PRECEDENTIAL 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

__________ 

No. 22-1035 

__________ 

UNITED STATES OF AMERICA and STATE OF NEW 

JERSEY ex rel 

VICTORIA DRUDING; BARBARA BAIN; LINDA 

COLEMAN; RONNI O'BRIEN 

v. 

CARE ALTERNATIVES 

 Victoria Druding, Barbara Bain, Linda Coleman, and 

Ronni O'Brien, 

 Appellants 

__________ 

On Appeal from the United States District Court 

for the District of New Jersey 

(District Court No. 1-08-cv-02126) 

Honorable Juan R. Sanchez, Chief District Judge 

__________ 

Argued on April 25, 2023 

Before: KRAUSE, BIBAS, and RENDELL, Circuit Judges

(Filed: August 25, 2023) 

Ross Begelman [ARGUED] 

Marc M. Orlow 

Begelman Orlow & Melletz 

411 Route 70 East 

Suite 245 

Cherry Hill, NJ 08034 

 Counsel for Appellants 
2 

Amanda Mundell [ARGUED] 

United States Department of Justice 

Civil Division 

7236 

950 Pennsylvania Avenue NW 

Washington, DC 20530 

Charles W. Scarborough 

United States Department of Justice 

Appellate Section 

Room 7244 

950 Pennsylvania Avenue NW 

Washington, DC 20530 

Counsel for Amicus Curiae United States of 

America, in Support of Appellants 

Jacklyn DeMar 

Taxpayers Against Fraud 

1220 19th Street NW 

Suite 501 

Washington, DC 20036 

 

Counsel for Amicus Curiae Taxpayers Against 

Fraud Education Fund, in Support of 

Appellants 

Jeffrey S. Bucholtz [ARGUED] 

King & Spalding 

1700 Pennsylvania Avenue NW 

Suite 900 

Washington, DC 20006 

Craig Carpenito 

King & Spalding 

1185 Avenue of the Americas 

New York, NY 10036 

William H. Jordan 

Jason Popp 

Alston & Bird 

1201 W Peachtree Street 
3 

One Atlantic Center, Suite 4900 

Atlanta, GA 30309 

Steven L. Penaro 

Alston & Bird 

90 Park Avenue 

12th Floor 

New York, NY 10016 

 Counsel for Appellee 

John P. Elwood 

Arnold & Porter Kaye Scholer 

601 Massachusetts Avenue NW 

Suite 1121 

Washington, DC 20001 

Counsel for Amici Curiae Chamber of 

Commerce of the United States of America and 

Pharmaceutical Research and Manufacturers of 

America, in Support of Appellee

__________ 

OPINION OF THE COURT 

__________ 

KRAUSE, Circuit Judge. 

The False Claims Act (“FCA”), 31 U.S.C. § 3729, et 

seq., is a flexible, far-reaching tool that empowers the federal 

government and private individuals acting in the government’s 

name, known as relators, to bring claims for fraud against the 

United States. At the same time, it is not “an all-purpose 

antifraud statute or a vehicle for punishing garden-variety 

breaches of contract or regulatory violations.” Universal 

Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 

176, 194 (2016). So when a government contractor submits a 

claim for payment but fails to disclose a statutory, regulatory, 

or contractual violation, that claim does not automatically 

trigger FCA liability. Instead, the Act requires that the 

contractor’s alleged violation be, among other things, 

“material” to the government’s decision to pay. Id. at 192-93. 
4 

And in Escobar, the Supreme Court identified various factors 

to assist courts in evaluating materiality. 

In this case, the District Court granted summary 

judgment to the Defendant, Care Alternatives, Inc. (“Care 

Alternatives”), a New Jersey hospice provider, for lack of 

materiality based principally on the government’s continued 

reimbursement of Care Alternatives even after being made 

aware of its deficient documentation required by regulation. 

Because the District Court assigned dispositive weight to a 

single Escobar factor, government action, while overlooking 

the factors that could have weighed in favor of materiality—

and despite an open dispute over the government’s “actual 

knowledge,” 579 U.S. at 195—we will vacate the District 

Court’s grant of summary judgment and remand for further 

proceedings consistent with this opinion. 

I. Background 

Defendant Care Alternatives is a for-profit hospice 

provider that operates in New Jersey. It employs teams of 

clinicians known as “Interdisciplinary Teams” (“IDTs”), 

consisting of registered nurses, chaplains, social workers, 

home health aides, and therapists. JA 6. These groups work 

alongside independent physicians who serve as hospice 

medical directors. The IDTs meet regularly to review patient 

care plans and discuss patients who are up for recertification of 

their need for hospice care. 

The Relator-Appellants (“Relators”) are former 

employees of Care Alternatives, some of whom were clinicians 

who participated in IDTs. They brought this action under the 

False Claims Act alleging that Care Alternatives submitted 

claims for Medicare reimbursement despite inadequate 

documentation in the patients’ medical records supporting 

hospice eligibility, as required by 42 C.F.R. § 418.22(b)(2) 

(2011). 

Before reviewing the specifics of Relators’ claims and 

the circumstances leading to this appeal, we will review the 

requirements that hospice providers must meet to qualify for 

Medicare reimbursement and the False Claims Act. 
5 

A. Medicare Hospice Benefit 

In 1982, Congress created the Medicare Hospice 

Benefit, an amendment to the Social Security Act that 

authorized Medicare beneficiaries to receive coverage for 

hospice care. See Tax Equity and Fiscal Responsibility Act of 

1982, Pub. L. No. 97-248, § 122, 96 Stat. 324, 356-63. 

