that payment would not be made for such items or services. In this case, the agency argued that it could not have been expected to know CMS’ interpretation of the 2008 rules, and therefore, CMS should deem the claims payable under 42 U.S.C. § 1395pp.  The Tenth Circuit agreed with the agency’s argument in vacating the district court decision.

The 42 U.S.C. § 1395pp defense could be a relevant point to make in many cases involving medical necessity or clinical judgment issues that the government has shown interest in pursuing under the False Claims Act other than homebound status, such as hospice eligibility and the appropriateness of inpatient status for a patient under the current “two midnight” rule. For example, in U.S. ex rel. Paradies v. AseraCare, Inc., the court ruled, in considering hospice eligibility, that the difference of opinion in clinical judgment between medical experts alone cannot support a falsity claim under the False Claims Act (FCA). Similarly, a provider’s good faith reliance on a contemporaneous medical opinion of a physician that the patient was homebound or hospice eligible could support finding the claim payable under 42 U.S.C. § 1395pp.  The standard “could not reasonably have been expected to know” appears to be less demanding that the FCA’s “reckless disregard or deliberate ignorance” standard.

However, this case does not lessen the burden the health care industry faces in achieving full compliance with voluminous federal regulatory requirements. The Tenth Circuit noted that “currently about 37,000 separate guidance documents can be found on CMS’s website — and even that doesn’t purport to be a complete inventory.” And this is only one federal program.