Deference for Subjective Clinical Judgment Does Not Extend to Whether Provider Actually Conducted the Tests It Billed For; United States District Court for the Southern District of Texas No. H-12-00480, U.S. ex rel. Michael Sorensen v. Outreach Diagnostic Clinic LLP


The district court granted the government’s motion for summary judgment in a healthcare fraud case, finding that the defendant billed for services it did not provide. While the defendant argued that practitioners disagree about the nature of certain diagnostic tests and therefore it should not be held liable for exercising its subjective clinical judgment, the court explained that this deference does not extend to whether the defendant factually used a certain type of device for patient diagnostic tests and whether it billed accurately for those tests. The court found the defendant intentionally misrepresented the type of diagnostic test it performed, because the actual tests were not separately reimbursable by Medicare.

Michael Sorensen filed a qui tam suit alleging Outreach Diagnostic Clinic intentionally mischaracterized the records they sent to Medicare for payment and violated the False Claims Act. The government intervened and moved for summary judgment.

Outreach Diagnostic Clinic LLP supplies ophthalmological services, and is reimbursed by Medicare for testing its patients for glaucoma. Michael Sorensen is an optometrist who began working for Outreach in 2005. In 2010, Sorensen expressed concern about Outreach’s billing practices, suggesting that the firm was using the wrong code to bill for certain glaucoma tests. According to Sorensen, Outreach actually performed services that were part of routine exams and were not separately reimbursable, but it billed Medicare for a different type of specialized test that is separately reimbursable. Despite telling Sorensen the issue would be addressed, Outreach continued billing for these tests under the incorrect code. Sorensen refused to bill under the code and instructed other employees to do the same. When the issue was not resolved, Sorensen resigned in 2012. This complaint followed.

In considering the government’s motion for summary judgment, the court found that Medicare’s billing instructions clearly identify the various types of glaucoma tests. However, the parties disputed whether the language was ambiguous. The government argued that the billing code used by Outreach was not vague. The billing code refers to “Tonography with interpretation and report, recording indentation tonometer method or perlimbal suction method”, which the government interpreted as referring to one procedure that may be performed by either of two methods. The relator and government alleged that Outreach did not use the method “tonography with interpretation and report,” and therefore should not have billed for this service.

In response, Outreach argued that this billing code provides for three separate types of procedures: (a) tonography with interpretation and report, (b) recording indentation tonometer method, or (c) perlimbal suction method. According to Outreach, because the code includes the words “recording indentation tonometer method,” it was appropriate to bill under the code when checking eye pressure using that method. However, the court found the defendant ignored the plain reading of the code to create the alleged ambiguity.

The court held that Outreach intentionally made false statements to the government to receive Medicare payments it had not earned. Outreach argued it had not, because the code described indentation tonometry and the instrument it used—a Tono-Pen—is an indentation tonometer. Alternatively, Outreach said that it is not liable under the FCA because it performed tonography with the Tono-Pen.

However, the court noted that tonography is the measurement of the aqueous outflow facility of the eye under continuous pressure. In other words, tonography measures the rate fluid leaves the eye as the eye is pressed. By contrast, tonometry is the measurement of intraocular pressure. The government provided scientific evidence supporting the substantive differences between the two procedures and the technology used to perform them. In short, the tool used for tonography is distinct from the tool used by Outreach.

Outreach argued that the difference was semantic and that practitioners disagree whether the Tono-Pen performs tonography. According to the defendant, because of this controversy, it should not be held liable for an error in its claims. Outreach cited cases holding that an FCA claim arising from a physician’s exercise of judgment must be predicated on objectively verifiable facts that are at odds with that judgment.

However, the court found those cases unavailing, because they addressed differences in physicians’ opinions in the exercise of subjective clinical judgment in patient prognosis. For example, whether a patient should be diagnosed with glaucoma is within an ophthalmologist’s subjective clinical judgment. By contrast, it is objectively verifiable whether a Tono-Pen is an indentation tonometer that performs tonography by measuring the aqueous outflow facility of the eye. The government’s expert witness credibly testified that it was not.

The court held that, at minimum, Outreach’s billing practices were reckless. The court found the company did not make a genuine inquiry into whether the Tono-Pen performed tonography, and persisted in using the code despite Sorensen’s repeated objections. The company also feigned compliance by manually plotting eye pressure measurements on a graph. They also ignored opinions from the American Optometric Association, American Academy of Ophthalmology, and the Review of Ophthalmology. In sum, Outreach acted with reckless disregard for whether the code accurately represented the service they were using.

The court also found this misrepresentation material to the receipt of payments, as Medicare’s billing system treats these types of tests differently. Tonometry is part of an intermediate or comprehensive service, while tonography is billed separately as a special service. In other words, tonometry is not separately reimbursable. By billing tonometry as tonography, Outreach caused the government to pay money it did not owe.

The court found Outreach caused the government to pay $807,450 for 14,450 instances of tonography services that were not provided. Accordingly, the court granted the government’s motion for summary judgment.