Hospice care is considered palliative care, meaning it is 

“patient and family-centered care that optimizes quality of life 

by anticipating, preventing, and treating suffering.” 42 C.F.R. 

§ 418.3 (2021). It aims to “mak[e] [a terminally ill] individual 

as physically and emotionally comfortable as possible.” 48 

Fed. Reg. 56,008, 56,008 (Dec. 16, 1983). A patient who has 

been certified as eligible for hospice care and elects to receive 

the Hospice Benefit waives the right to Medicare payment for 

“curative” care that is designed to treat the individual’s 

condition. See 42 U.S.C. § 1395d(d)(2)(A)(ii). 

For a patient to be eligible for Medicare hospice 

benefits, and for a hospice provider to be entitled to bill for 

such benefits, a patient must be certified as “terminally ill,” see

42 C.F.R. §§ 418.20, meaning “that the individual has a 

medical prognosis that his or her life expectancy is 6 months 

or less if the illness runs its normal course,” id. § 418.3. There 

are two principal components of that certification: it must (1) 

be signed by at least one physician, and (2) be accompanied by 

“[c]linical information and other documentation that support 

the medical prognosis” of terminal illness in the medical 

record. Id. § 418.22(b). 

To satisfy the first component, physician certification, 

an individual’s “attending physician” and the hospice’s 

“medical director” must “certify in writing . . . that the 

individual is terminally ill . . . based on the physician’s or 

medical director’s clinical judgment regarding the normal 

course of the individual’s illness.” 42 U.S.C. 

§ 1395f(a)(7)(A)(i). This certification must be obtained at the 

time a patient is admitted to hospice, id., and renewed at ninety 

days and every sixty days thereafter, id. at § 1395f(a)(7)(A)(ii). 

To satisfy the second component, medical 

documentation, “[c]linical information and other 

documentation that support the medical prognosis must 
6 

accompany the certification and must be filed in the [patient’s] 

medical record with the written certification.” 42 C.F.R. § 

418.22(b)(2); see also id. § 418.22(b)(3) (requiring 

certification to include a “brief narrative explanation of the 

clinical findings that support[] a life expectancy of 6 months or 

less”). As the Center for Medicare and Medicaid Services 

(“CMS”), the agency that administers the Hospice Benefit, has 

explained: “A hospice needs to be certain that [a] physician’s 

clinical judgment can be supported by clinical information and 

other documentation that provide a basis for the certification of 

6 months or less if the illness runs its normal course. A signed 

certification, absent a medically sound basis that supports the 

clinical judgment, is not sufficient for application of the 

hospice benefit[.]” 70 Fed. Reg. 70,532, 70,534-35 (Nov. 22, 

2005). 

B. False Claims Act

The False Claims Act “imposes significant penalties on 

those who defraud the Government.” Escobar, 579 U.S. at 

180. The Act makes liable “any person who . . . knowingly 

presents, or causes to be presented, a false or fraudulent claim 

for payment or approval” to the government. 31 U.S.C. § 

3729(a)(1)(A). 

The government may bring FCA actions directly. Id.

§ 3730(a). Alternatively, as happened in this case, “a private 

person, known as a relator, may bring a qui tam civil action” in 

the government’s name. Cochise Consultancy, Inc. v. United 

States ex rel. Hunt, 139 S. Ct. 1507, 1510 (2019); see also 31 

U.S.C. § 3730(b). In such cases, the government may 

“intervene in the action” after investigating the relator’s 

allegations. Cochise Consultancy, Inc., 139 S. Ct. at 1510 

(citations omitted). If, as here, the government declines to 

intervene, the relator may still “pursue the action.” Id. (citation 

omitted). The relator is entitled to “a share,” generally between 

15 and 30 percent, “of any proceeds from the action.” Id. 

(citations omitted). 

To prevail on an FCA claim, the relator must prove that 

the defendant (1) made a false statement, (2) with scienter, (3) 

that was material, (4) causing the government to make a 

payment. Escobar, 579 U.S. at 181-82; United States ex rel 
7 

Petratos v. Genetech Inc., 855 F.3d 481, 487 (3d Cir. 2017) 

(citations omitted). “Materiality,” the Court explained in 

Escobar, turns on a variety of factors such as: (1) whether the 

government has expressly designated the legal requirement at 

issue as a “condition of payment”; (2) whether the alleged 

violation is “minor or insubstantial” or instead goes to the 

“essence of the bargain” between the contractor and the 

government; and (3) whether the government made continued 

payments, or does so in the “mine run of cases,” despite “actual 

knowledge” of the violation. See 579 U.S. at 193 n.5, 194-95 

(quotation and citations omitted). As this Court and our sister 

circuits have repeatedly recognized, this is a “holistic,” 

totality-of-the-circumstances inquiry.1

 

C. Factual and Procedural History 

1 See, e.g., United States ex rel. Int’l Bhd. of Elec. 

Workers Loc. Union No. 98 v. Farfield Co., 5 F.4th 315, 342 

(3d Cir. 2021) (“A materiality inquiry under the FCA is a 

holistic, totality-of-the-circumstances examination[.]”); 

