A court in the Southern District of New York (“SDNY” or the “Court”) recently released an important decision applying the Supreme Court’s landmark Escobar ruling to a qui tam action involving percentage fee arrangements for billing agents. Among other claims, the City of New York (“the City”) and its billing agent, Computer Sciences Corporation (“CSC”) allegedly used an illegal incentive-based compensation arrangement for CSC’s services when billing New York Medicaid for services provided to eligible children under New York’s Early Intervention Program (“EIP”). EIP provides “early intervention services” to certain children with development delays using federal funds provided under the Individuals with Disabilities Education Act. EIP allows municipalities like the City to pay providers directly for EIP services and then seek reimbursement from other payors, like third party payors and New York Medicaid.
On Monday, the U.S. Supreme Court issued summary dispositions vacating the judgments in three cases brought under the False Claims Act (“FCA”). The Court remanded the cases back to their respective circuit courts for reconsideration in light of the Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U. S. ___ (2016). As we discussed in our advisory on Escobar, the Court held that liability under the False Claims Act can arise under the “implied false certification” theory. Under this theory, prior to Escobar, some circuits held that a claim could be “false” if the defendant submitted an accurate claim but violated an underlying “condition of payment” that arose from a statute, regulation, or contract. In Escobar, the Court found that FCA liability can be premised on a theory of implied false certification, provided that: (1) “the claim does not merely request payment, but also makes specific representations about the goods or services provided,” and (2) the defendant’s “failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.”
The following cases have been remanded: Continue Reading In Wake of Escobar, Cases Return to Circuit Courts