Federal Court Dismisses Care Alternatives Hospice Fraud Case

A federal court has dropped a False Claims Act (FCA) case against hospice provider Care Alternatives that has been working its way through the legal system for 16 years.

The U.S. Department of Justice (DOJ) and four whistleblowers in 2008 filed the qui tam lawsuit against Care Alternatives Inc., doing business as Ascend Health. In a qui tam action, a whistleblower, called a “relator” by the courts, files a False Claims Act suit on behalf of the government and possibly receives a portion of any funds recovered by the government via the lawsuit, typically ranging from 15% to 25%.

The suit, which alleged that Care Alternatives enrolled patients in hospice who were not eligible, was dismissed with prejudice for the plaintiffs and without prejudice for the government. This means that the four whistleblower plaintiffs cannot refile a similar complaint, but the government can.


“Relator filed a Joint Stipulation of Dismissal of this action without prejudice to the United States,” a court motion filed by the U.S. Justice Department indicated. “Pursuant to the False Claims Act, 31 U.S.C. § 3730(b)(1), the United States hereby notifies the court that the Attorney General consents to the dismissal of this action without prejudice to the rights of the United States.”

The motion did not indicate the reason for the dismissal. Bloomberg Law first reported the news.

The case has taken a circuitous course through the legal system, including a petition to the U.S. Supreme Court, which opted not to hear the case.


A key question in the suit has been the establishment of materiality. “Materiality” generally means a misstatement or misrepresentation could have influenced Medicare’s decision to pay or deny the claim.

A Sept. 2023 ruling by the third circuit U.S. Court of Appeals indicated that incomplete or inaccurate medical records, including documentation errors, may establish materiality in an FCA litigation. That decision followed several years of various courts overturning each other’s rulings, and the Supreme Court’s refusal to hear the case.

“Insofar as compliance with [documentation requirements] cannot be divorced from issues surrounding substantive eligibility, a jury might consider that reality in assessing materiality,” appellate judges wrote in their decision. “For purposes of appellate review, we acknowledge that some of [ U.S. Supreme Court precedent Universal Health Services v. United States, ex rel. Escobar’s] factors ‘could support a materiality finding’ not because the evidence definitively points towards materiality — it does not — but because on this record, a reasonable jury could conclude that Care Alternatives’ alleged violations were material.”

“Escobar” was an FCA case in which the U.S. Supreme Court ruled in favor of the plaintiff in 2016. This appellate court decision was the most recent court action prior to the dismissal, but whether the materiality issue played a role in the lawsuit’s conclusion remains unknown.

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