United States ex rel. Lemon v. Nurses To Go, Inc., 924 F.3d 

155, 161 (5th Cir. 2019) (“No one factor is dispositive, and our 

inquiry is holistic.”); United States ex rel. Foreman v. AECOM, 

19 F.4th 85, 110 (2d Cir. 2021), cert. denied, 142 S. Ct. 2679 

(2022) (same (quoting Lemon, 924 F.3d at 161)); United States 

ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 

F.3d 822, 831 (6th Cir. 2018) (“The analysis of materiality is 

holistic . . . None of these considerations is dispositive alone, 

nor is the list exclusive.”) (quotations and internal quotation 

marks omitted); United States ex rel. Escobar v. Universal 

Health Servs., Inc., 842 F.3d 103, 109 (1st Cir. 2016); United 

States ex rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 906 

(9th Cir. 2017) (citation omitted); United States ex rel. 

Sorenson v. Wadsworth Bros. Constr. Co., 48 F.4th 1146, 1157 

(10th Cir. 2022) (citation omitted); United States ex rel. 

Janssen v. Lawrence Mem’l Hosp., 949 F.3d 533, 541 (10th 

Cir. 2020); Yates v. Pinellas Hematology & Oncology, P.A., 21 

F.4th 1288, 1300 (11th Cir. 2021) (citation omitted); United 

States ex rel. Bibby v. Mortg. Invs. Corp., 987 F.3d 1340, 1347 

(11th Cir. 2021). 
8 

Relators brought this suit under the qui tam provision of 

the FCA. Pursuant to that provision, they filed their Complaint 

under seal in 2008 and provided the government with the 

information upon which they intended to rely so that the 

government could make an informed decision as to whether it 

would intervene and take over the case. 31 U.S.C. 

§ 3730(b)(2).2

 They alleged that Care Alternatives submitted 

fraudulent reimbursement claims to CMS between 2006 and 

2007, in violation of the FCA. Their theory is that although 

each claim had a physician certification of terminal illness, 

there was inadequate clinical documentation supporting that 

diagnosis, in violation of 42 C.F.R. § 418.22(b)(2). According 

to Relators, § 418.22(b)(2) is the “cornerstone” of the 

Medicare Hospice Benefit because without sufficient clinical 

documentation supporting a physician’s certification, there is 

no way “to ensure that the [physician’s] certification is 

accurate,” and thus, that hospice care goes to its intended 

beneficiaries. Reply Br. 12, 15. 

In 2015, seven years after the Complaint was filed, the 

government notified the District Court that it would not 

intervene but that it nevertheless wished to remain an interested 

party in the proceedings. Relators opted to proceed 

independently and served the operative First Amended 

Complaint upon Care Alternatives.3

During discovery, the parties produced extensive 

evidence addressing whether Care Alternatives admitted 

patients with insufficiently documented need for hospice care. 

This included dueling expert opinions. Relators’ expert, Dr. 

Robert Jayes, M.D., prepared a report as to whether the 

2

 As discussed below, the Department of Health and 

Human Services, Office of the Inspector General (“HHSOIG”) also issued a subpoena in November 2009 for the 

medical records of 112 patients and a variety of corporate 

policies, internal documents, and employee emails. 

3

 Care Alternatives moved to dismiss, and the Court 

granted the motion in part, dismissing Relators’ claims 

regarding altered documentation and violations of the federal 

Anti-Kickback statute, but not Relators’ FCA claims regarding 

inappropriate hospice certifications, which are now before us. 
9 

physician certifications were accompanied by supporting 

documentation. He examined the records of forty-seven 

patients and opined that the documents did not support hospice 

eligibility in thirty-five percent of those patients’ hospice 

certification periods. In his view, any reasonable physician 

would have reached the same conclusion. 

Care Alternatives’ expert, Dr. Christopher Hughes, 

M.D., disagreed. For each certification that Dr. Jayes 

reviewed, Dr. Hughes opined that a physician could have 

reasonably determined that the prognosis for each patient was 

six months or less. 

Discovery also included the depositions of several 

former Care Alternatives employees, including Relators, who 

testified to whether Care Alternatives admitted or recertified 

patients who did not have a documented need for hospice care 

and to Care Alternatives’ awareness of these alleged 

violations.4

 In addition, Relators produced an expert report 

prepared by Al Palentchar, a Certified Public Accountant, who 

calculated, based on Dr. Jayes’ schedule of inadequately 

documented patient billings, that Care Alternatives had 

improperly charged over $3.6 million to Medicare. 

At the close of discovery, Care Alternatives moved for 

summary judgment, arguing that Relators could not make out 

the elements of an FCA claim. In the ruling that gave rise to 

the first appeal in this case, the District Court granted that 

motion based solely on failure to show falsity. Druding v. Care 

Alts., Inc., 346 F. Supp. 3d 669, 685, 688 (D.N.J. 2018). It 

viewed the mere “difference of opinion” between experts 

regarding the accuracy of a patient’s prognosis as insufficient 

to create a triable dispute of fact as to the element of falsity. 

Id. at 688 (citation omitted). It therefore concluded that: “there 

[wa]s no factual evidence” that certifying doctors made 

“knowingly false” certifications. Id. We reversed, explaining 

that “FCA falsity simply asks whether the claim submitted to 

the government as reimbursable was in fact reimbursable, 

based on the conditions for payment set by the government.” 

United States ex rel. Druding v. Care Alts., Inc., 952 F.3d 89, 

4

 Their testimony is summarized infra Section III.B.1. 
10 

97 (3d Cir. 2020) (citations omitted). So the District Court 

should have considered evidence (such as Dr. Jayes’ report) 

that was relevant to whether Care Alternatives complied with 

regulatory requirements, including that the physician’s 

certification be accompanied by “‘[c]linical information and 

other documentation that support the medical prognosis [of 

terminal illness].’” Id. (quoting 42 C.F.R. § 418.22(b)(2)). 

Because there was substantial evidence of Care Alternatives’ 

noncompliance with this requirement, we held summary 

judgment on falsity to be improper and remanded for the 

District Court’s disposition of the other issues raised on 

summary judgment: scienter, causation, and materiality. Id. at 

101. 

On remand, the District Court found sufficient evidence 

of scienter,5

 but granted summary judgment based on lack of 

materiality and, a fortiori, causation. Specifically, it found “no 

evidence” that Care Alternatives’ “insufficiently documented 

certifications . . . were material to the Government’s decision 

to pay.” JA 16. Its reasoning was that “[t]he Government 

could see what was or was not submitted to it by Care 

Alternatives along with its claims seeking payment” yet never 

“refused any of Care Alternatives’ claims, despite the 

inadequacy or missing supporting documentation or where 

compliance with 42 C.F.R. § 418.22 was otherwise lacking.” 

Id. at 17. And it faulted Relators for failing to present evidence 

that “the Government’s apparent disregard of the inadequacies 

in Care Alternatives’ billing documentation was not the result 

of its having concluded those inadequacies were immaterial to 

its decision to make those payments anyway,” or that “the 

Government ever stopped reimbursing Care Alternatives after 

it was made aware of the false, inadequately supported 

physician certifications.” Id. As a result, it concluded: 

“Relators have failed to create a genuine factual dispute as to 

the issue of materiality[.]” Id. at 18. 

5

 On that point, it concluded: “[t]he [] evidence clearly 

reflects knowledge on Care Alternatives’ part that its medical 

documentation did not always support the physician-signed 

certifications of hospice necessity and thus did not always 

comply with the Medicare/Medicaid regulations governing 

payment.” JA 14. 
11 

This appeal followed. 

II. Jurisdiction and Standard of Review 

We have jurisdiction based on 28 U.S.C. § 1291. The 

District Court had jurisdiction under 28 U.S.C. § 1331. 

We exercise plenary review of a district court’s grant of 

summary judgment. Reedy v. Evanson, 615 F.3d 197, 210 (3d 

Cir. 2010) (citation omitted). Summary judgment is 

appropriate “if the movant shows that there is no genuine 

dispute as to any material fact and the movant is entitled to 

judgment as a matter of law.” Thomas v. Cumberland Cnty., 

749 F.3d 217, 222 (3d Cir. 2014) (quoting Fed. R. Civ. P. 

56(a)) (internal quotation marks omitted). When deciding a 

motion for summary judgment, “[a]ll reasonable inferences 

from the record must be drawn in favor of the nonmoving 

party” and the court “may not weigh the evidence or assess 

credibility.” MBIA Ins. Corp. v. Royal Indem. Co., 426 F.3d 

204, 209 (3d Cir. 2005). 

III. Discussion 

Relators contend that summary judgment was 

premature because a reasonable jury could have concluded that 

Care Alternatives’ submission of hospice reimbursement 

claims for patients with insufficiently documented need for 

hospice care was a “material” violation under the FCA. In 

Relators’ view, Escobar’s first and second factors—whether 

the legal requirement is a “condition of payment,” and whether 

the alleged violations were “[]substantial,” respectively—

weigh in favor of materiality, while Escobar’s third factor—

government action—is neutral. See 579 U.S. at 193 n.5, 194-

95. We consider these factors below. 

A. Whether 42 C.F.R. § 418.22(b)(2) Was an 

Express Condition of Payment 

The first factor that Escobar identifies as relevant to 

materiality is whether the government “expressly identif[ied] a 

provision as a condition of payment.” Id. at 194. 
12 

Here, it is undisputed that § 418.22(b)(2)’s 

documentation requirement is a condition of payment. Per 

CMS regulation, hospice providers may not bill CMS for their 

services without “[c]linical information and other 

documentation that support the medical prognosis 

[accompanying] the certification and [] filed in the medical 

record.” 42 C.F.R. § 418.22(b)(2). 

The question for us is what import to assign this 

designation. To that end, we are guided by Escobar, which 

indicates “[w]hether a provision is labeled a condition of 

payment is relevant to but not dispositive of the materiality 

inquiry.” 579 U.S. at 190. It is relevant because the 

government’s decision to expressly designate a provision as a 

condition of payment may “signal[] the importance” of that 

provision. Id. at 191. But it is not dispositive, because the mere 

fact that the government has the “option to decline to pay if it 

knew of the defendant’s noncompliance,” id. at 194, does not 

mean that the government is likely to exercise that option, or 

that it routinely does so, see id. at 193 (“Under any 

understanding of the concept, materiality [l]ooks to the effect 

on the likely or actual behavior of the recipient of the alleged 

misrepresentation.”) (quotation and internal quotation marks 

omitted). Thus, for example, “[i]f the Government contracts 

for health services and adds a requirement that contractors buy 

American-made staplers,” a contractor who “submits a claim 

for those services but fails to disclose its use of foreign 

staplers” does not commit a material violation if the 

government routinely pays such claims. Id. at 195. 

Equipped with this guidance, we conclude that the mere 

fact that § 418.22(b)(2) is identified as a condition of payment 

does not, in and of itself, support a finding of materiality; and 

thus, this designation does not necessarily preclude summary 

judgment. See id. at 194 (“Nor is it sufficient for a finding of 

materiality that the Government would have the option to 

decline to pay if it knew of the defendant’s noncompliance”). 

However, it is “‘certainly probative evidence of materiality.’” 

United States ex rel. Lemon v. Nurses To Go, Inc., 924 F.3d 

155, 161 (5th Cir. 2019) (quoting United States ex rel. Rose v. 

Stephens Inst., 909 F.3d 1012, 1020 (9th Cir. 2018)). And here, 

Relators have adduced evidence that bears on the importance 

of § 418.22(b)(2)’s documentation requirement and the 
13 

substantiality of Care Alternatives’ alleged violations.6

 Under 

these circumstances, a jury should have been permitted to 

weigh § 418.22(b)(2)’s condition of payment status alongside 

Escobar’s other factors. 

B. Whether Care Alternatives’ Alleged Violations 

of 42 C.F.R. § 418.22(b)(2) Were “Minor or 

Insubstantial” or Instead Went to the “Essence 

of the Bargain” 

Escobar’s second factor asks whether the 

“noncompliance is minor or insubstantial,” 579 U.S. at 194, or 

instead went to “the very essence of the bargain” between the 

contractor and the government, id. at 193 n.5 (quotation 

omitted). Care Alternatives argues that its purported violations 

of 42 C.F.R. § 418.22(b)(2) are insignificant because “[e]very 

patient” who is “part of this lawsuit[] had a certification of 

hospice eligibility, signed by an appropriate physician . . . and 

[n]o one is disputing that the staff at Care Alternatives 

provided good, compassionate care.” Answering Br. 32-33 

(quotation omitted). But the physicians’ signatures and the 

overall quality of care provided by Care Alternatives is neither 

here nor there. Instead, Escobar spotlights whether the 

contractor’s alleged violations are “minor or insubstantial.” 

6 Cf. Farfield, 5 F.4th at 344-46 (affirming denial of 

summary judgment where Davis-Beacon Act payroll 

requirement was condition of payment, which “support[ed] the 

District Court’s materiality finding” along with a lack of 

“evidence of past relevant Government (in)action”; and 

evidence showing that compliance was “essential to the 

bargain”); Bibby, 987 F.3d at 1352 (reversing summary 

judgment where “both the requirement’s designation as a 

condition of payment and its centrality to the government 

program favor materiality” despite “countervailing evidence of 

the VA’s knowledge and its reaction to noncompliance” 

because “[t]o resolve the issue by weighing conflicting 

evidence was error”) (citation omitted); United States ex rel. 

Miller v. Weston Educ., Inc., 840 F.3d 494, 504 (8th Cir. 2016) 

(reversing summary judgment where “conditioning [of 

payment], the significance of the requirement[,] and the 

government’s acts show that the recordkeeping promise was 

material”). 
14 

579 U.S. at 194. And here, those alleged violations are Care 

Alternatives’ certifications of patients with insufficient clinical 

documentation to support a terminal diagnosis, as required by 

§ 418.22(b)(2). So we will examine the importance of 

§ 418.22(b)(2) and the magnitude of Care Alternatives’ alleged 

violations. 

1. Significance of 42 C.F.R. § 418.22(b)(2)

CMS has made clear that “[a] signed certification, 

absent a medically sound basis that supports the clinical 

judgment, is not sufficient for application of the hospice 

benefit.” 70 Fed. Reg. at 70,534-35. Why? Because “[a] 

hospice needs to be certain that [a] physician’s clinical 

judgment can be supported by clinical information and other 

documentation that provide a basis for the certification of 6 

months or less if the illness runs its normal course.” Id. at 

70,534 (emphasis added). Put differently, CMS never meant 

to give physicians unchecked authority to certify patients as 

hospice eligible. So § 418.22(b)(2)’s requirement that 

physicians’ signed certifications be supported by the patients’ 

medical records is an essential form of oversight. 

More fundamentally, § 418.22(b)(2) protects the public 

fisc and the overall integrity of the Medicare hospice program. 

By requiring that “clinical information . . . support” a 

terminally ill prognosis, § 418.22(b)(2) helps ensure that 

hospice care goes to those who actually need it and protects 

Medicare funds from wrongfully claimed payments. See 

Lemon, 924 F.3d at 163 (finding it “apparent” that “false 

terminally-ill certifications may lead the government to make 

a payment which it would not otherwise have made” (quotation 

omitted)).7

 Conversely, it ensures that patients who are not 

terminally ill do not receive hospice benefits, and therefore, 

that they remain eligible for curative care. See 42 U.S.C. 

§ 1395d(d)(2)(A)(ii). 

7 See also Report of Dr. Robert L. Jayes 1, United States 

ex rel. Druding v. Care Alternatives, No. 1:08-cv-02126 

(D.N.J. 2021), ECF No. 135-6, Ex. 19 (Part I) (“Jayes Report”)

(highlighting “the possibility of fraud in the Medicare Hospice 

Program”). 
15 

In sum, § 418.22(b)(2)’s documentation requirement 

“addresse[s] a foundational part of the Government’s” 

Medicare hospice program, and thus, “false certifications 

simply [are] not ‘minor or insubstantial’ violations.” United 

States v. Luce, 873 F.3d 999, 1007 (7th Cir. 2017) (quoting 

Escobar, 579 U.S. at 194).8

2. Severity of Care Alternatives’ Alleged 

Violations

Nor is § 418.22(b)(2) significant only in the abstract. 

Relators have put forward ample evidence that Care 

Alternatives’ actual violations of § 418.22(b)(2) were not 

“minor or insubstantial.” Escobar, 579 U.S. at 194. That 

evidence, “viewed in the light most favorable to [Relators],” 

Reedy, 615 F.3d at 209 (quotation omitted), shows that (1) Care 

Alternatives’ documentation deficiencies were pervasive; (2) 

Care Alternatives was aware of the gravity of its 

noncompliance; and (3) Care Alternatives’ patients were 

potentially ineligible, as a medical matter, for hospice care. 

Beginning with the scope of Care Alternatives’ alleged 

violations, this is not a case about occasional noncompliance. 

Rather, as the District Court found, “there is [] significant 

evidence in the record . . . that Care Alternatives had 

longstanding problems with maintaining necessary and proper 

documentation.” JA 11. In addition to Relators’ expert, Dr. 

Jayes, who opined that forty-five percent of the files he 

reviewed did not support hospice eligibility, Druding v. Care 

Alternatives, Inc., No. 08-2126, 2021 WL 5923883, at *3 

(D.N.J. Dec. 15, 2021), Care Alternatives’ former CEO Sam 

Veltri observed that “‘it was a constant, constant fight to make 

sure the documentation was good,’ i.e. that it was ‘accurate,’ 

‘clinical, ‘made sense,’ and ‘made its way to the charts,’” id. at 

*4. Indeed, as a 2007 internal audit revealed, Care 

Alternatives’ “maintenance of the clinical records [wa]s below 

standard,” due to, inter alia, “documentation issues and 

information missing that is required for reimbursement, 

8 See also Bibby, 987 F.3d at 1348 (considering the 

“centrality” of compliance with a particular government 

regulation to the overall “goal” of the program) (quotation 

omitted); Escobar, 842 F.3d at 110 (same). 
16 

regulatory and accrediting standards.” JA 2110. The 

percentage of randomly audited charts containing all necessary 

data in 2007 was only 56.5% in the first quarter, 53.9% in the 

second quarter, 54.1% in the third quarter, and 43.6% in the 

fourth quarter. Id. at 13. In view of this evidence, a reasonable 

jury could find that Care Alternatives’ violations were not just 

isolated incidents but were part of a pattern of significant 

noncompliance. Cf. United States ex rel. Int’l Bhd. of Elec. 

Workers Loc. Union No. 98 v. Farfield Co., 5 F.4th 315, 347 

(3d Cir. 2021) (contractor’s misclassifications of more than 

$150,000, over the course of two years, on 105 separate 

occasions “were not minor or insubstantial”). 

Care Alternatives’ leadership also clearly understood 

the importance of § 418.22(b)(2) compliance, which could 

further support a materiality finding. See id. at 345 (“Farfield’s 

clear appreciation that Davis-Beacon violations would ‘likely’ 

so affect the ‘behavior of the recipient of the alleged 

misrepresentation’” weighed in favor of materiality (quoting 

Escobar, 579 U.S. at 193)). For instance, Loretta Spoltore, a 

Care Alternatives administrator, testified that her “goal was [] 

to be a hundred percent compliant” because she “do[es]n’t look 

good in stripes.” JA 1682. Likewise, Martha Coppola, a Care 

Alternatives compliance officer, testified that “if you were 

surveyed” by CMS and the requisite chart documentation “was 

not there, it doesn’t matter if [staff members] were on their way 

up the turnpike to bring it, it wasn’t there, and that was a 

problem.” Id. at 292. And Veltri testified that he brought in 

an outside consultant, Toni Swick, to train employees on CMS 

documentation requirements. 

This is also not a case where it is beyond dispute that 

the patients were, in fact, terminally ill. To be sure, Relators 

do not proceed under the theory that the physicians’ 

certifications of terminal illness were medically unreasonable. 

Their theory is that there was inadequate documentation 

supporting those certifications in the patients’ records—which 

could reflect either poor recordkeeping or lack of terminal 

illness (or both). Nor do Relators allege bad faith on the part 

of any of the certifying physicians. But they posit, and we 
17 

agree, that patients’ terminal prognoses cannot be verified 

without adequate documentation.9

 

In this case, the uncertainty is hardly academic. For 

instance, Dr. Jayes’ report discusses times when “[c]linical 

evidence contradict[ed] [the] hospice diagnosis,” Jayes Report 

5, and when “[s]ervices continu[ed] despite patient 

stabilization or clarification of erroneous admission 

information so that [the] patient no longer ha[d] a six month 

prognosis,” id. at 6. The testimony of certain employees also 

raises doubts about patients’ substantive eligibility, as Relators 

summarize. Some employees “testified that the medical 

records could not have supported hospice eligibility because 

these patients did not have the signs and symptoms that would 

meet the criteria necessary [to] make them eligible for 

hospice”; others testified that “they were directed by Care 

Alternatives to alter medical records, or to re-write medical 

records, in order to ‘paint a picture’ that the patients were 

actually hospice eligible.” Opening Br. 13 (collecting 

testimony). Even Veltri, although he averred that he “[n]ever” 

sought to bring in patients who were inappropriate for hospice, 

JA 2205-06, expressed the view that a hospice “lives and dies 

as a company . . . on its census” and thus, “[i]t is imperative 

that we constantly, constantly get new patients in,” id. at 1601. 

Whether this testimony should be credited is outside our 

purview. MBIA Ins. Corp.., 426 F.3d at 209. But the point is 

this: a reasonable jury could conclude, based on the evidence 

9

 That uncertainty distinguishes this case from United 

States ex rel. Spay v. CVS Caremark Corp., which involved an 

FCA suit against a CVS pharmacy that filled in “dummy 

Prescriber IDs” on CMS reimbursement forms in lieu of 

patients’ actual physicians’ IDs. 875 F.3d 746, 750-51 (3d Cir. 

2017). In Spay, there was no question that “[t]he claims 

themselves were neither false nor fraudulent” and that CMS 

accepted this “workaround” as a “technical, formulaic way of 

preventing a computer program from denying legitimate 

claims.” Id. at 765. So we upheld the District Court’s grant of 

summary judgment for CVS based on, inter alia, lack of 

materiality. Id. 
18 

presented, that Care Alternatives’ alleged violations of 42 

C.F.R. § 418.22(b)(2) were not isolated instances of 

incomplete notes or misplaced documents—that is, “minor or 

insubstantial” violations—but rather, that Care Alternatives’ 

violations went to the “essence of the bargain”: patients’ 

medical need for hospice care.10 Escobar, 579 U.S. at 193 n.5, 

194 (quotation omitted). 

For all of these reasons, Escobar’s substantiality factor 

could support a materiality finding.11 

C. Whether the Government’s Actions in the Wake 

of Relators’ Fraud Allegations Disprove 

Materiality 

That leaves us with Escobar’s third factor, government 

action. As the Supreme Court explained: 

[I]f the Government pays a particular claim in full 

despite its actual knowledge that certain requirements 

were violated, that is very strong evidence that those 

requirements are not material. Or, if the Government 

regularly pays a particular type of claim in full despite 

actual knowledge that certain requirements were 

violated, and has signaled no change in position, that is 

strong evidence that the requirements are not material. 

579 U.S. at 195. 

10 We emphasize that this is not a medical malpractice 

case, as Appellants candidly acknowledged during oral 

argument. See Oral Arg. Tr. 82:22-86:22. But insofar as 

compliance with § 418.22(b)(2)’s documentation requirement 

cannot be divorced from issues surrounding substantive 

eligibility, a jury might consider that reality in assessing 

materiality. 

11 For purposes of appellate review, we acknowledge 

that some of 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. 
19 

The District Court concluded based solely on this factor 

that Care Alternatives’ alleged violations were, as a matter of 

law, immaterial. Specifically, it reasoned: (1) the government 

continually reimbursed Care Alternatives despite knowledge 

of the inadequacies in its documentation, and (2) Relators 

produced “no evidence” explaining away “the Government’s 

apparent disregard” of those inadequacies, which the District 

Court surmised was their burden on a motion for summary 

judgment. JA 16-17. 

We perceive two errors with this approach, addressed 

below seriatim. 

1. The Government’s Alleged Knowledge

The District Court seemed to impute “actual 

knowledge” of Care Alternatives’ inadequate documentation 

to the government based on the fact that “[t]he Government 

could see what was or was not submitted to it by Care 

Alternatives along with its claims seeking payment.” JA 17. 

But CMS regulations do not require hospice providers to 

submit physician certifications and supporting clinical 

documentation with their claims for payment; instead, those 

documents are kept on file in the patients’ medical records. 42 

C.F.R. § 418.22(b)(2), (d). So CMS would not have obtained 

“actual knowledge” of Care Alternatives’ insufficient 

documentation simply by reviewing its reimbursement claims. 

Care Alternatives appears to concede this point. But it 

directs our attention to the fact that after Relators filed their 

Complaint (in April 2008, with service on the United States in 

September 2008, HHS-OIG and the DOJ conducted a joint 

investigation, including a November 2009 subpoena for 112 

patient medical records and a variety of company policies, 

internal documents, and employee emails. Still, it is not clear 

that the government thereby acquired “actual knowledge” of 

Care Alternatives’ alleged violations, or at least, of the full 

gravity of those alleged violations. 

Presumably, the government would have uncovered 

significant deficiencies in Care Alternatives’ documentation 
20 

controls,12 though by that point, the disputed claims (from 2006 

and 2007) were already paid.13 And if we credit—as we must 

at this stage—Relators’ testimony that Care Alternatives’ 

providers charted to “paint a picture” of hospice eligibility, see 

Opening Br. 13 (summarizing testimony), then the government 

would not have known that Care Alternatives was certifying 

patients who were potentially inappropriate for hospice care. 

To be sure, the government’s inaction over the past 

fifteen years is evidence of immateriality.14 As Care 

Alternatives forcefully argues, the government has not availed 

itself of any of its myriad enforcement tools, including its 

ability to recoup prior payments, 42 C.F.R. § 405.371(a)(3).15

But whether that inaction is dispositive evidence of 

12 However, the United States continues to deny that 

there is any evidence of “actual knowledge” of § 418.22 

violations. DOJ Amicus Br. 14, 17, 19. 

13 Escobar indicates that timing is relevant. See 579 

U.S. at 195 (indicating that whether “the Government pays a 

particular claim in full despite its actual knowledge that certain 

requirements were violated” is evidence of materiality 

(emphasis added)). 

14 The government’s decision not to intervene, on the 

other hand, is “at best, of minimal relevance.” Farfield, 5 F.4th 

at 346. As we recognized in Farfield, “[if] relators’ ability to 

[meet] the element of materiality were stymied by the 

government’s choice not to intervene, this would undermine 

the purposes of the [False Claims] Act,” which is explicitly 

designed to permit private persons to litigate suits in lieu of the 

government. Id. (quotation omitted); see also Prather, 892 

F.3d at 836; Janssen, 949 F.3d at 542 n.12. 

15 The Supreme Court in Escobar focused on the 

government’s continued payment decisions rather than posthoc prosecutions or other enforcement actions. See 579 U.S. 

at 195. But in light of Escobar’s holistic inquiry, we do not 

read this to suggest that the government’s post-hoc 

enforcement behavior is irrelevant to the materiality inquiry. 

Cf. United States v. Strock, 982 F.3d 51, 63 (2d Cir. 2020) 

(questioning whether “post hoc enforcement actions are 

relevant to FCA materiality analysis at all”). 
21 

immateriality is another matter. And Escobar focuses on 

whether the government had “actual knowledge” of a violation 

when it made a payment, which is still only “very strong”—

not dispositive—evidence of immateriality. 579 U.S. at 195 

(emphasis added). In this case, we simply do not know what 

the government knew and when. Cf. Spay, 875 F.3d at 746 

(“[Relator] does not contest that CMS employees knew that 

dummy identifiers were being used[.]”); Petratos, 855 F.3d at 

490 (affirming summary judgment where Relator conceded 

“the Government would have paid the [disputed] claims with 

full knowledge of the alleged noncompliance” (emphasis 

added)). Like our sister circuits, we will not equate the 

government’s awareness of allegations of fraud with “actual 

knowledge” that fraud occurred.16 And we recognize that “the 

Government may not want to prematurely end a relationship 

with a contractor over unproven allegations.” United States ex 

rel. USN4U, LLC v. Wolf Creek Fed. Servs., Inc., 34 F.4th 507, 

517 (6th Cir. 2022). So a reasonable jury could conclude that 

the government’s inaction is not conclusive. 

2. Relators’ Burden

Nor was it, as the District Court held, “incumbent upon 

the Relators to present some evidence suggesting the 

government’s apparent disregard of the inadequacies in Care 

16 See, e.g., Prather, 892 F.3d at 834 (“Without actual 

knowledge of the alleged non-compliance, the government’s 

response to the claims submitted by the defendants—or claims 

of the same type also in violation of 42 C.F.R. § 424.22(a)(2)—

has no bearing on the materiality analysis.”); United States ex 

rel. USN4U, LLC v. Wolf Creek Fed. Servs., Inc., 34 F.4th 507, 

517 (6th Cir. 2022) (“[T]he facts alleged in this case do not 

indicate that NASA had ‘actual knowledge’ that Wolf Creek 

did in fact submit falsely inflated quotes. Instead, the alleged 

facts show only that USN4U informed NASA of its 

allegations, not that NASA necessarily believed the allegations 

to be true.”); AECOM, 19 F.4th at 115 (“[I]t makes sense not 

to place much weight on the government's response in the wake 

of [] litigation because, prior to discovery and a formal court 

ruling, the relator’s allegations are just that – allegations, and 

the government may not necessarily have knowledge of all 

the material facts.”). 
22 

Alternatives’ billing documentation was not the result of its 

having concluded those inadequacies were immaterial.” JA 

17. As a general matter, relators are not required to conduct 

discovery on government officials to demonstrate 

materiality—an imposition that would find no support in 

Escobar’s holistic approach. And on a motion for summary 

judgment, it is the moving party who bears the burden of 

demonstrating the absence of a genuine issue of material fact—

a burden that Care Alternatives has not met. Celotex Corp. v. 

Catrett, 477 U.S. 317, 323 (1986) (citing Fed. R. Civ. P. 56(c)). 

* * * 

Thus, notwithstanding the government’s prolonged 

inaction in the wake of Relators’ fraud allegations, it was 

erroneous to treat this factor as determinative of immateriality. 

A jury must be permitted to weigh the government’s inaction 

alongside Escobar’s other factors.17 

IV. Conclusion 

For the foregoing reasons, we will reverse the District 

Court’s grant of summary judgment and remand for further 

proceedings consistent with this opinion. 

17 Although materiality is a jury question in this case, 

summary judgment may be proper in others. See Escobar, 579 

U.S. at 195 n.6 (rejecting assertion “that materiality is too fact 

intensive for courts to dismiss False Claims Act cases on a 

motion to dismiss or at summary judgment”).